Why Does Anyone Think the Recession is Bad for Apple?
12:01 am, November 20th, 2008, Pete Mortensen
The big tech news of the last few days is that Hewlett-Packard’s 2008 earnings are better than analyst estimates — and this most recent quarter should be their strongest. It was a major bright spot from one of the world’s largest companies, showing that the current credit crisis doesn’t actually mean that the entire economy has shut down. Specifically, the tech sector might be in less trouble than everyone else.
And it made me wonder, yet again, why exactly stock analysts continue to assume that Apple can’t continue to grow and innovate in the coming years. After all, if one organization knows something about hitting the gas during a down time to get light years ahead of the competition, it is Apple. The stock chart I’ve reproduced above from Google shows the performance of AAPL since the introduction of the iPod in the depths of the post-9/11 and -Enron recession. Even with the recent precipitous drop in AAPL (it’s down almost 60 percent since January), the stock is worth about eight times what it was before the iPod (when you factor in the stock split in 2005).
The iPhone is burning up the charts. Apple has its strongest line-up of laptops in the history of the company and is gobbling up market share. The iPod touch and new nano has cemented Apple’s lead in the media player market. When people aren’t buying cars and houses, they still find time for personal entertainment — it’s a comfort when everything else is crazy. With Apple’s current technology and product pipeline, I believe that Steve has the organization poised to thrive once again. They’re going to maintain their position, continue growth, and get out ahead in creating new markets while their competitors are battening down the hatches and sticking to doing what they already know.
What Apple has to offer isn’t going away because credit is scarce. If anything, it may grow even more appealing.
Posted by Pete Mortensen in Apple, News, Vintage Tech | Comment on this article
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Apple (SJ.) has already made the statement that a slow down in the economy opens up many opportunities for them; especially with 20+ billion in the bank. The first is that they can buy tech. companies at bargain prices and increase their intellectual property holdings.
The next is that they have plenty of cash for R&D. Steve said that during the last economic downturn Apple put a lot of effort into R&D, especially the iPod. Who knows what Apple can come up with over the next couple of years while many of its competitors are flagging.
And, as you have alluded, credit will not be a problem as they have the massive cash reserve. It’s a great time to grow.
MikeP, on November 20th, 2008 at 1:46 am
There was no post 9/11 post-Enron “Recession”.
Darcy McGee, on November 20th, 2008 at 4:58 am
You hit the nail on the head. Apple is in the entertainment business. When recession comes, people cut out expenses but they tend to keep some low end entertainment. Movies are the classic recession proof industry. I think that the iPod empire is another. They don’t cost all that much and you get a lot of entertainment value.
The iPhone is another thing since you have to pony up for the service. The recession may well hurt that. However, there are obvious opportunities for iPhone diversification. I think a corporate unit with a mechanical keyboard would help shore up sales if the consumer sector lags. I also think a smaller-simpler-cheaper iPhone Nano could help the consumer side.
On the negative side, the new MacBooks are more costly and mandate new camcorders and displays. They are a miscalculation in a major recession.
BillM, on November 20th, 2008 at 1:08 pm