Wednesday, February 18, 2009

How Long Before the Recession Clobbers Apple?

Like all companies, Apple is certainly not immune to the negative effects of any recession, let alone the unprecedented worldwide recession that we now find ourselves in. However, despite all of the gloom and doom out there, Apple has surprisingly been doing far better than most and it's January figures suggest that, at least for now, that Apple seems to be mostly recession-resistant!

The question is: for how much longer?

Thus far Apple's financial performance has been nothing short of remarkable, especially when considering that thousands of business's have been anything but. Apple, no doubt, will naturally feel some pain eventually down the line if the recession becomes longer and more deeply entrenched, but thankfully, up till now, Apple has been fairing very well indeed.

According to recent market research and numbers from NPD, Piper Jaffray's research analyst, Gene Munster, is now predicting that Apple could sell an estimated 2 to 2.2 million Mac's in it's next quarter, which is -6% growth compared to the almost 2.3 million Mac's sold during the same time last year. Considering that most companies sales have been dropping as much as 50% or more, this is quite a remarkable feat to say the least.

It is certainly very impressive for anyone, now a days, to simply be able to keep their heads above water, but, again, the big question is just how much longer can Apple continue to do so, let alone grow it's business? Of course, as obviously is the case, that will depend on many different factors, and factors coming from both within Apple's control and those outside of it.

Apple, like everybody else, simply doesn't hold all the cards, and it will have to play it's cards the best it can, because, in part, it's profitability will remain very much dependent on the actions, even the whims, of other forces such as government policies, both at home and abroad, as well as the supply and availability of raw materials, resources, and the highly-skilled people to bring them altogether, as well as many others. Just how long and just how hard the current recession continues, more than anything, will be the deciding factor for Apple as it will be the case for all business's. If  the recession is short (here's hoping?) the better for Apple;  if longer, naturally, the worse it will be.

NDP is indicating that iPod's could be off as much as 15% for the next quarter, but than again, didn't all the analysts say pretty much the same thing about Apple's last quarter, a quarter that saw the iPod actually end up breaking it's all-time sales record! Hopefully, just like the last time, where the introduction of the MacBook Air helped to counter falling sales in the desktop category, so too, will sales of the new uni-body MacBooks also do the same thing this time around. Likewise, in addition, any introduction of new iMac's, and/or Mac Minis, which are long over due and expected, could also go a long way in counteracting any negative recessional effect on Apple's next quarterly numbers as well, as Tom Kravit, writing for CNet,  speculated that they might.

The economy has been in the pits, and as long as it remains there, so too will be the outlook for Apple and the rest of us. It really doesn't matter how amazing, or how sexy, or how insanely great Apple's products are, or anybody's else's for that matter, as long as people are continuing to lose their jobs, or simply living in fear that they might, then people won't likely be buying any of Apple's products if they can't afford them! As great as Apple products generally are, they still take money, something that most of us can really afford to part with so freely in these trying times. 

Even though I'm no prophet, nor do I have any idea on just how severe or just how long the current recession will last, I'm still expecting to see Apple post some pretty decent numbers, next quarter, that one's that should be far better than most others will report, or could even could hope for. As was the case with the last recession, I expect that Apple, once again, will innovate it's way out of this mess, much like Steve Jobs said they would and actually did the last time around! 

One way or the other, all I can say, in conclusion, is that I sincerely hope that President Obama's massive gamble with his economic stimulus package will work and help lift the economy out of the doldrums the way he promised, or, otherwise, if it doesn't, then the rotten economy will eventually end up producing one rotten-Apple, at least as far as it's sales go, and it's ability to continue to do what it does best - what's in it's very DNA - continue to produce the easiest to use, most functional, sexiest and most innovative and game changing products in the industry, and ones that continually out-class it's competition, time and time again, and that by a good country mile! 

As for Apple and the economy, my fingers are crossed!

 And that's my 2 cents 4 this Wednesday, February 18, 2009

Apple financial stock chart: Yahoo  


The Vital Muse said...

Hey Don:

Saw the article in the Wall Street Journal today confirming Apple's 6% fall off in unit sales... but -- I'd be pretty happy if the value of my assets only dropped 6 points in the last year... Keeping my fingers crossed as well. Good post!

-- Paul

I am a lover of children's literature said...

Thanks for your comment Paul. Of course, the % drop in Mac sales is due to the recession. All companies are feeling the pinch. Other companies may pick up more sales by selling cheaper wares, netbooks for example, but in the end, I suspect that Apple will still bring in profits were most other PC companies will be losing money!

After the recession, no doubt, Apple will bounce back. It's doing much better, over all, then any other company out there.