Apple beats recession, sells more Macs, touts 'value'

Drops prices, sells more; again scorns netbooks

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Gottheil heard the word "value" over and over again from Cook today. "I must have heard it 42 times," he said, only slightly exaggerating. "That's going to be their response to the 'price' talk of Microsoft and its 'Laptop Hunter' ads. The fact that retail revenue was only up 4% but retail traffic was up 22% shows that they're succeeding in getting across the idea that the Apple experience is worth the Apple difference in price."

All that talk has created a slightly different Apple, Gottheil said. "They've got the same strategy now for all their lines, including the iPhone, that they've had for notebooks and desktops," he said. "You see the entry price of the category, and it's not a bait and switch, there's value at the entry price, but for only a little bit more, there's something significantly better."

He argued that Apple used that tactic to its advantage after its laptop refresh, when the difference between the $999 previous-generation MacBook and the redesigned 13-in. MacBook Pro was just $200. "I think we're seeing [in the unit sales and revenue numbers] the upselling that Apple's doing," Gottheil said. "So average selling prices are taking a bit of a hit, and it's not clear where the price floor is going to be. But any price drops from now on, they won't be out of any sense of compulsion."

Some things, however, never change. As it has for almost a year now, Apple belittled the low-priced, lightweight PC notebook market. "Some of the netbooks being delivered are very slow, with software technology that is old, they lack horsepower, they have small displays and cramped keyboards," said Cook. "I could go on and on but I won't," he added, after he already had.

In answer to an analyst's question about whether Apple envisions a market for a "truly mobile device with a larger screen than an iPhone" -- in other words, a tablet-style device, Cook again heaped abuse on netbooks. "Our goal is to build the best product, so at whatever price point, we'll build the best," he said. "But we don't see a great product at this $399, $499 price point."

Gottheil took that to mean that there's still a possibility Apple will introduce something at a price higher than the $499 minimum that Cook mentioned. "I still think the best time for this would be at the end of the back-to-school selling season," said Gottheil, talking about late September or October. Reports out of Taiwan earlier this month claimed that Apple will unveil an $800 touch screen-based device in October. For his part, Gottheil thinks it's just as likely that Apple will retrofit older components -- those that made up a circa-2006 MacBook, for instance -- in a new case and sell it at around $700.

Apple sold 5.2 million iPhones in the quarter, largely on the back of the release of the new iPhone 3GS in mid-June. "We were unable to make enough to meet demand," Oppenheimer said of the 3GS. Cook went even further: "iPhone 3GS [inventory] is constrained in virtually every country," he said.

iPhone sales were up 37% over the first quarter of 2009, and a not-so-amazing 626% over the same quarter last year. The latter wasn't as impressive as it looked, Gottheil said, since the comparison quarter was the one in which Apple ran out of first-generation iPhones in the run-up to the announced launch of the iPhone 3G in July 2008.

"But the 5.2 million, that's a very impressive number, given the economic market," said Gottheil.

The other big seller, said Cook, was the iPod Touch, whose sales jumped 130% year-over-year. However, that model of the iPod line, along with the iPhone, have cannibalized sales of the more traditional iPod music players, the executives admitted today.

"The App Store has become their rock," Gottheil said, talking about the Apple-run online mart for applications that can be loaded onto the iPhone and iPod Touch. "It's an amazing success [and it's] created a barrier to competition."

Copyright © 2009 IDG Communications, Inc.

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