Lately my RSS News Feed reader is bursting with news and opinion about Apple (AAPL), the iPhone price cut, and who did what to whom and why. If you don’t know what I am talking about then consider yourself lucky because it is all meaningless noise.
The explanation is simple. There is a consumer slowdown. Apple is at the very knife edge of discretionary consumer spending. $600 Phones don’t sell in an environment like this. The price had to be cut more rapidly than planned to ensure market penetration. It is not some masterful marketing plan by Steve Jobs.
Apple is a great company. The iPhone is a killer product. I am not alone in that opinion.
What is unseen is that Apple has evolved from being a computer company to a consumer products company with a highly elastic relationship to discretionary consumer spending. People who are paying $500 more a month on their ARM mortgage aren’t going to be buying $599 iPhones.
We can debate the presence and depth of a consumer slowdown, but can anyone debate with a straight face that the iPod and iPhone are at the extreme margin when it comes to consumer discretionary spending? Why doesn’t anyone else see this? Am I mad? Discuss.
