Brad Ferris

Apple in the Bargain Bin

Apple is about to learn a very important lesson that many before have learnt the hard way. You don't reduce margins in an effort to spur demand for your product in a market that's already matured.

They were better as a company that offered niche products and could therefore charge a much higher margin for them. Now what they're doing is matching competition margins for similar products and expecting to have the same sales growth as before?

You NEVER compete on price. It's the last thing you do. If demand dries up either you're not making a product that people want or they simply don't have the discretionary spending to afford it.

Now Apple does make some great products, but the consumer is tapped out at the moment and lowering their margins is akin to suicide. Motorola tried it and failed, McDonald's learnt their lesson in the early part of this decade and Apple will be no different.

Over the long-term it might be a fine investment, but its certainly not dirt cheap as the market is pricing it accordingly to how the margins will express their future earnings potential.