Sean Olender

Gadget Stock Watch: Apple's Selloff, EA's Spore for Mac, More

Apple seems to me ill positioned if there is a severe downturn in consumer spending. Apple makes very well designed products, but usually with little, or no real additional functionality. It's about turning the experience of using a phone, MP3 player, or laptop into feeling like you are a hip 20-something dancing in a subway station.

That "feeling" is a powerful sales tool, but I am willing to be it will not be more powerful than the desire to get a good deal if credit contracts and consumer spending slows. "Consumers" want to show off their buying prowess to strangers with name brand products that cost as much as possible, but when the bankruptcies and foreclosures roll in, a good deal ALWAYS trumps conspicuous consumption.

Beyond a temporary downturn in consumer spending, Apple is very poorly positioned to weather what may become a structural change in the way consumers spend their money and how much they save. If deeper structural changes occur after what has been a gradual 20 year drop in savings rates from 9% to -1% and a massive bubble in credit growth, people may simply view "splurging" differently than they do now.

Nouriel Roubini, Stephen Roach and many other economists focusing on international markets believe there will be no "decoupling" which means when the US consumer's binge is over, the rest of the world is going to have reduced production and consumption as well.

These issues are much larger than Apple, but Apple may indeed be in the wrong place at the wrong time. It is selling "really incredibly nice and expensive" versions of the things you can buy without the brand name (yes, and without the stupendous interface) for 50% or 70% less. When people can't pay their bills, they are less concerned about dance-video-like interfaces.