With thee current economy, will Apple drop prices on MBPs ?

The economy has tanked, and will keep on tanking at least till Mid 2010.
Lets assume the above assertion.

Will Apple then drop prices to maintain sales ? Or are MBPs luxury goods which which will not be affected by the downturn ?

MBPs are Apples highest profit margin products, so there is scope for price drop here.

 

Go ask Steve Jobs, he's one of the only ones that can tell you.

 

I went yesterday to two major retailers who are major apple resellers here and both of them cannot get enough MBPs in stock to sell. They had one entry level MB and the higher end MB (with the backlit KB etc...) they had five customers waiting for them to come in stock. I also went into an Apple store and bare in mind that it was mid week and you could hear a pin drop at most surrounding retailer, but apple store was so packed that I waited twenty minutes before a staff member got the chance to merely acknowledge my presence.

The feeling I got walking away is that in theory Apple must be hurting like the rest of the industry but after seeing that I have a suspicion that they might not be as affected by the economy as some might think, at least not yet.

 

Are you an economist?

Will apple drop their prices to maintain sales revenue? I doubt it... the same people that were dying to spend $2000 on a MBP have plenty of disposable income... they are buying them regardless...

I seriously doubt it...

 

Strangely enough, in January the MacBook Pro was Apple's number one selling machine. Also, they have billions of dollars in the bank to ride out the recession. So my guess would be no, there won't be any significant decrease in MacBook Pro prices based on economic reasons.

 

Others might be selling their Macbook Pro's because of the economy so they can make some money back, though, so just watch out for that instead.

 

They are. I have this directly from one of Apple's executives.

Also look at the profit margins posted here:
http://forum.notebookreview.com/showpost.php?p=4590043&postcount=9

 

Considering the statement you made is unlikely, no apple will not lower their prices, because apple doesn't adapt to the economy, because apple doesn't need to adapt, people that need or want macbooks, will get the computers no matter the price.

They have no competition to worry about, ever. They have the power.

 

Where i work, we get maby in total 80 Apple products in a week (Big Box hardware) and we constantly sell through that at retail price. And most customers that i see walking away with a Laptop or iMac take iWork's (about 60% do), and 60% applecare. afew take iPod's etc. The Margin on the big box products (that our company has) is 3 and 5 times higher then on laptops and desktops.

Even if people stopped buying the big box hardware from apple, their professional market (which btw i belive the Mac Pro is the biggest markup or some of their software/servers) will see them through as well as their Music section (iTunes & iPod)

 

That begs the question, why arent the macbooks priced higher then ?

 

That's because they know that if they price their laptops too high, will start to find alternatives. F!nn is wrong on several accounts. Put the price too high, and it becomes too much of a luxury. Put it too low, and it loses its prestige. I think Apple found a real sweet spot here for all of their systems, in that they set their computers at a high price but not so high that it is out of the average consumer's reach. Most of our computer budgets are around $1000, so we can grab an Apple computer inside our budget. That's the beauty of it all.

 

Although this statement is largely true, there is one more aspect that needs to be considered. Prices for most retail goods (in an ideal situation) are determined by supply-demand economics. As supply of a particular good increases and demand remains constant, market equilibrium price should go down. Similarly, as demand shifts (either increasing or decreasing), the market equilibrium price will also adjust accordingly. Given the OP's pessimistic outlook on our economy (I mean no offense with this statement...), if the economy will continue to decline putting lower and lower expendable capital in people's pockets, the demand for luxury items like the MBP will automatically decline, simply because the *vast* majority of its targeted clientale will be unable to afford its purchase. In this case, if Apple wants to maintain sales numbers, it will be forced to drop the price. Of course, this is all assuming that inflation and the purchasing power parity of the US dollar is kept under control. Foreign exchange rates and raw material component costs will also affect the pricing.

Although Apple has been rather nonchalant about adjusting to the current economic climate, assuming that people who want a mac, will buy one at any cost, this attitude will have to change if the consumer's expendable capital tanks.

 

Booji, thanks, for the detailed explanation.

My question is about the underlined statement. Will the vast majority of MBP buyers be affected so much that the demand curve will shift to a significant extent ?

Or is Apple at that sweet spot where the apple buyers will most likely be able to afford it even if the economy tanks more. Or, they will reduce their consumption in other areas to get a MBP ?
I know that the stock market does not really give a gauge of the state of the economy, but lets say if the US Dow tanks to 4000 ?

 

Wearetheborg, you are neglecting the reality of it all. Regardless of the economy Apple has a lot of customers who's paycheck remains recession proof. Let's see who I'm referring to? Um, Shaq, Kobe and any one of the sports stars any one of the major R&B, country, Rock or symphonic music superstars. For some reason these people never seem to take a dive in their paychecks so Apple is not going to take a dive in theirs.

 

Wearetheborg,

Wow, thats a profound question, and one that I can only answer with speculation. Before answering the question, one should consider who the current MBP clientale include. In my opinion, these are graphic designers, photographers, multimedia professionals, students, engineers, scientists, etc. (this is by no means a complete list, others feel free to chime in). If unemployment, debt, and diminished income continues to rise within this consumer bracket, consumption pessimism will also rise, and hence demand for the MBP will drop. How much that demand drop is what will eventually drive Apple to change its pricing. At this point, I feel that many of the professionals listed above are still able to afford the purchase of an MBP, and so unless significant economic recession looms, I can't really predict a significant drop in demand. Moreover, offering refreshes and implementing new technologies and slightly altering the product on Apple's part will continue to maintain consumer interest and "desire" for the MBP and these factors counteract the drop in demand resulting from affordability.

One of the hallmark characteristics of economic recession is a decrease in the consumption component of GDP (Gross Domestic Product). As expendable capital drops, consumption will also drop, and potentially the GDP will drop. The rate of change of GDP is one of the factors ultimately determining economic growth or economic recession. This is why "stimulus" packages are often offered by the government - the goal is to increase consumer spending on goods and services to increase the consumption component of GDP.

Sorry for such a long-winded answer to your question. As you can tell there are many factors that go into this determination, and the worst predictable parameter of all is human behavior. So to succinctly sum all of this up, no outsider would really know how much of a hit in sales Apple will take due to the declining economy, before it decides to lower prices on the MBP. Apple has to satisfy its stockholders eventually, and successive quarterly postings of reduced profit or loss (both unlikely at this point in time), will cause them to adjust their modus operandi when it comes down to pricing.

 

I dont think they will drop them. The mbp is really targeted towards the more fortunate financially people. Typically these people are hurting a lot less than the rest of the population. Perhaps the mb will go lower to sell more, but i think the mbp will stay as is.

 

This is true, but the question is what percentage of Apple's clientale really recession proof. I am pretty sure that people like Shaq, Kobe, and other celebrities account for less than 1 percent of Apple's total clientale. The "pro" consumer clientale for Apple, at some point, will be hit by the recession. The question is how long this economic downturn needs to continue before they ("pro" consumers) reduce consumption of Apple's goods and services.

 

Wel said and very true.

 

True dat
You are right that this is all speculation.
MBPs are a wierd object. People may be able to justify purchasing it even in hard times as it can 'be used for work". So it may be considered a tool, an investment.



And windows 7 is on the horizon (and getting good reviews).

IMHO we will see a 10-15% drop in prices within a year

 

Don't forget Apple just doesn't sell in the US.

 

Yes, but the entire western world (and China/Japan) are going into recession/depression.

 

I think in order to handle the economic crisis, Apple will just keep creating more varied iterations of its same product line with the Macbook Pro. There are the 15" and 17" versions of this system, one over $1000 more than the other. You also have the older versions that it still sells to different outlets such as schools, musical recording facilities, video editing companies, etc etc etc. They also garner huge amounts of revenue through their ridiculously popular iPod and iPhone products that they can afford to funnel that into their laptop line, so that gives them even less reason to drop the price. You would be surprised at the large amount of companies who depend on things such as royalty checks from patents and licenses to fund huge projects without having to worry about a big loss on their balance sheets. This is very true of Apple, who has some of the deepest pockets of any company, and thus far, have been immune to the effects of PC prices falling everywhere (especially the recent Netbook craze), and the recent noise that AT&T will be forced to drop exclusivity, which means opening it up to a much wider range of consumers, which means a huge surplus of cash flowing in for Apple.

But as you saw after last year, Apple was reminded that they needed to keep the base consumer in mind, so that's why they offered the refresh to the Macbook polycarbonate. Not everyone wants the aluminum unibody system, so they will spend a little less and get something they're comfortable with while also pocketing money on the side. It is as simple as that. You will not see a 10-15% drop unless they offer a new Macbook this Fall, which doesn't seem quite as likely.

 

Apple is not a depression proof company. Sales are going to fall. You can't honestly be expecting people to spend as much in 2009 as they did in 2008 when there are hundreds of thousands of jobs being lost each month. It just isn't going to happen. Sales are going to fall across the board, sales ARE falling across the board.

If Apple is smart they will use this period of economic uncertainty and their massive pile of cash to hit other PC makers where it hurts. People might not be able to afford that $2000 MacBook Pro but they might be able to afford that $1600 one.

 

I never said they are depression proof. I don't think anyone did. I said they are so far immune to the sliding PC prices. F!nn said they don't need to change the prices to adapt to the economy because they are a powerful company atm, which is very true. The people not hurting from the economy are picking up Apple products at a very large rate (that's why a lot of big celebrities own an iPhone). So far, they are still picking up a lot of speed. Just compare Microsoft and Apple stock and you will see how market share is faring at the moment. Think of Apple like a Hungry Hungry Hippo!

 

Because they aren't a monoploy and don't want to discern customers away from the products. If they were for say $4500 for a MBP base config and a $6000 top line config.

Do you think people will be more willing to switch? Yes, because to a certain extent their is a "conscience" that knows apple is having a fun time with their monopoly.

Since they are smarter than that, they don't jack the prices.

You can be unique, but you also have to be competitive.

 

Don't forget that the rest of the world is in the same situation..

and honestly, i believe that the market in North America is far larger than any other place in the world.. Macs are much more expensive in Asia/South America.. not sure about Europe, but I believe it is somewhat more expensive there as well...

in South America and Asia the macbook cost almost are more than double in North America

 

why should they drop the price when ppl are willing to pay

 

a) MBP's are used for a lot of business applications, so anyone using it as such can write the expense off at tax time.

b) My good friend is a chiropractor and he recently went to a seminar about increasing his customers. The guy giving the seminar said this (paraphrased):
"If you get a chance, drive through some lower-income areas and look at the roofs on the houses. How many of those houses have satellite dishes, despite the house falling down around them and the depresssed area they live? People are willing to go out of their way for items they want."

c) Tax season is heating up, and people are notoriously liberal with the "OMG FREE MONEY" they get from their tax rebates. It's why you see giant sales on durable goods (tv's, appliances, cars) this time every year. Even in the recession, people see this money as "outside the budget" so they can spend it on luxury items and not feel bad about it.



If gas was still high and grocery prices were getting worse, I could see a response by Apple, as people's everyday lives are impacted more than they are now. Yes, people are losing their jobs, but the price of everyday life is not spiraling out of control like it was a couple of years ago. As it stands, though, I think the MBP prices will stay; especially if Apple keeps upgrading them somewhat regularly like they have been.

 

But the savings are. The stock market has been cut in half, which means that a lot of savings have been cut in half. But on the other hand, this will mostly affect the older generations.

 

Well, Apple had its profit forecast cut by JPMorgan today. But I doubt Apple are going to change anything, though.

 

Hmm, so at least JPM thinks they WILL be affected.

Someone was comparing microsoft with apple, both have fallen about 50% from their all time highs, so they may not be too disparate.

 

Agree very much so, Apple has its own niche and a very loyal client base.

cheers ...

 

No, savings has not been cut in half. It actually has been skyrocketing because people aren't willing to spend like they used to. That's why last year's stimulus checks failed ultimately because people wanted to put that money away for a rainy day instead of spending it. A huge amount of people are finding the real benefits of opening one of these accounts. Sure, savings interest rates are down because of federal interest rates being cut, but that hasn't stopped people.

Don't look at the stock market, anyway. Traders are so sensitive that they are always looking at the short term rather than the long term. Ever since 9/11, even a little hiccup in reports causes them to go in a frenzy. They aren't looking at the companies that are doing ridiculously well because they are adjusting to the times, such as Walmart (discount retailer) and McDonald's (dollar menu). The ups and downs of the market don't make quite as big an impact as we think it does. It mostly counts towards the investments we make towards the future, and not our reactions to it. This is why I invested over $300 in stock towards GE, and it is seemingly paying off. If you can't handle the pressure, don't get involved in the stock market at all, I say.

But as you said, this will only affect the older generations. We will see the light at the end of this recession hopefully before 2012, and we can see the effects of what our new president is planning to do by then. For now, Apple is handling itself fine in today's economy (certainly a hell of a lot better than most companies right now. Their prices stay hundreds of dollars above the average notebook, and their stock is still very high (Apple is currently at around $88 a share, while Dell is at $8.25 a share and HP is at $26 a share, for example). This may seem a little technical, but just based on that information alone, you can see that they're weathering it pretty well.

Now, if Steve Jobs retires this summer, then that is another story.

 

I need to find the article that details this: McDonald's recently removed one piece of chese from every quarter-pounder with cheese to cut costs. End result: they saved billions.

It's a baseless example, and really only points out the power of volume; but it shows that companies can make small changes that cause large ones. For example, Apple incrementing the procs in the MBPs allows them to buy processors from Intel at a higher volume; and hence better unit prices. Therefore they don't need to raise prices, and consumers get more value. This breeds more loyalty, giving Apple more income down the road.

 

I think a huge drop in AAPL is coming. Their PE ratio is 15+, for dell its around 7.

 

This thread has become an economic analysis forum.
I like to read your comments ^_^.
IMO, Apple wont change pricing strategy, because if they price either too low or high, it will be seriously affecting their goal and sales. Apple wants to keep their product as a luxury product but somehow still very affordable to some niche market.
If there is many macs, more problem about os x will be reported and reduced in customers' satisfaction.
If they price too high, no body wont buy it because Microsoft and Linux is still available at much much cheaper price.
Unless, their is a huge change in Apple organization's goal or another big fall in the economy, Apple wont change their price.

 

That doesn't mean that they will be cutting prices on their MBP's. They will just offer more choices. That's really what it comes down to. And as I said, they have plenty of products at the budget zone, such as their iPods and their iPhone (which is speculated to soon be sold for $99) that they will not be experiencing any of the big drops that their competition has. Dell and HP don't have close to the number of fans that Apple does, which is why their market share continues to climb even in this economy while companies like Microsoft are falling pretty dramatically. The iPhone has a commanding lead right now.

For example, I doubt you will ever see a Macbook netbook or some budget model, because then their product will become oversaturated which leads to a decline in demand and a decline in general interest, which is hardly what they would ever want to have happen to them.

However, as I also mentioned, if Steve Jobs and his influence over the company starts to disappear, then we might see such drops. I mean, it happened to Microsoft when Bill Gates left. Their P/E ratio may be high, but their stock is still going up. It shows the stockholders' confidence that Apple will continue on as a strong company in the near future. They are really a whole other beast compared to the dime-a-dozen electronics companies like Dell and HP. Sure, they may have huge market shares, but that is here today, gone tomorrow, if the big car companies are any indication. Apple has so many outlets that they may grow pretty weak in the laptop arena, but their iPod and iPhone sales make up for it. This is an overall stock we're talking about, after all. Microsoft used to lead, and now they're trying to follow Apple, and that is their downfall. So long as Apple continues to innovate, they are on pretty solid ground.

 

Their stock has been dropping (so has been dell), look at their 1 year chart:
http://www.google.com/finance?q=aapl

People are now gonna switch to saving after having lead a life of excess, I just can figure out if MBPs will be considered an excess..

A P/E ratio of 15 assumes some growth model, I'm just not sure that apple will continue to grow in this economy. Even if the number of MBPs/ipods sales remain where they are now, AAPL must fall (a lot).

 

^how do you know that?

 

Hmmm, I was wrong. Assuming no growth, PE=15 implies discount rate=6.6% which seems fine.
http://fisher.osu.edu/~kho_1/Ch12_equity valuation.ppt

 

The whole world isn't getting hit as bad as the US. Europe has a higher cost a living so stuff there cost more.

 

You can't really compare a stocks price against another stocks price and try to find how well the company is doing compared to another company. Instead, it would be better to look at a graph of each company and look for trends. The price is irrelevant unless compared to itself at a different time because if a company decides to, they will split the stock. That reduces the price of each share but doesn't subtract the overall amount invested. It just allows people to get in for a smaller price.

http://www.businessknowledgesource....t_does_it_mean_for_my_stock_price_021915.html

 

recession doesn't make things better for consumers.

apple will either start selling cheaper machines (not the same expensive machines for less money, just machines that are cheaper to make)

or the price will INCREASE... possibly.

 

Unless we have deflation. Didnt US CPI go negative recently ?

 

I just saw this article/video today saying the rest of the world is actually being hit worse than the US: http://finance.yahoo.com/tech-ticker/article/203206/Global-Economy-Slumps-U.S.-%27Best-Looking-Horse-in-the-Glue-Factory%27?tickers=FXI,^DJI,UUP,EKH,EEM,TLT,GLD

 

comon people, we don't have it that bad.

i mean, i still have my job, gas is $1.85

it sucks, but its not that bad.

 

Do you realise how much debt you have ? For just the financial bailout, US has commited around 2 trillion dollars. Thats $10,000 per person in US. You OWE that much. It WILL have to be paid.

 

has anyone posted this?

http://arstechnica.com/apple/news/2009/03/unlike-pcs-apples-mac-prices-not-collapsing-yet.ars

 

Well . It's not that bad here in Canada, yet. Or at least I don't notice it.... Wait I haven't worked in 2 weeks....

 

The author is drawing an erroneous conclusion. All the analyst noted was that the average selling price of apple dropped, this may mean that more MBs were sold bringing the avg price down, not that the price of a given computer dropped. GAH