Horace Dediu was once again proven that he’s only analyst that has a true appreciation of what Apple stands for as a tech company.
In his recent post – The Price is right, Dediu posits that Apple’s strategy of selling their products at a premium price has served the tech giant well over the years and there is nothing to suggest that this won’t remain the case for years to come:
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….the average profit for a PC is less than the price of a coffee at Starbucks. LG and Sony’s exits from the market are symptomatic of the crisis. This is not a new phenomenon. There has been a long series of mergers, acquisitions and exits by incumbents.
Except of course for one incumbent.
The Mac, aged 30, seems to soldier on. Phil Schiller noted that of its original competitors, Apple is the only PC maker to still be in the market. One could imagine that this existence is marginal, or that the Mac managed to survive by giving up on unit volumes or pricing.
The Mac not only continues to preserve pricing but it also seems to grow volumes at a time of overall market decline. Going back to the consumer price index, the Mac in December 2007 was priced, on average, at $1539. In December 2014, the price was $1322, with $40 deferred.
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Horace Dediu believes that Apple focuses on designing products that people actually cares about. As a result, consumers are prepared to pay that extra for their coveted device:
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The result is plain to see: Caring about the product means that it can be priced at a point which consumers care to pay.
Trouble is, judging by how Apple is valued, nobody believes that this is sustainable. Regardless of the evidence within Apple’s own history, it’s the exception, not the rule and the bet continues to be that they cannot continue to remain an exception.
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But no everyone is thinking about Apple in the same way. Today, Barclays analyst Ben Reitzes told investors that Apple is the new Microsoft and downgraded the stock from “overweight” to “equal weight” with a $570 price target.
“Frankly, we just couldn’t quite bring ourselves to use smart watches or TVs as reasons to raise numbers – nor were we fully convinced that these products could move the needle like new categories did in the old days,” says Reitzes. “As a result, we believe it is time to step aside, given a maturing smart phone market.”
“We believe Apple’s story is all about iPhones and ‘new categories’ seem to be designed to make the iPhone more useful – but don’t necessarily re-accelerate growth in the iPhone category to sustainable double-digit levels.”
Only time will tell which of these two gentlemen is right.
