The Tech Recession Takes Another Victim

First Seagate (NYSE: STX  ) . Now ... Apple (Nasdaq: AAPL  ) ?

Researcher NPD Group this week said that the iEmpire's retail sales fell 6% in January, more than the average decline suffered by PC sellers like Dell (Nasdaq: DELL  ) and Hewlett-Packard (NYSE: HPQ  ) .

"This is the first time in a long time that Apple has underperformed the market," analyst Stephen Baker told Computerworld in an interview. How long isn't exactly clear, but according to Gartner, Apple grew 10 times faster than the industry average in last year's first quarter.

Those were the good old days, eh?

The tech recession has taken a toll on all save for a handful of companies, including Google (Nasdaq: GOOG  ) , IBM (NYSE: IBM  ) , and Apple. Between iPhone mania and higher MacBook sales, we thought the iEmpire would persist mostly unscathed.

Well, some of us did, anyway. Foolish colleague Rick Munarriz has long insisted that Apple would pay for ignoring the netbook market. Turns out he was at least partially right. Baker attributed some of Apple's sales decline to netbooks, but even more to the Macs' well-known price premium. "There's been some switching even among Apple buyers to the $999 [MacBook]. That's taken some sales away from the next tier up," Baker told Computerworld.

How to respond? If you believe comments by Sanford C. Bernstein analyst Toni Sacconaghi to industry trade magazine Macworld, it's by introducing a line of netbooks. His conclusions are based on recent meetings with Apple management, including Chief Operating Officer Tim Cook.

I'm not sure that this is a good idea. It's not that I don't see the merits of a netbook -- I do. What I don't like is the idea of Apple playing also-ran, following the herd simply because there's not enough green in its current pasture.

Don't fall for the temptation, Tim. Apple has the cash, talent, and temerity to invent the next thing, the thing that'll turn today's netbooks into $300 paperweights. Do that, and the market will reward you -- as it has every time before.

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Fool contributor Tim Beyers had stock and options positions in Apple and Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. If you don't tell your children about the Fool's disclosure policy, who will?


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  • Report this Comment On February 21, 2009, at 6:20 PM, rfaramir wrote:

    The next netbook-like thing from Apple will probably be something like a more capable iPod Touch. Something with a killer app already in it (beyond really good web surfing, which is almost killer itself).

    But you're right, Apple doesn't do "also-ran", nor should it. It runs ahead of the pack, and needs to to continue to thrive.

    Survive it will, if simply because of its cash hoard, but thrive it may again, if the next great thing comes soon.

    (long AAPL and I program Macs, not for Apple, though)

  • Report this Comment On February 22, 2009, at 12:29 AM, kristm wrote:

    Apple has publicly stated their reasons for not doing a netbook type product. They have almost no profit margin, and the hardware requires a lot of compromise that would lower the quality Apple customers have come to expect. They're not chasing after Dell and HP by turning out lower quality products with low margins attract the least-common-denominator of computer shoppers. The iPhone Pro and iPod Touch Pro will eat up the netbook manufacturers' market share once they come out this summer.

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