There Go Apple's Margins: iPhone 5 To Sell At Wal-Mart For A Third Off Original Price

Tyler Durden's picture

Remember when less than brisk sales of the iPhone 5 after it was first unveiled (to the usual fawning media Borg collective ooh-ing and aah-ing) were blamed on "supply issues" even as "reputable" Wall Street analysts conducted channel checks which foretold of epic holiday sales and massive pent up demand. As it turns out the only commodity in short supply was, well, demand, particularly that coming from consumers, very much as we predicted during the last earnings report (which was merely the latest consecutive earnings miss in a row). And, as Reuters reports with its Friday night bombshell report, Apple has finally thrown in the towel on pretending there is a supply shortage and admitted there is simply not enough demand at the given price point, by proceeding to sell the margin flagship iPhone 5 at a third off the original price, at the bargain basement commodity expert Wal-Mart of all places. And not only the iPhone, but the Ipad too (we have no idea which generation is the latest one: the iPad 3, the New iPad, the iPad 4s, the iPad Mini, the MAXiPad, etc...) And just like that, the "niche premium" magic of the once uber-cool gizmo is gone, not to mention AAPL's profit margins, very much as the stock price has been sensing over the past two months, during which time it lobbed off some $150 billion in market cap. And with the reflexivity of fad-ness, as long as the price of the stock is soaring for whatever reason, interest and demand in the product remains at virtually any cost. Sadly for AAPL bulls, the opposite is also true, as is being witnessed right about now.

Alas - as with every fad, the time has once again come to find the new latest and greatest distraction, one with just as ridiculously unsustainable a growth curve.

From Reuters:

Wal-Mart said it is selling the 16 GB Apple iPhone 5 for $127, versus an original price of $189.97. The price is valid with a two-year contract from wireless carriers Verizon, Sprint and AT&T, the retailer added.


Wal-Mart said it is also selling the 16 GB iPhone 4S and the 16 GB iPad with Retina display and WiFi at discounts.


The offers will be available for 30 days in about 3,000 of Wal-Mart's stores, which were not identified. They are not available online, according to the retailer.


Apple has focused on high-priced, premium gadgets for many years and has strictly enforced its prices with retailers and other distributors. However, a Wal-Mart spokeswoman said on Friday that the discounts were arranged with Apple.


"We worked together with them on this," the spokeswoman, Sarah Spencer, said. "They are a great partner."


Wal-Mart is pricing the iPad starting at $399, down from $499. Beginning December 17 the retailer said it will throw in a $30 iTunes card.


Wal-Mart is selling the 16 GB iPhone 4S for $47, versus an original price of $89.97, it said.


Apple did not respond to a request for comment.

We wouldn't either.

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blunderdog's picture

$47 is a reasonable amount to pay for an iPhone as long as you don't need something to talk on.  I think they're leaving out some important details.

TwoShortPlanks's picture

There goes the Bread Winner of the US economy

QE3: Same day as iPhone launch
QE4: Same week as iPhone sell off

"However, a Wal-Mart spokeswoman said on Friday that the discounts were arranged with Apple"....yeah, Wal = Geithner and Mart = Bernanke.

flacon's picture

I held Dec 14 $515 AAPL puts that I bought yesterday. I cashed out this morning at 09:32 for a whopping 1,000% gain. 

WonderDawg's picture

Beautiful. Well done, sir.

AldousHuxley's picture

how much apple's rev comes from deferred revenue sharing from carrier's required data plan.

phone: $127 for life

data plan: $30/month = for 2 years it is $720

basically it is a $1000 device bought as a monthly payment plan because consumers are poor to buy it outright.

GetZeeGold's picture



So renting to buy may not be the best plan?

wesayukcom's picture

You nailed it.  It's all just hire purchase at the end of the day feeding the credit bubble..

I'm happy to be stuck in a rolling contract costing $15/month with a rinky-dink phone that allows me to use it for it's sole purpose of basic voice communication much to the carriers annoyance - who would rather like to see me to get out of deal knowing I'd have to pay nearer $20-25/month to get the  same offering..

Samsonov's picture

That's a good deal, but even better for voice/text only is Tracfone, which, if you charge the phone for a year at a time works out to about $8 per month.  That's still too much for me, so I'm looking into one of those new Obamaphones, which I hear are free.

Sorynn's picture

Thanks for the mention.  I am going to check them out.

wisehiney's picture

If you see the SOB staggering around who stole from my car seat last night my Tracfone with $120 prepaid on it, along with a good bottle of whiskey, kick his ass for me.

centerline's picture

What is going to happen is that as the "squeeze" continues, people will be forced to abandon things like expensive cable and phone plans.  What would be interesting is to see a carrier suddenly offer the use of a smartphone without requiring a data plan.  As much as a signal of deflationary pressure as Walmart selling iPhones.

Of course, this is all feeds the deflationary feedback loop.  Moar QE!

Waterfallsparkles's picture

I have a $10. a month prepaid plan with Verizon, which incudes minutes that accumulate every month.  The Samsung phone for the plan cost me $20.  I rarely use the phone and have accumulated 100s of minutes.  Works for me.

disfiguredskating's picture

And STILL AMZN trades at nosebleed levels...

aint no fortunate son's picture

I'm intrigued by the (non)reaction to iPhone 5 in China - wondering if it's a function of the fad being over or if (just as likely) it's a sign that the Chinese consumer - supposedly the savior of their economy since exports there have tanked - is also having nose bleeds, and other hemorrhages

Waterfallsparkles's picture

I think that when the China Launch was announced it was on an Option experation day.  So many including UBS had so much invested in their Put Options the only thing to do to get them in the Money was to lower their price target to $700. and the stock sold off making them winners on their options.

Ned Zeppelin's picture

The right trade with AMZN is to buy stuff from them, not the stock.

nachtliche's picture

All other carriers and devices do the same scheme. Even so, no mobile phone is going to last you a lifetime, not by a long shot. Most people only stay with the same phone about 2-3 years. And no people aren't too poor to buy a phone outright, and they don't cost $1000, more like $600 or $700 for the latest and greatest. People spend that kind of money on tech all the time.

nachtliche's picture

All other carriers and devices do the same scheme. Even so, no mobile phone is going to last you a lifetime, not by a long shot. Most people only stay with the same phone about 2-3 years. And no people aren't too poor to buy a phone outright, and they don't cost $1000, more like $600 or $700 for the latest and greatest. People spend that kind of money on tech all the time.

Overflow-admin's picture

The principle is:

- Hey I don't have enough money to buy that device...
- No worries my good sir, we'll take your money either way!

Element's picture

That's what I call a smart phone!  Well done sir.

samcontrol's picture

wtf you talkin about Willis?

Rathmullan's picture

Morphing into mediocrity. The Beatles win!

RIMM anyone?


LongSoupLine's picture

"The iPad is much more filling than the iPhone," -W. Dudley


Fuck you apple...chinese child slave labor fucks.

AldousHuxley's picture

virtual food brought to you by company named after real food.


ironic isn't it?

Spastica Rex's picture

Symbols, myths, softly spoken magic spells.

TWSceptic's picture

There is no child slave labor by Apple you idiot. And Samsung etc are working in the same factories but you like them I bet hypocrite. Without Apple those workers would already be dead. Suicide is higher outside Apple factory than in. 25 ignorant Apple haters should educate themselves before voting.

YesWeKahn's picture

Kiss 15$/share earnings goodbye, I'd say that it will be something like 5$/share moving forward. Oh my, that's 50-100$ stock, not 500. God, this thing is gonna crash.

flattrader's picture

You may well be right.

A producer/manufacturer who does business with Walmart - the "Walmart Way" - soon finds itself going down the tubes.

Just google Vlasic pickles and Walmart.

>>>>Apple has focused on high-priced, premium gadgets for many years and has strictly enforced its prices with retailers and other distributors. However, a Wal-Mart spokeswoman said on Friday that the discounts were arranged with Apple.

"We worked together with them on this," the spokeswoman, Sarah Spencer, said." They are a great partner.<<<

Yes.  That's just what Walmart wants their "Partners" to think.

TheProphet's picture

Agree with the general sentiment of this, but you need to factor in the cash per share that AAPL has and figure it could easily trade at 4x or 5x cash. That would put the stock between $120 and $150. I would not suspect even in market chaos that it would get much lower than this, and if it did, I would be a careful but certain buyer.

OldPhart's picture

Apple iPhone I iGnore. 

I paid about $40 on my tRakfone about 5 months ago and still have 10 minutes left. 

I spent the first 45+ years of my life without such pocket clutter other than change for a payphone (or making the payphone collect call*).

I find watching people finger fuck those gadgets to be the most irritating insult.  There are real, live human beings right in front of you, directly ingaging you, interacting with you as best they can and you're finger fucking a piece of plastic?!

I can only imagine the wave of depression as the ennui of dis-stimulation occurs from an EMP or other catastrophic event.  Thirty years later there will still be addicts softly stroking their little piece of black plastic and glass for their 'fix'.


*Real story from the early 80's.  I had gone from a itsy-bisty town in Flawduh, Port St Joe to be exact, back to California for a funeral.  On the return, my plane dropped thousands of feet and a large crack appared before my eyes on the wing.  I watched as the skin of the wing continue to split going towards the bow of the wing.  The Captain of the plane came back to the empty aisle seat in front of me, and leaned over the guy in front to peer out of the window.  At that point I was half crouching to watch him and the wing.  He turned back to he guy and, sorta, to me and said 'Looks pretty bad, doesn't it?'  The guy in front said, 'Yeah' in a what the fuck sort of way.  The pilot went back to the cabin and came on to announce that we were going to make an unscheduled landing, and I don't even remember where, to check on the stress of the plane due to the sudden drop we experienced.

We landed without incident and were offloaded and taken to the terminal of a small regional airport.  (Back then, planes actually flew with empty seats, and small airports served as hubs to major airports.  Oh, and security checks usually involved as rather LARGE black lady sitting on a stool who would run your shit through an x-ray that she ignored as she talked with another LARGE black lady...both improbably named La-QuishTa via nametags.  (They are now TSA Executives)

Anyway, we filter through ticketing and I wind up with a flight to Chicago and a connector to Fort Walton.  I was supposed to go to Panana City and arrive about six hours earlier.  The timing requires that I fast trot from the ticket counter to the gate.

I arrive in Chicago O'Hare and I have two hours to board the next leg.  I go looking for a payphone.  At the time I was the dorkiest white guy you've ever seen...including pocket protectors.  So I go down the into the terminal and try to figure out where the hell stuff is and I see a young black lady with a little boy about three.  I start walking towards the exit thinking that would be about where payphones are when the little black kid yells "Daddy!" and runs up to hug my knees.  I have never been in this town so I fairly certain that I have little chance to be this little boys 'Daddy', and his mom's embarrassment is confirmation enough to bend down and hug the kid and say 'I'm not your Daddy, but thanks for greeting me' in this town.  He got flustered and ran back to momma and I gave her a thumbs up as I continued.

Found the payphone bank near the entrance and dialed the local operator.  She came on and I told her I'd like to make a collect call to Port St Joe, gave her the number and she dialed it.  The operator there came on and said, 'Port St Joe Operator'.  I said 'Hey Terri!  She said Hey 'OldPhart' (she used my real name).  I asked that she tell my wife and mother in law that I ws routed to Chicago and would be going to Fort Walton about six hours later than planned.  Terri said 'hang on'...than came back on and said, 'no one answered, I'm going on break in about ten minutes and I'll walk over to Flora's house and let her and your wife know.'

The Chicago operator broke in...'You two know each other?!'  Terri said, 'Know each other!  Shit, we delivered a baby together a week ago.  You take good care of 'oldphart', he's a keeper!  He needs to make a call make the call.'

Terri hung up and the Chicago operator said 'I have the number to Reagan, want to call him?'  I said no thanks.  Later I heard onthe news that the plane I came into Chicago on got hi-jacked to Cuba.

My flight to Fort Walton was uneventfull until we were about to land at about one in the morning.  There was a lightning storm and rain.  The plane was just about to touch down when the pilot stepped on the throttle and the plance did this sort of rolling loop.  Drink glasses and shit floated in the air for long seconds, then dropped all over laps, seats and carpets.  It was a mess.  The pilot came on and apologized saying there was a herd of deer in the middle of the runway and that he had to abort the landing.  Everyone in the plane started giggling nervously.  The second approach was no problem, we landed and a stair way was rolled up to the side of the plane.  Me and one other guy got off and stood beside the plane on the runway as they opened the side and looked for our bags.  He handed them to us from inside the plane.  Jumped down and then said that the  terminal was closed but pointed at a street light and said that a phone was over there along with a bench.

I called Terri and she told me that apparently my wife and mother in law had already left, but that she had called the Panama City operator to tell the airport to tell them that I was waiting in Fort Walton.  The other guy was picked up within ten minutes, leaving me by myself.  About an hour later my wife and mother in law showed up. 

That's how we rolled before cell phones.

Hulk's picture

Planes didn't fly in the 1880's , dumdass...

Svendblaaskaeg's picture


Great read, made my day - thank you Sir!

samcontrol's picture

stupid stories great reading....please post more old ft. I could of read chapters..

i found the finger fucking jaw dropping when i visited the US last time.
I go to Miami every two years..
Here i was in the lounge of the Hilton. Some twenty people devouring the device. It was literally a culture shock, like being in India for the first time.
A WTF moment.

Bangin7GramRocks's picture

Cool story bro! Tell us another.

Imminent Collapse's picture

Update. Gulf County (Port St. Joe) is about to get a pot of money from the BP spill and will be building a deep water port. Won't be such a quaint little paper mill/fishing village again.

lakecity55's picture

*sigh* Sometimes I think it should have stopped at pay phones and beepers.

Winston Churchill's picture

Old Phart

I too grew up before cell phones.Though I was one of the first to buy

that Motorola 'brick' when it came out.I needed it for business .and it was only $4500-00

and $2 per minute back then. s\

What I really hate nowadays is that since the advent of cell phones for the common man,

that all initiative has been abandoned.Endless phone calls asking dumb questions is the norm.

No need for them to think before dialing.

Thisson's picture

Don't you know that nobody uses a cell phone for talking anymore?  It's for texting, looking at maps to see where something is, and social media (twitter, facebook etc.).


Tijuana Donkey Show's picture

Uh, porn? Let's be real here.... Ijerkit

StychoKiller's picture

Did you used to write for "National Lampoon?"

Iamzlatan's picture

The new disposable femipad will save them.

samcontrol's picture

I'm quite sure the mini will temporarily save them this Christmas, it is the top line item for kids , i can see that literally from the middle of the woods thousands and thousands of miles away.
They will soon have one more run up , one final stand , retest the glory . A two quarter thingy , and another crash .Just another wash and repeat. Then the chart will look like Microsofts' the last decade.

IPA's picture

I just cant see someone, with an ipad, getting the mini... what is the point. I know some people just get it to say they have it, but I could see parents buying their kids the mini because it is cheaper than the ipad. I just did a price check and the mini's are not much cheaper than the ipad... Kindle fire hd is $200 the mini is ~$450 google nexus is ~$250. I see parents wondering why their kids cannot do their homework on their tablet. To be fair, I do not think they get homework anymore.

Zap Powerz's picture

Fuck iPhone. Dont be a pretentious douche and buy a Droid instead.

MiltonFriedmansNightmare's picture

Fuck iPhone, fuck Droid; be a patriot and don't buy anything. Crash the system.

Bangin7GramRocks's picture

Why are you a pretentious douche for owning an IPhone? I owned two Android phones and liked them both. I switched to an iPhone 4S and like it even more. I don't root my phone. I just want apps that work. Apple may not be worth it's stock price, but they do make great products. All of the vitriol directed at Apple on this site is bizarre. Smartphones make life a bit easier and much more enjoyable. If you are financially able to afford a premium smartphone and don't, you are really missing out. I'm well aware it will not work after the "end of days" but I am going to enjoy life in the present. Happy Holidays!