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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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Fri, 12/14/2012 - 22:45 | 3065516 sitenine
sitenine's picture

Most importantly, there goes the 'cool' premium.  Poof.  AAPL will likely be trading with a 3 handle before 2013 is over.  I hope they're still sitting on that mountain of cash, because they are going to need it - especially if they seriously intend to manufacture in the U.S. (laugh).

Sat, 12/15/2012 - 04:35 | 3065877 NoClueSneaker
NoClueSneaker's picture

... enough of slaves in the pens. Even cheaper than the ShenZhen ones ...

Cash just for bribing the judges and the police to assure the workforce - bullish ... ( Cupertino paging Eric Holder - stop those rougue states legalising the pot  ... ) :-P

Fri, 12/14/2012 - 22:45 | 3065519 Squid Vicious
Squid Vicious's picture

still waiting for a bullish rebuttal from the orange jump suit apple fan boy... "i am a man i am really am"?

Fri, 12/14/2012 - 22:51 | 3065530 earleflorida
earleflorida's picture

Apple says future of IT/ IP is in the U.S.of A.--- backs-up words  by investing $100 million in manufacturing plant... Wow!!

Samsung says its going to invest and build in Austin, Tx., a ~$4.0 billion[ with a B'] manufacturing plant!

Who puts their money where their mouths are? 

Sat, 12/15/2012 - 00:28 | 3065691 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1  Mighty Samsung Electronics is Korea's largest company.

(South) Korea is a place I VERY much respect.

Sat, 12/15/2012 - 04:37 | 3065882 NoClueSneaker
NoClueSneaker's picture

21% of GDP in the education - they deserve respect. Koreans are nice people, btw.

Sat, 12/15/2012 - 10:14 | 3066118 flapdoodle
flapdoodle's picture

Koreans are a really tough bunch - most likely a Darwinian thing. Eating concentrated garlic and red peppers (a.k.a kimchee) killed off all the weak ones...

Sat, 12/15/2012 - 11:27 | 3066211 Ginsengbull
Ginsengbull's picture

Tang Soo Do teaches how to kick people in the face.

Sat, 12/15/2012 - 05:28 | 3065914 OldPhart
OldPhart's picture

Toshiba...JapCrap of the 60's

Honda...JapCrap of the 70's

Datsun...JapCrap of the 80's

SamSung...JapCrap of the 90's

Exxon Mobile...JapCrap of the 00's

FoxConn...JapCrap of the 10's

The FED...JapCrap of the 20's

 

Sat, 12/15/2012 - 12:14 | 3066294 Eally Ucked
Eally Ucked's picture

I hope they know what they're doing. There are two choices why the're doing it. first they have fate in american market or they think that american workers will be cheaper shortly. Second they want to finish competitor in PR job and know how at their own turf. Anyway they will be successful because they are manufacturer not like Apple just assemblers. 

Fri, 12/14/2012 - 22:52 | 3065536 orangedrinkandchips
orangedrinkandchips's picture

bloody maxipad never worked anyway!!

 

 

Fri, 12/14/2012 - 22:58 | 3065552 fireangelmaverick
fireangelmaverick's picture
"There Go Apple's Margins: iPhone 5 To Sell At Wal-Mart For A Third Off Original Price"

One of the most retarded and biased comments ever by Tyler. Apple is making revenues of close to $600 per phone with a large amount coming from the carriers. The $60 is a 10% price cut at best, not a 33% price cut as you are implying.

Sat, 12/15/2012 - 09:18 | 3066056 BurningFuld
BurningFuld's picture

Most valuable thing a company owns is it's image and Mr Cook just sold it. Brilliant move Tim. Brilliant.

Fri, 12/14/2012 - 23:11 | 3065574 Yen Cross
Yen Cross's picture

The roaches over at Breaburn Capital, are about to get exterminated...

Fri, 12/14/2012 - 23:23 | 3065597 bigrooster
bigrooster's picture

iPhone this...Droid that...I gotz me an Obamaphone BITCHEZ

Fri, 12/14/2012 - 23:32 | 3065610 RECISION
RECISION's picture

What Bozo wrote this piece?

It is moronic - and so is all the halfwit comments to it.

Well - we now know who all the retards in the room are.

Sat, 12/15/2012 - 01:24 | 3065745 sun tzu
sun tzu's picture

yes, we do  ;-)

Sat, 12/15/2012 - 10:15 | 3066119 flapdoodle
flapdoodle's picture

If you are in a room full of people and can't spot the retard, your it!

Fri, 12/14/2012 - 23:35 | 3065617 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Where's Reggie?

He can come on now and tell everyone he told us so.

Maybe Apple can sell that many more products though.  Since they don't have a monopoly on the products any more lowering the price point is a smart move.  I have no idea how this will affect earnings though; once again, Reggie should tackle this shortly.

Fri, 12/14/2012 - 23:56 | 3065636 I am a Man I am...
I am a Man I am Forty's picture

this call will be as good as your muni bond call

 

and let me know how you know who is taking the hit, I heard it was a loss leader for Walmart

Fri, 12/14/2012 - 23:52 | 3065639 toomanyfakecons...
toomanyfakeconservatives's picture

The real bargain at Wal Mart is the 100 packs of Federal .223 Remington for $34.97.

Sat, 12/15/2012 - 05:29 | 3065915 OldPhart
OldPhart's picture

.45 ACP's aren't a bad price either.

Sat, 12/15/2012 - 11:18 | 3066202 Ginsengbull
Ginsengbull's picture

Sportsmansguide has them for cheaper.

Sat, 12/15/2012 - 12:27 | 3066319 Colonial Intent
Colonial Intent's picture

All three of ya are pretty sick people for making fun of kids deaths.

NRA members perhaps?

Sun, 12/16/2012 - 00:13 | 3067931 Thisson
Thisson's picture

Who says they are making fun of kids' deaths?  There are those of us who believe that these incidents would be prevented (or be less deadly) if more law-abiding citizens carrying weapons were around to stand up to the pyschopathic cowards who commit these attrocities.

Sat, 12/15/2012 - 00:16 | 3065678 WallowaMountainMan
WallowaMountainMan's picture

apple now faces the impossible....to convince people that apple post jobs is as great apple was with jobs...

genius is tough to replace with hype.

Sat, 12/15/2012 - 00:39 | 3065706 Foo Bar Baz
Foo Bar Baz's picture

"Walmart has contacted MacRumors to note that it erred in stating that the iPad promotion was for the current generation. It is in fact the third-generation iPad that is on closeout sale for $399." - Souce: Macrumors (if anyone cares).

Sat, 12/15/2012 - 00:42 | 3065708 Tom Green Swedish
Tom Green Swedish's picture

Apple has now fallen pray to Wal Mart.  And Wal Mart being the ultimate customer of all they make the rules.  But you can always spend your money somewhere else just ask Sam.  Is Apple Store going to discount too?  After all they have their own stores.

 

There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.

 

Sam Walton

Sat, 12/15/2012 - 08:16 | 3066009 flattrader
flattrader's picture

Yes.  That's why I drive right by Walmart in the great race to the bottom and keep on driving.

Sat, 12/15/2012 - 01:09 | 3065729 q99x2
q99x2's picture

Apple Sucks and I've never owned one. I did a lot of service on them though so I know they suck. The people that own them usually don't suck. Bunch of technophobic look at me type M'Fers that get sold a bill of goods. It's not their fault they are F'n stupid.

Sat, 12/15/2012 - 12:15 | 3066299 Colonial Intent
Colonial Intent's picture

iphone is fine if you jailbreak it, otherwise its a POS,

Sat, 12/15/2012 - 12:50 | 3066362 Waterfallsparkles
Waterfallsparkles's picture

Everyone in my Family owns an I Phone and an I Pad, including my 2 Grand Children.  Except for me of course.  I do not need one I am on the Computer all day.

My Cousin wants an I Pad and I told her not to buy anything but an Apple I Pad.  It has so much more going for it than the other brands.  I am going to call her and tell her to get it a Walmart.  Although, they are only offering it at 3,000. stores for 30 days.  I hope she does not have to drive too far to get one.

Hope they do not have a limited inventory.  This promotion is only for 30 days so I believe it is to draw customers into Walmart during Christmas.  I would bet my bottom dollar it is a lost leader for Walmart.  They want the people that buy IPhones and IPads, who have more discretionary Money to spend in their stores over the Holidays to boost their sales on everything else.

Sat, 12/15/2012 - 02:40 | 3065793 orangegeek
orangegeek's picture

Apple is a hardware company selling a premium priced product.  Apple's revenue bulk comes from the iphone - hardware.

 

More importantly, it is rare to see a stock outperform its index.

 

The NASDAQ100 is not looking so healthy.

 

http://bullandbearmash.com/chart/nasdaq100-daily-gaps-below-channel-supp...

 

And AAPL should follow - down.

 

Sat, 12/15/2012 - 02:57 | 3065809 JPMorgan
JPMorgan's picture

I'm personally tired of iStuff, I've thrown Nokia and Microsoft a bone and it's a breath of fresh air.

Sat, 12/15/2012 - 04:34 | 3065875 Element
Element's picture

So... the iphone 5 is about 2 weeks away from a guest appearance in the bargin-bin?

 

How appropriate :D

Sat, 12/15/2012 - 05:33 | 3065917 caerus
caerus's picture

aapl gap will be filled at 430

Sat, 12/15/2012 - 05:44 | 3065921 SoundMoney45
SoundMoney45's picture

Walmart is likely selling at a negative margin.

Sat, 12/15/2012 - 06:21 | 3065930 I am Jobe
I am Jobe's picture

USSA inbred fucks will keep buying this shit and be slaves forever and ever. How pathetic Amerikan fuckheads have become. Amerikans talk about slavery not realizing they are one.

Sat, 12/15/2012 - 08:17 | 3066012 flattrader
flattrader's picture

Yes.  That's what they do to get you in the door.  Ask they guys at the original Vlasic pickles before Walmart put them out of business.

Sat, 12/15/2012 - 07:14 | 3065954 Racer
Racer's picture

They are doing this just at the supposedly busiest time of year?? Oooo dear, things MUST be bad!

Sat, 12/15/2012 - 07:35 | 3065967 Go Tribe
Go Tribe's picture

ZH hates Apple. Who'da guessed? Love it when people miss the important part. Selling low through WalMart will capture the additional share of the Honey Boo Boo market, yes it will. Most people will continue buying through the cell providers, though.

Next, you guys will be posting that the Chinese 5 launch was a bust, ingoring the pre-registration details.

Thanks again for your shares at this support level!

Sat, 12/15/2012 - 07:56 | 3065988 Racer
Racer's picture

I doubt that's the case, more like recognising over priced iCrap for what it is

Sat, 12/15/2012 - 13:13 | 3066403 earleflorida
earleflorida's picture

if you have infinite? patience, and wait two quarters when the shares are at $228 or so`oh.... and, they begrudgingly put on a happy face announcing a whopping 3-1 split-- be my guest!

we all know how splits fair in a fed-controlled equity market-- don't we?

Sat, 12/15/2012 - 08:21 | 3066015 Aurora Ex Machina
Aurora Ex Machina's picture

Apple has become mainstream (your aged mother owns one, and probably an iPad as well), but now it's also become lower class with the Walmart deal (no longer middle - aspiring). Wait 'till the Square payment & iSNAP gets authorised. Hate to say "told you so", but...

 

I'd invest in Samsung stocks, frankly.

 

p.s.

 

Where is Reggie? He's had a lot of mud thrown at him, but he was right. Just too early, which on the Street is considered the same thing as wrong, but I see it differently. QE~Infinity, no Seer can match that game-changer.

Sat, 12/15/2012 - 11:16 | 3066170 Floodmaster
Floodmaster's picture

Where i live old woman drive expensive german sports cars .. my next car is a buick park avenue.

Sat, 12/15/2012 - 08:38 | 3066029 Downtoolong
Downtoolong's picture

... even as "reputable" Wall Street analysts conducted channel checks which foretold of epic holiday sales and massive pent up demand. 

I don't understand why the MSM even has commercial breaks anymore. Their entire broadcast, including most of their in-depth investigations, is one never-ending advertisement for something. It used to be fun to read between the lines and figure out what they were really trying to sell you in their news. These days, you don't even need an average IQ to do that. 

Sat, 12/15/2012 - 09:02 | 3066044 GregGH
GregGH's picture

I just saw this .....  "An earlier version of this story said that the iPad model on sale was a fourth-generation one, based on information from Walmart that was later corrected. MacNN regrets the error.


Read more: http://www.electronista.com/articles/12/12/14/iphone.5.price.drops.to.127/#ixzz2F7p22pLs"

andThe third-generation iPad features the same Retina display as the latest model, which is mostly similar in features apart from a faster processor, more RAM and faster graphics.


Read more: http://www.electronista.com/articles/12/12/14/iphone.5.price.drops.to.127/#ixzz2F7pDzoKm"

Sat, 12/15/2012 - 09:46 | 3066082 toomanyfakecons...
toomanyfakeconservatives's picture

I'm prepared to buy into the false flag thing on this one. One tell tale sign already exists.... in false flags they always have the perpetrator(s) identified, tried, and convicted before the bodies are even cold.

 

On a somewhat unrelated subject, does anyone remember the DC sniper madness? For months we had to listen to professional criminal "profilers" tell us the shooter was assuredly a white, middle-aged militaman? When it turned out the shooters were black muslim terrorists, the story was dropped like a hot potato and instantaneoulsly swept under the rug.

Sat, 12/15/2012 - 09:48 | 3066083 toomanyfakecons...
toomanyfakeconservatives's picture

Wrong thread, but you get my point.

Sat, 12/15/2012 - 10:04 | 3066103 rtbarr
rtbarr's picture

The true price of an iPhone 5 seems to be about $650 ( without the contract subsidy). So a $62 discount is really less than a 10% discount. This seems reasonable to me for a holiday promotion for one of your best customers.

My wife and I have both used AT&T iPhones long enough to have completed two 2 year contracts each. I am now trying to decide if I want to renew my contract, try the Verizon iPhone, or perhaps a plan that re-sells AT&T service. T-mobile has a limited footprint where I live.

Our monthly bill for two iPhones is about $125.

Some Android users seem to enjoy bashing Apple. I am glad we have a competitive marketplace and lots of choice for mobile service. As an investor I stay away from APPL (and Facebook and similar stocks) because the price is mostly a popularity contest rather than related to fundamentals.

Sat, 12/15/2012 - 11:04 | 3066190 I am a Man I am...
I am a Man I am Forty's picture

Wrong, apple's stock price is based on fundamentals, FB's price is based on media pumping in the beginning and people erroneously thinking it is a bargain when it sold off about 50%.  Apple is trading at 8.4x trailing earnings if you take out the cash.  Tyler thinks this is a bubble.

Sat, 12/15/2012 - 14:28 | 3066633 rtbarr
rtbarr's picture

I didn't intend to imply that APPL didn't have very solid fundamental reasons for investors to consider buying it. Certainly it does. But I sense many who buy its stock are speculators buying on media hype or momentum. I prefer to make money buying unknown stocks, then selling them after their value is noticed by the market.

Apple is a wonderful company that sells elegant products that work right out of the box. I have used Macs since 1988 when I bought a Mac SE20HD.

It seems silly to me to debate if thy are a hardware company or a software one. They sell oodles of high margin hardware because their superior ease of use (due to well written software and tenacious adherence to user interface guidelines. )

Sat, 12/15/2012 - 10:07 | 3066108 spanish inquisition
spanish inquisition's picture

Next up.. The new Mc iPhone! Sold with Happy meals

Sat, 12/15/2012 - 10:46 | 3066164 tony bonn
tony bonn's picture

"...MAXiPad..."

i thought that was a female sanitary napkin competing with kotex and the like...

Sat, 12/15/2012 - 11:04 | 3066182 marginnayan
marginnayan's picture

How is Gene Munster going to give a +ve spin to this one? LOL.

So basically Tim Cook was lying when he told media and/or investors that there they were having supply chain issues and that they could not simply meet the exploding demand.

It's simple. This is not 2007/08. There are quiet a few other really good smartphones, besides iPhone, available on the market today. Margin squeeze inveitable for AAPL going forward. Now let's see how far AAPL's ecosystem goes in keeping things together for the company.

Some more not so good news for AAPL:

Analyst: iPad Mini is cannibalizing iPad sales 

http://www.zdnet.com/ipad-mini-is-cannibalizing-ipad-sales-analyst-70000...

ICE says it will test Blackberry 10 Smart Phones

http://www.dailytech.com/ICE+Says+It+Will+Test+BlackBerry+10+Smartphones...

Sat, 12/15/2012 - 12:00 | 3066269 falak pema
falak pema's picture

Margin crunch as predicted by Reggie...iphone and ipad are now mature products having lost their fulgurance in impending market recession coming to every local theatre. 

Let's see what Apple has in its pipeline to broaden its product offer. 

Sat, 12/15/2012 - 12:07 | 3066281 Spastica Rex
Spastica Rex's picture

iVibe - an extremely high quality personal theraputic massager. It will be sold only at Apple stores and Victoria's Secret.

Sat, 12/15/2012 - 13:12 | 3066426 falak pema
falak pema's picture

therapy and massage; now that is both holy and unholy; talking about 18 holes of course! 

Sat, 12/15/2012 - 17:47 | 3067151 Winston of Oceania
Winston of Oceania's picture

Comes with an app that lets you text while you tickle...

Sat, 12/15/2012 - 12:33 | 3066335 Waterfallsparkles
Waterfallsparkles's picture

If we get a poll change none of them will work.  Just saying.  Its getting close to 2012.

Sat, 12/15/2012 - 13:36 | 3066501 pragmatic hobo
pragmatic hobo's picture

question for people using "smartphone" ... what do you use it for besides making phone calls? if you could go back to using "dumbphones" which feature would you miss the most?

Sat, 12/15/2012 - 15:22 | 3066824 tip e. canoe
tip e. canoe's picture

having my whereabouts known by Skynet 24/7/365

Sat, 12/15/2012 - 18:21 | 3067220 mkhs
mkhs's picture

I'd miss the diot function.

Sun, 12/16/2012 - 11:36 | 3068516 Tango in the Blight
Tango in the Blight's picture

The camera is the thing I'd miss the most if I went back to a dumbphone. I use it all the time. If I encounter a text (eg on a sign or price card in a shop) which I want to save I just take a picture of it. Also if I see something funny or interesting I can take a picture of it. It's nice to have a camera with you wherever you go.

Also I like that I can google something when I'm out and look up locations on Google Maps, but I could do without them if I must,.

I rarely use apps, they're fun to try out but most aren't really useful so they mostly get deleted.

Sat, 12/15/2012 - 16:04 | 3066932 css1971
css1971's picture

Wow.

So now we know what happens when the unstopable force meets the immovable object. The Walmart wins.

Sat, 12/15/2012 - 17:14 | 3067071 Aurora Ex Machina
Aurora Ex Machina's picture

One million+ employees will be "encouraged" to buy only Apple iphones, just you see, and even if WalMart doesn't do it actively, well... there's a whole lot of product hanging around those stores now, just like the iPads[1]. Who knows how many of them will get "damaged" and need to be "binned"?

That's a whole chunk of the market Apple hasn't been able to touch before: the working poor (drug dealers and so on are already in the bag)

 

 

[1] The iPad has been sold in WalMarts on offer for some time now. Thus, this isn't really a paradigm shift, merely the inexorable slide to mediocrity.

 

Bonus round: WalMart Employees throwing iPads around. Went viral about two months ago; and yes, they got fired.

Sat, 12/15/2012 - 17:12 | 3067063 laomei
laomei's picture

The price is valid with a two-year contract from wireless carriers Verizon, Sprint and AT&T, the retailer added.

 

Yea, so the whole "discount" thing is bullshit.

Sat, 12/15/2012 - 19:16 | 3067340 Pejorative Requiem
Pejorative Requiem's picture

Wonder what the DJIA would look like if APPL was in the average....... from like 16000 to 12000? something like that? Wonder what kind of sell off that might have triggered. Ol' Ben may have gone straight to 100 bil a month.

Sat, 12/15/2012 - 22:13 | 3067730 ebworthen
ebworthen's picture

1/3 off the Apple Store price?

Holy Crapple!

Samsung?

Sun, 12/16/2012 - 01:12 | 3068048 resurger
resurger's picture

Fuck AAPL ... there days are numbered, what happened to those guys who said that AAPL will hit 1500 by 2013!

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