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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IPA's picture

Most companies try ever so hard to create a product that the people will want. Apple creates a product then tries ever so hard to make people want that product. Granted, it is a good product. There was one ipad now there are two, how can they convince people which one is better, they are now making their customer choose. There is no longer a default choice.

Thisson's picture

No, people aren't choosing - they are getting both.  Granted, at some point, the market will be saturated but for now, the products are selling.

nachtliche's picture

Because "douche" droid owners can only conscieve of someone buying an iphone out of pretentiousness. It couldn't possibly be that they like the phone and it actually does what they want, easily with no fuss. People really need to get over Apple being rightfully successful and deal with it.

TWSceptic's picture

Dont be a pretentious douche and buy a Droid instead.


Yeah be an unpatriotic pretentious douche and buy cheap South Korea plastic and a copycat OS instead, much better!

malikai's picture

Ironic, considering those are Samsung chips in that iCrap.

Cognitive Dissonance's picture

But....but.....but I JUST paid full price.

<I really hate being the greater fool.>

Sutton's picture

"Just do iPhone6"


pragmatic hobo's picture

aapl looking fight on price front ... sounds like a bad news for android phones, death-knell for microsoft, and obituary for blackberry.

sun tzu's picture

looking to save their ass is more like it

infinity8's picture

Well, I guess that's one way to look at it. .  .

jimijon's picture

Actually true. Tim Cook wants marketshare, Steve Jobs didn't care. Of course, the same people here saying Apple is doomed when they wouldn't get marketshare are now saying they are doomed for a strategy to get marketshare.

Basically, all are just emotional beings who like to hate Apple. A truly innovative US company.

Macintosh, Newton, Unix for Masses, iPhone, iPad, .... ?

Everyone else, besides Nintendo, just copy.

sessinpo's picture

The problem with your view is this. In fact, your statement that Tim Cook wants marketshare actually explains why Apple is in trouble.

Back in the 80s. Apple ignored market share. Kept control of everything - very proprietary. PCs clobbered Apple. No one wanted to be locked into the restrictions of Apple.

Apple has done it again, except that their product was so hot it did well for several years. But then the FREE MARKET caught up with apple with phones supporting Droid. I have neither an Apple or Droid phone, so I have no skin in it.

The fact that one can copy others (without patent issues) crushes those companies that don't adapt to markets that favor less restrictions (not talking regulatory restrictions). That is what decimated Apple before and they are repeated it. The only difference this time is Apple is lowering its margins to MAINTAIN share, not get more.

jimijon's picture

Apple is ALWAYS in trouble. Until its next breakthrough item. 

And, while droid sells a lot, the software market is horrible, development is horrible, and most people just use their phones as phones and don't even do much more then texting or facebooking. 

So, as everyone crowds the down trade on Apple, just like the up trade, beware.

One final thing.... I have found Apple to be a leading indicator... so watch those longs in general

Spastica Rex's picture

Maybe they could bring back pet rocks. Rebrand them as iRocks.

Could be big.

Or maybe they could do women's hand bags. Put big letter "i"s all over purses. 

IPA's picture

Personally, I clipped the wires off my ear buds and just leave them in my ears, peeps be mad jealous.

TraderTimm's picture

The big difference is the "walled garden" that Apple shoves down everyone's throat. I've written apps for both iPhone and Android, and I know what I'm talking about.

"development is horrible" doesn't apply to Android. If you actually wrote software for the platform, you'd know. Here's something you can research - how many steps does it take to get an iPhone app on their market versus Android?

Also, look into how distribution is handled for applications. Apple has a very limited 'ad-hoc' system that allows for beta testing and small groups, whereas Android allows me to email an .apk file to anyone I choose - without going through a central authority. I've personally dealt with being rejected on vague grounds by the people doing app review through iTunes connect. Its extremely frustrating.

The plain fact of the matter is that Apple is now resorting to the WalMart distribution, which I'm pretty sure Jobs would never permit, as he understood maintaining the image of a product is almost as important as what goes inside of it.

So, as a technical user of both, I have to logically conclude that the negatives outweigh the positives for Apple's future.



flapdoodle's picture

Apple is a fashion statement ala Louis Vuitton or Prada.

Selling at WalMart is Russian roulette - butt-crack WalMart shoppers waving iShit gimcracks around will eat away at the mystique like battery acid.

Chupacabra-322's picture

I'll stick with my TracFone no contract plan of $45 a month and Samsung Galaxy which is just as good, or if not better than the piece of iSHIT.   

Freddie's picture

TracFone aka ObamaPhone.  Look it up.

mkkby's picture

I'll stick with my pre-paid tiny little PHONE with no data at all for $3 a month.  Why do you even need that horse shit?  To text non stop on your facebook page to people who don't give a crap about your life?

OldPhart's picture

I call my TrakFone my Taliban Telephone.  I use it for IED' phone call and 'I Evidently Disturbed Someone'.  It's best feature is that I no longer have to wear a watch and my alarm clock at home is the same anywhere I go.

Mine cost about ten bucks, so I could give a shit if I lost it, broke it, threw it away or blew it up.  And I use the damned thing to make or receive phone calls. 

(Over the last year, though, I learned that you can do text but I'm not sure why that's necessary...just call the bitch and finger fuckin' with an ittybitty screen required!)  Apparently there's some doohickey that will allow for email, guess I have to wait for grandkids to teach me how to do that.  In the meantime, I'm not missing it.

Oh, and with TrakFone...if you worry about the fuckin'Feds tracking your ass.  You can either pull the battery or throw the fickin' thing out the window. 

formadesika3's picture

I never go out without separating my cellphone from its battery.

StychoKiller's picture

I remember when going from rotary to touch-tone was a pretty big deal.  Curiously enough, the phone switching networks STILL support rotary phones.

Tijuana Donkey Show's picture

By fluke. They offically dropped support years ago, but some old fuckers who pay a land line phone bill still spin the dial, so they kept support to keep them from buying a Tracphone.

dobermangang's picture

The cost is still too high and there's still not enough memory(I want 256 GB).  Plus, consumers should be able to easily replace the battery when it finally stops charging.  The next iPad should be made of gold and able to shoot lead.  It would sell very well.

Crimedog's picture

While Apple is surely taking some sort of hit on their margins, I doubt that it is that much.  I suspect that many of these stores, Best Buy as another example, are basically selling it at cost or even at a loss, purely to drive traffic in the hopes that people will also buy other products.  Thus is life in the retail industry when Amazon is around.  Sure, Apple's margins of 2007-2010 are gone, but they are still pretty good in the industry.

Element's picture

Except for the pending Walmart 2 for the price of 1 deal.

dobermangang's picture

I guess those hilarious Samsung commercials are working.

Or maybe the depression is getting worse.

MiltonFriedmansNightmare's picture

The depression is getting worse. This is bigger than Apple.

ball-and-chain's picture

I have a Samsung Galaxy Note.

It's a thing of beauty.

Apple can go screw itself.

I'm a Samsung boy till the day I die.


smiler03's picture

So you're a self confessed sheep. Bravo!

Element's picture

Yes, but now sheep can bah right across the planet at each other.

Dats progress!

jimijon's picture

So true.

I guess then Samsung will be hot, hot, hot... for how long? What have they invented or innovated? That is correct .. nothing.

So they will flood and throw more speghetti on the walls to see what sticks while Apple will create some other great device for Samsung to copy.

Eally Ucked's picture

Yes they did much more than you think on technical side, screens, processors, hundreds of chips. Is it enough? You're talking about software side, but this is the easy part and they will catch up.

robertocarlos's picture

After you've drawn a clownhead on your photo of a loved one then what?

TWSceptic's picture

I held it in hand, everything from Samsung feels like cheap girly plastic. Apple on the other hand feels like quality. Haters gonna hate.

Unprepared's picture

Tyler, didn't you get the memo, iTV is the new cool shit now. It gonna eclipse everything else:


"Everyone is expecting it," says David Kirkpatrick, founder of Techonomy Media and author of The Facebook Effect. "There are lots of reasons to think Apple can and should do a TV product" beyond the simple set-top box the company already makes, Kirkpatrick tells The Daily Ticker. It would be an "actual TV with guts that connects to the Internet," according to Kirkpatrick.

Tenshin Headache's picture

I already have too many things that have guts that connect to the Internet, including my TV. So do the majority of American families.

StychoKiller's picture

Hmm, Apple's gonna have a tough time with a rounded-corner patent(s) then...

StoleYourMoney's picture

Where is the iAnalyst with the $1,111 price target?

r3phl0x's picture

He's only off by a factor of 2, give him a break.

Seasmoke's picture

Good news for the homeless guy.

surf0766's picture

There will be lots of sales there, hobo's abound !