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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 - 21:30 | 3065347 Tom Green Swedish
Tom Green Swedish's picture

Finally something Apple has done right since Steve Jobs left.  They had the product at the right place at the right time and could charge a premium for it.  Now that Android has caught up they only have one option. More volume lower price.

Fri, 12/14/2012 - 21:35 | 3065352 LetThemEatRand
LetThemEatRand's picture

"We worked together with them on this," [the Wal-Mart] spokeswoman, Sarah Spencer, said. "They [Apple] are a great partner."

Does that not say it all?  If you won't buy, we will lower the price and further automate our Chinese factories.  Sign up for a new student loan and get an extra 25% off the gadget you don't need. Resistance is futile.

Sat, 12/15/2012 - 01:18 | 3065741 sun tzu
sun tzu's picture

How about people start practicing personal responsibility and not buying it instead of blaming Apple for selling it?

Sat, 12/15/2012 - 02:18 | 3065776 wee-weed up
wee-weed up's picture

personal responsibility???

In the age of Obama... What a hoot!!!

Fri, 12/14/2012 - 21:31 | 3065356 ceilidh_trail
ceilidh_trail's picture

My 20yr old sony walkman has better sound and volume than the ipod. Not even close. Granted, the walkman is a bit clunkier looking, but, paid for, better sound and can change the batteries. i vote no for icrap...

Fri, 12/14/2012 - 21:43 | 3065381 Bunga Bunga
Bunga Bunga's picture

The best thing about good old audio is that Apple can't revoke the right to listen to their lossy compressed songs. I am picking up CDs for pennies on the Dollar those iTunes idiots dropping off at thrift stores.

Sat, 12/15/2012 - 02:51 | 3065800 Freddie
Freddie's picture

Yeah the sound quality on iPods is crap/compressed.

Fri, 12/14/2012 - 22:03 | 3065421 Kreditanstalt
Kreditanstalt's picture

Vinyl is the way to go...nobody loves old technology now and they go for as little as ten cents a record in second-hand stores...and Oscar-winning VHS movies for fifty cents apiece... :)

We live in a world where the idiot consoomer HAS TO HAVE only THE LATEST and will pay, pay, pay thru the nose to have it....


Sat, 12/15/2012 - 00:51 | 3065719 Frozen IcQb
Frozen IcQb's picture

I want a phone with only two buttons: Hello and Goodbye

Sat, 12/15/2012 - 02:57 | 3065810 Freddie
Freddie's picture

I don't know why you goodbye, I say hello.


Sat, 12/15/2012 - 03:10 | 3065820 Freddie
Freddie's picture

A lot of people are going back to vinyl.  Not huge numbers but a lot of people do not like digital.  I don't think VHS tapes hold up as well as vinyl records.  Doesn't VHS degrade over time?

Sat, 12/15/2012 - 05:12 | 3065902 OldPhart
OldPhart's picture

Back in the late 80's we discovered that VHS get 'boogers' on the tape.  That's what my family called it, at least.  Shit in the air, tobacco smoke, papermill smoke, cooking smoke (don't ask), and just handling as one often had to manally rewind the cartridge because it got jammed somehow and the tape spooled around the magnet.

Vinyl had a needle that carved its path through the grime and the recording was an up and down pattern that cared little about the crud on the sides unless it was a deep scratch.

What I miss is the sound that resulted from vacuum tubes.  One Blauplunkt from the 30's/40's with vacuum tubes has way better sound than that 'Wave Radio'.  Plus the Blauplunkt we had got short wave from around the world, including NASA/Soviet missions.

Early 70's..."BOOM BOOM BOOM.  THIS IS THE BBC.  IT IS ONE AM GREENWICH MEAN TIME" Turn the dial a cunthair and there'd be the depressing Soviet Symphony March of Whatever.  Another cunthair and it would be East Berlin and the same Soviet Symphony March of Whatever.  Another 'hair and it would be the fastest damned morse code you ever heard.  Punch a button...Then KFI Los Angeles, some Chicago Station, New York, Singapore, and other places.

The electronic stuff sounds 'tinned'.  It doesn't have the clash and clang that vaccum tubes would put out.

Sat, 12/15/2012 - 08:07 | 3066001 Svendblaaskaeg
Svendblaaskaeg's picture

....The electronic stuff sounds 'tinned'...

Talk about Tinny sounds - Monty Python's best sketch ever:




Sun, 12/16/2012 - 11:45 | 3068531 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Listening to digital with a dedicated DAC and a tube headphone amplifier. Even YouTube vids generally sound darn musical with this rig.

Sat, 12/15/2012 - 06:52 | 3065943 overmedicatedun...
overmedicatedundersexed's picture

fred my middle son cleans vinyl(collects old records) the sound is better ,why I do not know..perhaps because all the sub liminal messages cannot be put on vinyl unless you spin them backwards..

Sat, 12/15/2012 - 06:59 | 3065945 overmedicatedun...
overmedicatedundersexed's picture

is too much tech a factor in mental illness?? well if walking while looking down at a few inches of plastic while a silent electric hybrid is careening off the road right in front of you is an indication... 

Sat, 12/15/2012 - 08:06 | 3065999 flattrader
flattrader's picture

Oh man.  I just got one at a white elephant Christmans exchange.  I was giddy.

The guy who gave it away was thinking he made a mistake after everyone ooohed and aaawed over it.  It was hysterical.

Retro cool.

Fri, 12/14/2012 - 21:36 | 3065368 Tombstone
Tombstone's picture

Crapple will be shipping these babies to the government to be passed out to the welfare crowd.  Hope they can keep up with the demand.

Sat, 12/15/2012 - 01:20 | 3065742 sun tzu
sun tzu's picture

iBama Foamz

Fri, 12/14/2012 - 21:39 | 3065375 dolph9
dolph9's picture

Ah, it's finally happening.  The inevitable demise of AAPL.

Let's see how quickly the sellers and the Wall Street boys take their profits and abandon ship.

Nice going Steve "Jobs".  You took our jobs and shipped them to China!


Disclosure:  I never bought nor shorted AAPL because I refuse to try to time this dysfunctional market.

Fri, 12/14/2012 - 21:48 | 3065393 insanelysane
insanelysane's picture

Retail sales of everything is way down as the citizens priced in the fiscal cliff.  

Sat, 12/15/2012 - 01:20 | 3065743 sun tzu
sun tzu's picture

You mean they maxed out their cards

Sat, 12/15/2012 - 04:50 | 3065890 Tenshin Headache
Tenshin Headache's picture

What fiscal cliff?

Fri, 12/14/2012 - 21:59 | 3065412 Kreditanstalt
Kreditanstalt's picture

Guess credit-less and money-short customers are making (downward) hedonic adjustments...maybe to home phones...

Fri, 12/14/2012 - 21:59 | 3065415 virgilcaine
virgilcaine's picture

RM is rock hard about now.

Fri, 12/14/2012 - 22:10 | 3065422 Zer0head
Zer0head's picture

actually this Newtown thing is casting a pall over Christmas, or at least that will be a question raised by one if not both of the dipshit finance networks come Monday.

Will it be Tom Keene or his counterpart Joe Kernan who set asside social sensitivites to ask the quesitons that no others dare to ask:  Will consumers stop buying because of the wall to wall covearge of this tragedy a week of funerals, more Obama appearances** etc OR will consumers in grief pull out all the stops and shower their little precious with every manner of gift from gender neutral Barbie to the latest video game release Call of Duty: Black Ops II. Will it be economic stimulus or a dark shadow over the consumer?

Jump you motherfuckers in the MSM jump


**And dear President will you be heading off to your zillion dollar Hawaiian  XmAS - but of course as a parent directing drone strikes from paradise is just as easy as from the golf course.  What the fuck if a housefull of Pakistani kids get fried, that's just part of the job

Sat, 12/15/2012 - 02:39 | 3065792 jeff montanye
jeff montanye's picture

obama is superb at evil; calling him a monster insults charlie manson.

however, like newton, he stands on the shoulders of giants:


Fri, 12/14/2012 - 22:06 | 3065433 RobotTrader
RobotTrader's picture

Time for Tim Cook to announce either a massive 5 for 1 stock split, or a Costco-style "Special Dividend", or both.

Fri, 12/14/2012 - 22:09 | 3065440 Zer0head
Zer0head's picture

where the fuck have you been?  welcome

my favorite ZH character bar none

Fri, 12/14/2012 - 23:02 | 3065557 Acorn10012
Acorn10012's picture

RT and trav on the same day? Its a day of days no doubt.

Sat, 12/15/2012 - 02:03 | 3065766 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

On the day Zero Hedge got its chat feature both Robotrader and Trav7777 had their accounts closed.  Now they are both back.  Coincidence?  I think not.

Sat, 12/15/2012 - 08:11 | 3066007 flattrader
flattrader's picture

No doubt views and posting were suffering.  Everything is a business model

Trav7777 and Robotrader included.

That's why you take a random black guy standing in front of a bank call him a hobo with an iphone, sit back and wait for the views tally to skyrocket.

Posters and lurkers are being played to using their prejudices and they don't even realize it.

Ad revenues skyrocket for the Tylers.

Sat, 12/15/2012 - 02:03 | 3065768 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

On the day Zero Hedge got its chat feature both Robotrader and Trav7777 had their accounts closed.  Now they are both back.  Coincidence?  I think not.

Fri, 12/14/2012 - 22:24 | 3065482 pitz
pitz's picture

"Special" dividend, as in, "Special" olympics?

Does Apple even have cash for a 'special' dividend?  Is Apple's "cash" even real or is it encumbered in off-balance sheet guarantees to suppliers and customers? 

Fri, 12/14/2012 - 23:04 | 3065564 WAMO556
WAMO556's picture

Do you know where trav7777 is at???

Roomies maybe?

Sat, 12/15/2012 - 11:49 | 3066247 Eally Ucked
Eally Ucked's picture

In the early days everybody loved RobotTrader. But he has some mental Problem when they started attacking him he responded with annoying posts. Trav is a bit different, and I don't think you can connect them in anyway, different personalities.

Fri, 12/14/2012 - 22:11 | 3065447 ISEEIT
ISEEIT's picture

Reggie nailed it.

Fri, 12/14/2012 - 22:12 | 3065448 Northern Lights
Northern Lights's picture

They couldn't give these things away for me to be remotely interested in getting one, or, any brand of cellphone for that matter.  

I wouldn't even want an Obama Phone!

Fri, 12/14/2012 - 22:14 | 3065450 devo
devo's picture

Hipsters in tears

Fri, 12/14/2012 - 22:19 | 3065470 formadesika3
formadesika3's picture

Did the iPhone hit the rock or did the rock hit the gorilla glass?

Sat, 12/15/2012 - 04:28 | 3065869 NoClueSneaker
NoClueSneaker's picture

184 hedgies/Muppets hit the ground ....

Fri, 12/14/2012 - 22:23 | 3065473 earleflorida
earleflorida's picture

Best Buy has Samsung Galaxy s3 selling off the shelf at a ratio of 3:1 v. iPhone 5x!  what's more, is that Amazon is literally crushing the iPad in on-line sales-- competition isn't close with Kindle Fire 8.9 HD [all models] setting a backdraft for iAAPL's cremation! 

as apple [apple gdp woops!] falls, so does the economy... 

never ever, put all your apples in one basket...

Fri, 12/14/2012 - 22:22 | 3065480 pitz
pitz's picture

What's the real price of the iPhone? Without the bullshit of a 2-year contract (financing), locking, etc?

How many of Wal-Mart's customer are even creditworthy enough for financing an iPhone?


Fri, 12/14/2012 - 22:30 | 3065494 RopeADope
RopeADope's picture

The US government guarantees those iPhone loans through the Student Loan program.

Fri, 12/14/2012 - 22:36 | 3065503 pitz
pitz's picture

iNdentured iServitude?

Sat, 12/15/2012 - 04:31 | 3065873 NoClueSneaker
NoClueSneaker's picture

.. who cares - iChannelStuffing good, and the jerks are leaving the ammo on the shelf, even better ....

Fri, 12/14/2012 - 22:26 | 3065486 Cursive
Cursive's picture

The initial purchase price isn't the problem.  I ain't buying nothing on contract.  Unlocked, no contract or no deal.

Sat, 12/15/2012 - 13:05 | 3066397 Waterfallsparkles
Waterfallsparkles's picture

Yes, it is the Contract my dear fellow.  Just $25. more per month on a 2 year Contract is $600.  So, who is really getting a deal?

Very interesing marketing though.  Perfect for the Walmart Customer.  Low down payment for the phone and then a high monthly service charge.  It is almost like a Rent to Own plan.

Unfortunatly that is how they take advantage of the poor. They think they are saving $100. on the phone but end up paying $600. more on the monthly service.  So a $400. phone ends up costing them $1,000.

Fri, 12/14/2012 - 22:30 | 3065491 Dr. Engali
Dr. Engali's picture

I just paid $.01 on an iPhone 4 for my daughter. I'm sure AT&T ate it on the subsidy, but it sure has changed from a couple years ago. There is know way you could have gotten an older model without paying a premium. As for me I'm looking at swapping out to the new Galaxy. My smaller screen 4s feels like a brick compared to it.

Fri, 12/14/2012 - 22:34 | 3065498 Kina
Kina's picture

Apple should stop abusing the letter i

Time to move on guys... lets all have jPhones


And by the way Apple, you see that? I just owned the letter j  so hands off or I will do you for a billion.

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