RUSH: So got an e-mail, “Dear Rush: I know you’re an Apple fan. Why is Apple stock dropping so fast today?” I’ll tell you why I think, for you high-finance people. Yesterday, as you know, Apple introduced two phones: The 5S which is their top-of-the-line flagship, and the 5C. That’s the one that has the plastic, polycarbonate backing. They’ve never made one like that — well, not in the modern era. The first ones were that way, but with all these bright colors.
There are five different colors. For six months, the tech media and the financial media has been predicting this phone, even by name. They got wind of it, the 5C, and they’ve been predicting it as a cheap phone that would be priced so that poor people in emerging markets like the ChiComs would be able to afford it, because the tech media and the Wall Street people think that Apple’s market share isn’t big enough, and they think Apple agrees with ’em.
So they think Apple is making a cheap phone, or a cheaper phone, priced so that poor people can afford it and then more people would buy Apple phones and then their market share would be up. So yesterday Apple introduced the phone and this phone isn’t cheap. It’s not even midrange. It’s in the high level of prices of phones. It’s just $100 less than their flagship 5S. I’ll tell you, it’s interesting. The Apple people have known what has been said about this phone for six months, and they let it stand.
They let everybody think that they were coming out with a cheap phone, and then when the phone was announced, it isn’t, and so people are selling Apple off today. You might ask yourself, “Why didn’t they say something? For six months they’ve known what the market’s expectations were. Why didn’t they correct it behind the scenes? Say, ‘This phone is not gonna be what you think. We’re not building this phone to expand our market share. We got something else in mind with it.'”
You know, Apple, they march to their own drummer.
They don’t care.
I mean, you got a CEO here who really… The stock price is obviously a concern, but not like other CEOs. They do not do what they do for the stock price. They do it for other things. They do it for themselves. I think that’s the reason, ’cause so many of these… At the same time, these people that think Apple ought to be going for market share will tell you what would happen. If Apple did come out with a cheap phone yesterday it wouldn’t be long before the same people were complaining that Apple’s profit margins were down because Apple’s in a position right now where they can’t win with the tech media or high finance.
That’s my answer. Hope it helps.
RUSH: You know what Wall Street and tech media will never understand? Apple does not market to poor people. They’re not interested in it.
RUSH: Oh, oh, oh, yeah. Snerdley wants me to explain why Apple doesn’t market cheap phones. Look, I don’t mean it to sound that way, but Apple has never made their high-end gear for moderate- to low-income people. That’s just not how they’ve marketed. Now, iPods, yeah, and things like that, but their computers have always been high priced. They’ve always had a business model of high profit margin. It’s just their business model.
The reason why there’s not a cheap phone is that they’re not into market share. They don’t want to just sell the phone. They want people to buy the phone to also have money to buy apps and to buy accessories and then to buy the next phone and maybe buy a computer. They don’t want people having to take out a loan to buy a phone. That market’s covered. The feature phone business, that’s covered.
Samsung does it, HTC does, Windows phones, Nokia. Apple’s not biased. It’s a business model. After they sell you the phone, they want you to have enough disposable income to use it and download their apps and spend money there and so forth. They want you in their ecosystem. They want you to buy a Mac and then an AirPort Base Station. They want you in their ecosystem. (interruption) Oh, Microsoft buying Nokia?
I gotta tell you something. Microsoft. You know, one of the great misconceptions about Microsoft? Microsoft was never a company of innovation. Microsoft became multi-gazillionaires by licensing MS-DOS, and Gates was brilliant in making it standard. Every PC sold, he got a take. He made sure that MS-DOS was on every one sold with a take and Microsoft Office and Internet Explorer (until this DOJ suit). But product innovation’s not something they’ve ever done, and when they tried?
The Windows phone’s a new one, and the mobile segment has just totally passed ’em by. They never have been a product-innovating company. They didn’t even really write DOS. They bought DOS, and then Gates refashioned it, but Gates’ genius was in contract negotiations, essentially. He was a smart tech guy, don’t misunderstand, and they still do quite well, given the market share of PCs. That business is slowing down dramatically. But they’ve never been a product innovator. They just came out with their own tablet called the Surface, and I think they’re at the point now where they will pay you to take one out of the store.