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Apple: Economy Is Depressed

by: Eric Savitz July 24, 2008 | about stocks: AAPL    

Eric Savitz

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No one has official said we’re in a recession. But consider this: Apple (AAPL) thinks the economy is “depressed.”

As Michelle Leder points out in her always-interesting Footnoted.org blog, Apple’s latest 10-Q, filed yesterday with the SEC, includes some new language about the economic risks the company faces.

The new filing says this (emphasis added):

The Company’s operations and performance depend significantly on worldwide economic conditions and their impact on levels of consumer spending, which have recently deteriorated significantly in many countries and regions, including without limitation the United States, and may remain depressed for the foreseeable future. For example, some of the factors that could influence the levels of consumer spending include continuing increases in fuel and other energy costs, conditions in the residential real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence and other macroeconomic factors affecting consumer spending behavior. These and other economic factors could have a material adverse effect on demand for the Company’s products and services and on the Company’s financial condition and operating results.

As she points out, there is no similar language in the previous 10-Q, which in the same section said the following:

The Company’s operations and performance depend significantly on worldwide economic conditions. War, terrorism, geopolitical uncertainties, public health issues, and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on the Company, its suppliers, logistics providers, manufacturing vendors and customers.

Michelle notes that The last time Apple used the word “depressed” in any of its filings was in December 2003, “when it used the word to describe its own sales.”

Puts the question of Apple’s vulnerability to a weak economy in a new light.

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This article has 7 comments:

  •  
    Jul 24 03:23 PM
    For some economy showing extreme softness, to some this is a recession and to some this is a depression. Depends what sector you are in, hedges and cash flow position.

    Overall, to me this is a recession and has been for two quarters now. Depression? Yeah it is heading that way but we just really began the nasty downward spiral trend. What we all saw is back to back market crashes at the end of each quarter.

    The economy will see some short term rallying Q4 with oil easing and around election time. Then begin a slow but steady deflation to finish shaving off 20% of our GDP by 2011.

    Let's see how Washington does with policy, specifically energy. More socialism for the rich in 2009 will exacerbate the pain later but here's to being hopeful that the D.C. mental dwarves are paying attention now.
    Reply
  •  
    Jul 24 03:50 PM
    Seriously, stop wasting internet space with his crap.
    Reply
  •  
    Jul 24 04:09 PM
    judging by the lines at the stores yes the depression will slow the growth rate from 800 percent to somewhere around 799. if we were in a "depression" and i was as broke as Russell Crowe in Cinderella man i could only afford one present for my kid this christmas guess where i would spend my wad. No worries about the apples mate!
    Reply
  •  
    Jul 24 04:14 PM
    NOBODY KNOWS ANYTHING! The economy will do what it's going to do... and APPLE... even though it has had uninterrupted stellar growth... is in a downward trend... Iphone and all. If everyone knew.. there would be NO recession.. and NO downward trend in APPLE. FOLKS.... We're gambling.... That's all this is.. GAMBLING. Some are lucky to catch the wind upward... few of us pull the trigger when we have a profit. So, we ride it lower. and hope for the rise again. Programs for trading just make it AN EDUCATED GUESS.. but, even those things are wrong. The people factor.. and their vulnerbilities.. make accurate fore casting..... unrealistic.
    Reply
  •  
    Jul 24 04:42 PM
    I believe your over looking Apple's key support, entertainment. No matter which way the market goes people will always want to be entertained. Proof is in the the new release of Dark Night. What Apple has brought to the table is the vehicle and the fuel is sold through iTunes. Coke survived the depression because of its cheap cost and thrill factor. iTunes will do the same for Apple...
    Reply
  •  
    Jul 25 09:16 AM
    Bank failures--wall street failure---real estate values went and still are going down ---government bail outs--energy cost sky high--unemployment ---hmmm in the 1930's this was called a depression--so please call it like it is
    Reply
  •  
    Jul 25 12:00 PM
    if people are cutting back on spending for back to school, vacations, auto purchases, and house payments, I think they would be inclined to purchase a less costly mobile telephone as an interim measure pending a recovery in future confidence. appeletts are a cult like band of lemmings wanting the newest touchy techie thing to show off to their band. kinda like $450 sunglasses.
    Reply
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