Will Apple (AAPL) iPhone Sales Cause A New Recession?
http://247wallst.com/2009/06/23/will...new-recession/
Apple (AAPL) sold more than one million of its new iPhones over the
weekend. The costs of those handsets could have been $300 million, and
that does not include the two-year calling plan from AT&T (T).
Together, the handset and service commitments made by consumers should
be between $500 million and $1 billion. Those figures could easily
stretch to $3 billion or $4 billion by the end of the summer, even if
the pace of sales of the iPhone drops considerably.
The success of the new phone is either a sign that customers have the
cash to help push up consumer spending, or they are willing to return
to their leveraged habits, habits that helped bring on and then
exacerbate the recession. It may take months to know which of the two
possible paths the economy is taking.
The sales of the iPhone are certainly a sign that the consumer has
become intrepid. He has been unwilling to part with money for several
quarters now. An especially well-made, well-branded, and well-marketed
product has changed that. Buyers could have resisted those
enticements, but they did not.
It is too bad that the no one knows where customers got the money to
buy their iPhones and whether they will be able to pay that debt and
the cost of the AT&T subscription plan. The money may have been
borrowed. It is borrowing the consumer may not have been able to
afford. AT&T subscriber default rates over the next few months will be
worth watching. iPhone purchasers may have overextended themselves.
The other and more optimistic case is that consumers have saved money
long enough and kept household expenses down so that they can afford a
new modestly priced consumer electronics device. But, that sounds un-
American. No one pay cash anymore if they can use leverage. The
recession has probably not taught people a thing.
Douglas A. McIntyre
Will Apple iPhone Sales Cause A New Recession? 
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