Apple may benefit from slowing economy

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While global economic woes certainly aren't good news for retailers this holiday season, a report by Reuters suggests a silver lining for Apple: its key competitors may be hit even harder.

The looming recession doesn't look good for anyone in retail this holiday season, but Apple's past performance with the iPod, expanding new Mac growth, and its blockbuster sales of iPhones mean that the company has both feet firmly anchored to weather the storm. That isn't the case with many of the company's rivals.

A Hollywood Reporter article syndicated by Reuters points out that Blu-ray, having finally defeated HD-DVD to become the exclusive successor to the DVD, is now facing a lull in consumer excitement just when it needed a bright holiday season to seal the deal.

The article cited Lori MacPherson, GM of domestic home-entertainment at Disney, as saying, "The economy is the biggest challenge, because there are just so many pieces to the Blu-ray puzzle that consumers face. You need the high-definition television set, you need the player, you need the cables, you need the software."

Apple's alternative to Blu-ray discs, in the form of iPod-friendly iTunes video downloads, can't really compete with the quality Blu-ray offers, particularly for users with HDTV sets larger than 50" where the increased resolution becomes most apparent.

At the same time however, the economy is dragging down consumer spending on the priciest gear, making less expensive movie downloads that don't require a hardware investment more appealing.

Another fortunate bit of timing relates to the fact that the iPhone has already gained a strong critical mass to become the top selling phone in the US this summer. Apple also managed to roll out its software store and build up a strong series of development partners before the bottom fell out of the market.

Google's Android is just now hitting the market as consumers are less likely to spend their money. Its software store is also brand new and not nearly as active, thanks to the very small installed base of Android phones. Similar efforts to open software stores by Sprint, Microsoft, and others are also going to hit the ground during the global slump.

On the Mac front, Apple also managed to complete its Intel transition and establish the Mac platform as safe for switchers who may still need to run Windows apps, all with enough time to establish sales before the economic slowdown had the chance to pinch that window of opportunity closed.

All of these factors helped contribute to Apple's burgeoning coffers of cash, a critical strength required to continue investments in technology research and avoid employee layoffs during times of tightening credit. Many less fortunately positioned companies will either be driven out of business or have to find a stronger partner that can acquire them and fund their ongoing operational expenses.


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