September 7th, 2007
Apple's $100 million apology a financial wash
UBS analyst Ben Reitzes puts the cost to Apple at $100 million this quarter (Also see What Job’s iApology says about the iPhone).
Now this sum is getting a decent amount of play on CNBC. But you have to go a little deeper than the headline to figure out that the $100 million is a wash.
For starters, the $100 million is a one time charge and Wall Street excludes those things. Meanwhile, it’s a store credit and not cash.
And then there’s the payoff for Apple. Initial reports are that the $399 price point for the iPhone is stoking sales.
So let’s add this up:
- Jobs gives Apple customers a $100 credit and an apology. This satisfies most hard core Apple fans.
- The charge will have minimum impact on earnings.
- And Apple is getting more iPhone sales out of the deal. And the price cut merely puts the iPhone price tag on par with other smartphones.
It’s a win-win in most cases.
Once folks do the math, figure out that Apple fundamentals are solid and realize there are new product cycles ahead Apple shares will be in Wall Street’s good graces again. The bigger question is whether Apple’s reputation takes a hit over this. My hunch is that it won’t.
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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| 09/07/07
