Apple (AAPL): The Recession Comes Calling

Wall St. was disappointed by RIM’s (RIMM) forecast for the upcoming few quarters? Could the same thing happen to Apple (AAPL)?

Several companies in the cell phone business have made comment that the second half of the year will be rough. The latest was Sony-Ericsson, which relies on high-end handsets for most of its sales. Shares in Nokia (NOK) have dropped sharply on similar concerns.

The launch of the new 3G iPhone is almost certain to be a success which will be the envy of every other handset company in the world. But, if the recession continues to deepen, what happens to the product a month or two after the first flood of buyers?

A recession will cut into the buying power of customers shopping for iPhones, iPods, and Mac, but inflation, which erodes consumer spending capacity, is even worse. All of Apple’s products are discretionary purchases, which makes the company vulnerable to a sharp drop in the economy.

Apple’s shares have already made a move down from nearly $190 in early June to $170. If analysts begin to show concern that Apple’s sales are being cut by sharp drops in consumer purchasing, the firm’s shares could move back toward $120 where they traded in late March.

Douglas A. McIntyre