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Apple Inc. (AAPL), Microsoft Corporation (MSFT): Have Consumer Electronics Become “Good Enough”?

We could even extend the apathy for new TV technology to Blu-ray. Go to any electronics store, and you’ll see a bigger DVD section than a Blu-ray section, even though it’s been nearly a decade since Blu-ray was released. TV in 2-D HD or on DVDs is “good enough,” and consumers aren’t willing to pay extra for the next generation.

What it means for investors
When companies are wowing us with new products, it usually means high prices and high margins for product developers. When Apple Inc. (NASDAQ:AAPL) released the iPhone and iPad, it could charge a premium, and the same was true for Intel and Microsoft Corporation (NASDAQ:MSFT) when they were wowing us with better chips and operating systems a decade ago.

So if electronics have become more of a commodity, it will negatively affect margins at the electronics makers. There’s plenty of evidence that this is already happening.

AAPL Gross Profit Margin Quarterly Chart

AAPL Gross Profit Margin Quarterly data by YCharts

Over the past three years, even as the economy was improving, Apple Inc. (NASDAQ:AAPL), Intel, and Microsoft Corporation (NASDAQ:MSFT) have all seen a decline in gross margins.

Unless the consumer-electronics industry can wow customers again, I think the margin declines will continue slowly. Even low-end devices are functional for most users, and there’s no need to pay up for the best, which isn’t good for consumer-electronics stocks going forward.

The article Have Consumer Electronics Become “Good Enough”? originally appeared on Fool.com and is written by Travis Hoium.

Fool contributor Travis Hoium manages an account that owns shares of Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Intel. The Motley Fool recommends Apple and Intel and owns shares of Apple, Intel, and Microsoft.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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