While Apple Inc. (NASDAQ:AAPL) shares followed the basic pattern of the overall market last week — falling sharply on Monday and battling back on well-received remarks from Federal Reserve Chairman Ben Bernanke — technology is often thought of as existing outside of the classic economic pressures. Think of it as the last, and essentially invisible, divide between the old economy and the new economy. Given this divide, you must ask yourself if it remains a legitimate point of differentiation, or if it may be the source of some investment mistakes, particularly as companies mature.
One of the reasons for this disconnection is that consumers have essentially inelastic demand for smartphones. No matter how bad things may get, you are going to find a way to keep your iPhone running. This does not mean that Apple Inc. (NASDAQ:AAPL) can rest on past successes. CEO Tim Cook somewhat startled investors when he said that the company was “looking” at new product segments, which might signal that Apple has reached a certain level of maturity that requires more attention to be paid to macroeconomic influences. Or it could mean that Cook is being coy before the company goes to market with a big release.
Big Ben chimes in Congress
When Bernanke testified last week before the House Financial Services Committee, he made it abundantly clear that despite the voices of dissent as to current Fed policy, the country’s monetary policy was not about to be altered. Since last December, the Fed has more explicitly tied interest rates and quantitative easing measures to the employment rate and inflation. While members of the Federal Open Market Committee have publicly commented that perhaps the Fed should alter its course, Bernanke claims the stimulus measures are working and will continue.
What does this have to do with Apple?
One of the biggest and most germane criticisms of Apple Inc. (NASDAQ:AAPL) is that it does not have a sufficiently comprehensive emerging-markets strategy. This is the complicated way to say that the company is missing out on a lot of potentially critical sales by not releasing a cheap iPhone that can attract purchasers in areas where a full-priced iPhone 5 is simply out of reach. This means that Apple Inc. (NASDAQ:AAPL) is particularly dependent on sales in the U.S. and Europe, although China is becoming increasingly critical and is likely to become the most important market in the future.
To bring this back to the Fed, if the economy goes into a tailspin, Apple will likely be affected more than Google Inc (NASDAQ:GOOG) and more than not-at-all. The reach of Android into the low-end market means that the sale of Android phones is less affected by a recession. Emerging-market economies would be affected by a U.S. recession much differently than Europe or even China. Since Apple Inc. (NASDAQ:AAPL) is so reliant on sales to the consumers of developed nations, it has greater exposure to a recession.