(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
By Robert Cyran
NEW YORK, June 29 (Reuters Breakingviews) - Apple (AAPL.O)
rolled out its iconic iPhone five years ago, just as Bear
Stearns subprime hedge funds sounded the alarm on a systemic
trauma. Financial woe often impedes development. But the iPhone
is proof that innovation can defy the odds and overcome hard
The advance of technology is hard to stop. R&D budgets do
get slashed in downturns. The growth rate of patent filings has
slowed during the recent crisis. But companies that don’t
invest, or that do so poorly, can suffer. Research In Motion
RIM.TO and Nokia NOK1V.HE learned the lesson all too well.
Their market values have plummeted over 90 percent since
More importantly, desired products, whether new plastics in
the 1930s or smartphones now, tend to thrive regardless of the
economic climate. About 40 percent of Dupont’s revenue in 1937
came from products introduced during the Great Depression.
Almost 60 percent of Apple’s sales are now generated by the
Apple’s focus on high-end customers hasn’t hurt. Even
reduced disposable income at a certain level still leaves plenty
left over for a new bauble. But the iPhone offers value for the
considerably less affluent, too. It replaces digital cameras,
personal organizers, guidebooks, dictionaries, satellite
navigation systems and music players. That list isn’t inclusive
and is bound to grow.
The contrast with the financial crisis is a stark one.
Apple’s market value has increased by about $430 billion since
the iPhone was introduced. The device represents a majority of
the company’s sales and an even greater proportion of profit,
and has contributed greatly to the popularity of the iPad. That
makes it safe to ascribe a healthy amount of the gain to the
By comparison, Apple’s increased capitalization isn’t far
off the $470 billion that was required from the U.S. Treasury’s
Troubled Asset Relief Program to bail out Citigroup (C.N), AIG
(AIG.N), General Motors (GM.N) and others. Real estate crashes
reverse themselves and debt hangovers get worked off. In the
meantime, technology relentlessly marches on and provides fresh
stepping stones for the eventual recovery. That makes the iPhone
a hopeful reminder for a world stewing in another five-year
anniversary that isn’t much worth celebrating.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- Apple’s iPhone first went on sale in the United States on
June 29, 2007.
- In the most recent quarter, the company sold 35 million of
the devices. The $22.7 billion of revenue from the handsets
during the quarter accounted for 58 percent of Apple’s sales.
- On June 23, 2007, Bear Stearns pledged over $3 billion to
rescue one of its hedge funds that had suffered big losses from
subprime mortgages. The attempted bailout turned out to be one
of the earliest signs of a systemic crisis.
Crispy Apple [ID:nL1E8G367T]
- For previous columns by the author, Reuters customers can
click on [CYRAN/]
(Editing by Jeffrey Goldfarb and Martin Langfield)
Keywords: BREAKINGVIEWS APPLE/IPHONE
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