Apple says economy is “depressed”…

July 24, 2008

While some people continue to debate whether or not we’re actually in a recession, Apple (AAPL) went a step further in the 10Q it filed yesterday, using stark new language to describe the state of the economy in its risk factors section:

The Company’s operations and performance depend significantly on worldwide economic conditions and their impact on levels of consumer spending, which have recently deteriorated significantly in many countries and regions, including without limitation the United States, and may remain depressed for the foreseeable future. For example, some of the factors that could influence the levels of consumer spending include continuing increases in fuel and other energy costs, conditions in the residential real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence and other macroeconomic factors affecting consumer spending behavior. These and other economic factors could have a material adverse effect on demand for the Company’s products and services and on the Company’s financial condition and operating results.”

I’ve highlighted the key words in this disclosure. Just to put this into perspective, this is how Apple handled the economy risk factor in the Q it filed back on May 1:

The Company’s operations and performance depend significantly on worldwide economic conditions. War, terrorism, geopolitical uncertainties, public health issues, and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on the Company, its suppliers, logistics providers, manufacturing vendors and customers.

Keep in mind that the words that companies use in their SEC filings are chosen very carefully, and this is probably particularly true for Apple, which is especially cautious about everything that gets out, as we’ve seen with the all the discussion this week on Steve Jobs’ health. The last time Apple used the word depressed in any of its filings was back in December 2003, when it used the word to describe its own sales, so it’s hard to chalk this up to an accidental insertion.

In Monday’s conference call, economic conditions came up briefly in a question from Sanford Bernstein analyst Toni Sacconaghi that was answered by CFO Peter Oppenheimer:

Toni, we’re going to leave economic commentary to others but we didn—t see any obvious impact to the business in the June quarter, and I talked a little bit about in my prepared remarks just how we did at the company level but also in the U.S., in our retail stores with our iPods and our education unit, which had the best June quarter in our history. We’re certainly aware of the economic environment and we—ve considered it among other factors in preparing our guidance.

Perhaps Oppenehimer was thinking nobody would catch what’s clearly economic commentary in the Q.

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