Morningstar.com Praises Apple's Retail Strategy

by , 5:00 PM EDT, September 5th, 2001

Morningstar.com has posted a ringing endorsement of Apple's retail strategy that says Apple's retail stores will help push Apple out of its 5% market share niche. The article looks at a variety of issues including Apple's financial strength, the company's unique position, and other related factors. From the article:

Last week I toured Apple's fifth retail store, located in Schaumburg, Ill., with a group of analysts and reporters. After seeing the store, I'm convinced that Apple's retail strategy could finally help the company grow beyond its 5% niche. By opening retail stores in areas with existing foot-traffic (all six current locations are in high-profile shopping malls), Apple hopes to raise consumer awareness of its products.

In its most recent 10-Q statement, Apple disclosed that it plans to spend $85 million to build out its first 25 stores, and the firm has signed store leases valued at $203 million. In addition, Apple will incur the costs of paying employees and stocking the stores. Can Apple afford the stores? Absolutely. Apple has around $4 billion in cash and investments (and no debt) on its balance sheet, so the price tag on the stores isn't much of a problem. In fact, I think that investors are more likely to get a better return on the store investment than they would if Apple were to keep that money in the bank, generating a small amount of interest.]

Apple Isn't Gateway?
Furthermore, other computer makers have found that computer retailing isn't as easy as it looks. After all, isn't Gateway still having problems competing with Dell and Compaq, despite its big retail push? And wasn't Gateway already closing some of its underperforming stores?

Well yes, and yes.

But there are critical differences between Apple and Gateway. Most importantly, Apple is not a victim of the PC price war. Of all the PC vendors, Apple is in a unique position because it does not have to play the pricing game on Dell's terms.

Thee is a lot more that we did not quote, and it's a very good read.

The Mac Observer Spin:

This is really a surprisingly robust endorsement for Apple. It definitely tickled our fancy when we read it.

Morningstar.com Report