Is High-End Tech Going Out of Style?

Jacob Harper |

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Chromebook, Google's (GOOG) foray into the growing low-end laptop market, has finally started to see success. According to consumer research group NDP Group Inc., the Chromebook has already snared between 20 and 25 percent of the entire sub-$300 laptop category.

Another popular alternative to high-priced computing, tablets, have also seen healthy growth. Tablet sales increased 142.4 percent from Q1 2012 to Q1 2013,  to hit 49.42 million units shipped worldwide.

Simultaneously, the high-end market has stagnated. In the first quarter of 2013, Apple (AAPL) sold 4.1 million Macs, down 1.1 million from first quarter 2012. In the same time periods, sales of Apple's iPad went up from 15.4 million to 22.9 million on the introduction of the relatively affordable iPad and iPad Mini. An iPad 5 is expected by the end of the year, with a price point around $500.



The smartphone market tells a similar story to low-end laptops and tablets. Apple’s flagship, the iPhone, and Samsung’s wildly successful Galaxy are not immune to the trend, as consumers flock to theoretically outdated – read, cheaper – versions. Canaccord Genuity’s Mike Walkley warned investors in Barron’s that “sub-$400 Samsung Galaxy S IIIs and iPhone 4s continued to sell better than our expectations, while the (more expensive) iPhone 5 and Galaxy S4 sold below our expectations.”

This general trend in all three arenas points to a consumer preference for cheaper tech. Tablets, smartphones and laptops are far cheaper than desktop units, and mobility and affordability are increasingly important to consumers.

The sub-$300 laptop market is expected to increase by 10 percent by the end of 2013. Conversely, MacBook sales slumped 6 percent during the 2012 holiday season. MacBooks retail for between $1,200 and $2,800.

Consumers seem to be less concerned with keeping up with the Joneses and snatching up new releases, and more concerned with staying connected via the cheapest means possible. Though consumer confidence continues to go up, aftershocks of the Great Recession have people spending less to stay connected.

Google’s high end version of the Chromebook, Pixel (retailing for around $1,300) has been called by analyst more of a status symbol than a serious sales threat – a neat toy, a “flagship device that has a halo effect for the broader portfolio.” Like their entrance into the gaming console market, Google's Pixel appears to be more of a sleek demonstartion of what they are capable of than a serious attempt to make a dent in the market.

Because the future, it seems, is pointing towards a continuing growth of cheaper alternatives. It's a trend that, if it holds, could spell the end of the High-End Tech Era.

Google’s stock is up 1.57 percent to hit $919.95 a share. Apple is up 1.63 percent to hit $427.72 a share.

(Editor's note: the author is long Apple stock)

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 150.27 -0.07 -0.05 26,252,630 Trade
GOOG Alphabet Inc. 972.92 4.77 0.49 1,711,000 Trade
AFTC Alternative Fuel Techs 0.00 0.00 0.00 4,980,000

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