Apple: Don't Mind the Maggots

Apple (AAPL) is a wonderful profit-beating machine. It's also a dispenser of some of the finest Kool-Aid in the land.

After nailing its second-quarter numbers and sharing its customary cautious guidance, Apple laid on the real sales pitch to investors, glossing over the blemishes and putting a fine polish on its aura.

If you didn't know better, you would think Mac marketshare was still growing and the top-shelf prices that Apple commands were holding up just fine in this economy. But that's not true.

Not only did Mac sales fall for the first time in five years last quarter, but computer revenue also fell 16% from year-ago levels. Perhaps even more alarming, in view of the Mac being Apple's core business and the best-suited challenger to the industry dominators Microsoft (MSFT) and Intel (INTC), Apple lost marketshare in the second quarter as sales in North America fell 8%.

As a reflection of how tough times can rough up even the most lofty tech shops, Apple felt the pinch of a tight-fisted buyer last quarter. The combined average selling price for Macs, including laptops, was $1,320, down 6% sequentially from $1,400 in the prior quarter.

Apple's price erosion came from fewer high-end Mac buyers being replaced by less expensive MacBook customers, TBR analyst Ezra Gottheil wrote in a report Wednesday.

So what's taking a bite out of Apple? The economy, obviously, and with it the rise of what Apple deems an entirely distasteful and unworthy rival: netbooks.