Is the High-End Smartphone Boom Ending?

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July 22 (Bloomberg) -- Pacific Crest Senior Research Analyst Andy Hargreaves discusses slowing demand for high-end smartphones with Cory Johnson on Bloomberg Television's "Bloomberg West" (Source: Bloomberg)

Andy, what is it about apple's business that worries you?

Deflation is kind of a natural part of the technology cycle.

This is a company that has avoided it for the most of the last decade because of how strong their product cycle has been.

What informed us of the downgrade is you are seeing saturation in the high end smartphone market and early signs of the high end tablet market.

Typically when that happens, prices come down and volumes lowe's, which is a bad combination.

I was looking at this, looking at the numbers, and there has not been much price cutting for the product because they have added features.

We're entering into a refresh cycle, a new cycle for the phone potentially this year.

Can they hold off prices, or is the pressure from samsung too much and they will have to cut prices?

It is ironic given the downgrade, i think they can hold prices.

There retention rates are still extraordinarily high.

Their hold on the rich global consumer is still high.

A lot of discussion about a low- cost phone.

I would be surprised if the new phones they come out with are priced materially differently than the one they have now.

I think they can do that and continue to gain share of the high end, moving significantly down market is something that typically does not work.

There are less profits there than above.

When you look at the growth -- the raw numbers of how many phones they have sold is just stunning in its growth over the last five years.

I wonder how much of that is geographic, and will it come to an end?

Most rich people in the world, i guess, live in aid limited number of geographies.

So geographic in that sense.

The bottom line is, on a global basis, it costs more than more people can afford.

So your total addressable market is limited.

They can bring out a lower-cost products and try to get more people.

Usually in technology that does not work.

You can ask nokia and rim, or they can try to dominate the high end and capture as much as they can.

We think they should do the latter.

This text has been automatically generated. It may not be 100% accurate.

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