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The real news is that their margins seems to have shrunk dramatically from 48% to 38% and profit is down 18% from the year ago quarter. Looks like they're faci

The real news is that their margins seems to have shrunk dramatically from 48% to 38% and profit is down 18% from the year ago quarter. Looks like they're facing pressure and are dropping prices to maintain sales.

Osmium 13y ago
The iPad Mini didn't exist last year, and that's surely a lower margin product. I also have no doubt that margins are tighter than they used to be on their MacBook Pro line now they've switched to Retina screens and all-SSD. But both of these are likely to be less of an issue as the tech gets cheaper, so it might not be quite as dramatic as it seems at first glance. That said, they are surely facing tougher smartphone competition than ever now.
- cooldeal 13y ago
  >The iPad Mini didn't exist last year, and that's surely a lower margin product Why is it "surely" so? We're talking percentage margin here, not the margin in dollar terms. The iPad Mini can theoretically have a higher margin than the iPad.
  - Osmium 13y ago
    Source: http://www.theverge.com/2012/10/25/3555664/apple-ipad-mini-margin-is-significantly-below-corporate-average http://www.theverge.com/2012/10/25/3555664/apple-ipad-mini-m... The way I think about it, the iPad Mini requires largely the same components as the regular iPad but runs at hundreds of dollars less. This is slightly mitigated by a cheaper screen and smaller battery, but I'd have thought it's still a lower margin product.
  - filmgirlcw 13y ago
    Apple has consistently warned that margins on the iPad mini are lower and it will impact overall gross margin.
ajross 13y ago
To be clear: this is great news for anyone who isn't an Apple shareholder. If you're a fan of the hardware, it's getting cheaper! If you like the other brands, iOS's margins are shrinking and competition is working! It's a win-win all around. The kind of profit's Apple's been making over the last half decade really aren't a good thing, even for Apple. They can barely spend it, and that money could be driving growth elsewhere.
- MichaelApproved 13y ago
  I was with you until you said that amazing profits aren't a good thing, even for Apple. Yes, the amount of money is more than what Apple can realistically spend but they can give that money to shareholders who could invest that money in other ventures. That's an amazing result of great profits.
  - ajross 13y ago
    How is that different from not taking that money from consumers (or investors) in the first place? If a consumer gives Apple $1 to hold for N months before Apple hands it over to a shareholder, that is clearly less effective than the consumer simply giving that dollar to the investor in the first place (e.g. by dropping it in the stock market). I'm not saying that "Apple doesn't deserve its profits". I'm saying that past a certain point, the marginal value to society of huge profits drops to zero, and that Apple is past that point.
    - snowwrestler 13y ago
      I don't see why the marginal value of profits drops to zero. Profits fund bets on the future. The bigger the profits, the bigger the bets that can be made.
    - MichaelApproved 13y ago
      "the marginal value to society of huge profits drops to zero, and that Apple is past that point" It wasn't a discussion about value to society. It was discussion about too much money being a bad thing for Apple, which I disputed.
LekkoscPiwa 13y ago
which is very stupid of them. It's akin to Porsche cutting prices on 911 because market (i.e. market analysts should be the term) demands it. I don't want cheap phone from Apple or a cheap car from Porsche. I want a smartphone from Apple that has the best design, the best build quality, the best user interface, the best customer service. Samsung and others are just assembly plants and they don't seem to "get" value added portion of the products. Switching from iPhone to S3 was for me what switching from Mac OS X to Win Vista/7/8 could have been. A disaster. I don't want cheap Mac OS X. I want one that doesn't suck like the competition does. And hell yeah, I'm going to spend more on it. The earnings are lower because Apple started to be more like everybody else - a commodities manufacturer where the cost is everything. Anybody resurrect Steve, please?
- SupremumLimit 13y ago
  And yet that's exactly what Porsche did with the Boxster. It's exactly what BMW did with expanding their product line with the 1 series. I guess if you want continued growth, eventually you might have to expand into lower margin products. It's not so black and white between expensive products and commodities, by the way. Both Boxster and 1 Series are still relatively expensive.
  - LekkoscPiwa 13y ago
    >> Both Boxster and 1 Series are still relatively expensive. Right, spot on, $50k for a 6-cylinder two-seater while American counterparts are half the price with 8-cylinder engines. And who says Porsche/BMW are in trouble because of that? And who says GM has a great business model because of that? Nobody! But in the tech it is somehow backwards. Who cares about Porsche market share in their right mind? Porsche makes about $20k on average on every vehicle they sell in Europe. And they have maybe 0.5% of the market share. GM losses nearly $2k on every vehicle they sell in Europe. And has about 20% of the market. I don't think that "commodity model" makes sense for Apple. They should stay away from it.

Osmium 13y ago

The iPad Mini didn't exist last year, and that's surely a lower margin product. I also have no doubt that margins are tighter than they used to be on their MacBook Pro line now they've switched to Retina screens and all-SSD. But both of these are likely to be less of an issue as the tech gets cheaper, so it might not be quite as dramatic as it seems at first glance. That said, they are surely facing tougher smartphone competition than ever now.

cooldeal 13y ago
>The iPad Mini didn't exist last year, and that's surely a lower margin product Why is it "surely" so? We're talking percentage margin here, not the margin in dollar terms. The iPad Mini can theoretically have a higher margin than the iPad.
- Osmium 13y ago
  Source: http://www.theverge.com/2012/10/25/3555664/apple-ipad-mini-margin-is-significantly-below-corporate-average http://www.theverge.com/2012/10/25/3555664/apple-ipad-mini-m... The way I think about it, the iPad Mini requires largely the same components as the regular iPad but runs at hundreds of dollars less. This is slightly mitigated by a cheaper screen and smaller battery, but I'd have thought it's still a lower margin product.
- filmgirlcw 13y ago
  Apple has consistently warned that margins on the iPad mini are lower and it will impact overall gross margin.

ajross 13y ago

To be clear: this is great news for anyone who isn't an Apple shareholder. If you're a fan of the hardware, it's getting cheaper! If you like the other brands, iOS's margins are shrinking and competition is working! It's a win-win all around. The kind of profit's Apple's been making over the last half decade really aren't a good thing, even for Apple. They can barely spend it, and that money could be driving growth elsewhere.

MichaelApproved 13y ago
I was with you until you said that amazing profits aren't a good thing, even for Apple. Yes, the amount of money is more than what Apple can realistically spend but they can give that money to shareholders who could invest that money in other ventures. That's an amazing result of great profits.
- ajross 13y ago
  How is that different from not taking that money from consumers (or investors) in the first place? If a consumer gives Apple $1 to hold for N months before Apple hands it over to a shareholder, that is clearly less effective than the consumer simply giving that dollar to the investor in the first place (e.g. by dropping it in the stock market). I'm not saying that "Apple doesn't deserve its profits". I'm saying that past a certain point, the marginal value to society of huge profits drops to zero, and that Apple is past that point.
  - snowwrestler 13y ago
    I don't see why the marginal value of profits drops to zero. Profits fund bets on the future. The bigger the profits, the bigger the bets that can be made.
  - MichaelApproved 13y ago
    "the marginal value to society of huge profits drops to zero, and that Apple is past that point" It wasn't a discussion about value to society. It was discussion about too much money being a bad thing for Apple, which I disputed.

LekkoscPiwa 13y ago

which is very stupid of them. It's akin to Porsche cutting prices on 911 because market (i.e. market analysts should be the term) demands it. I don't want cheap phone from Apple or a cheap car from Porsche. I want a smartphone from Apple that has the best design, the best build quality, the best user interface, the best customer service. Samsung and others are just assembly plants and they don't seem to "get" value added portion of the products. Switching from iPhone to S3 was for me what switching from Mac OS X to Win Vista/7/8 could have been. A disaster. I don't want cheap Mac OS X. I want one that doesn't suck like the competition does. And hell yeah, I'm going to spend more on it. The earnings are lower because Apple started to be more like everybody else - a commodities manufacturer where the cost is everything. Anybody resurrect Steve, please?

SupremumLimit 13y ago
And yet that's exactly what Porsche did with the Boxster. It's exactly what BMW did with expanding their product line with the 1 series. I guess if you want continued growth, eventually you might have to expand into lower margin products. It's not so black and white between expensive products and commodities, by the way. Both Boxster and 1 Series are still relatively expensive.
- LekkoscPiwa 13y ago
  >> Both Boxster and 1 Series are still relatively expensive. Right, spot on, $50k for a 6-cylinder two-seater while American counterparts are half the price with 8-cylinder engines. And who says Porsche/BMW are in trouble because of that? And who says GM has a great business model because of that? Nobody! But in the tech it is somehow backwards. Who cares about Porsche market share in their right mind? Porsche makes about $20k on average on every vehicle they sell in Europe. And they have maybe 0.5% of the market share. GM losses nearly $2k on every vehicle they sell in Europe. And has about 20% of the market. I don't think that "commodity model" makes sense for Apple. They should stay away from it.