Apple's 44.7% gross margins are highest in at least 15 years

Posted:
in AAPL Investors edited January 2014


Apple's record setting quarter included another major achievement for the company with gross margins of 44.7 percent, a number that was its highest in at least 15 years, and maybe its highest ever.



Apple Chief Financial Officer Peter Oppenheimer pointed out his company's gross margins and helped to put them in perspective when speaking with analysts during his company's quarterly earnings conference call on Tuesday.



"I would also say that 44.7 (percent) is a high high," Oppenheimer said. "Higher than we've seen since I've been with Apple in 15 years."



Looking toward its next quarter, the CFO said he doesn't expect Apple to be able to replicate margins that high once again. Apple provided its standard conservative guidance for the next quarter, calling for revenue of about $32.5 billion.



"Last year, we did have a sequential increase in iPhones, and that was a big contributor to our going up sequentially," Oppenheimer said. "We don't see that reoccurring this year, specially from the high of 44.7 (percent)."



Apple's total company gross margin was 470 basis points higher than its guidance for the quarter. About half of the difference was driven by lower commodity and other product costs, while the remainder came, in part, from better-than-expected iPhone sales.





Apple's gross margins through the Sept. quarter (does not include 44.7% record in Q1 2012). YCharts.







Chief Executive Tim Cook said Apple was aided in the quarter by a favorable component environment, even in the face of a hard drive shortage that drove up prices of traditional hard disk drives. Cook said he believes that favorable pricing for components Apple uses in its products will continue into the next quarter.



Oppenheimer said while the component environment is expected to be favorable next quarter, which would help gross margins, Apple expects its gross margins will be down by about 270 basis points in the March quarter.



"And we see that largely coming from the loss of leverage on the sequentially lower revenue on the December-to-March quarter," he said, "(as well as) the nonrecurrence of one-time items, which benefitted us in the December quarter, and the stronger U.S. dollar that we've seen."

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Comments

  • island hermitisland hermit Posts: 6,217member
    "Last year, we did have a sequential increase in iPhones, and that was a big contributor to our going up sequentially," Oppenheimer said. "We don't see that reoccurring this year, specially from the high of 44.7 (percent)."



    This statement should keep Slappy happy if he hasn't already jumped out of a window after reading the quarterly results.
  • christophbchristophb Posts: 1,370member
    Quote:
    Originally Posted by island hermit View Post


    "Last year, we did have a sequential increase in iPhones, and that was a big contributor to our going up sequentially," Oppenheimer said. "We don't see that reoccurring this year, specially from the high of 44.7 (percent)."



    This statement should keep Slappy happy if he hasn't already jumped out of a window after reading the quarterly results.



    My disbelief in Slapppy's actual existence is almost surpassed by my frustration that people here continue(d) to engage him.
  • matrix07matrix07 Posts: 1,993member
    Apple's revenue this quarter = 1 Microsoft+2Google+3Yahoo. (from somewhere in internet)
  • island hermitisland hermit Posts: 6,217member
    Quote:
    Originally Posted by ChristophB View Post


    My disbelief in Slapppy's actual existence is almost surpassed by my frustration that people here continue(d) to engage him.



    From here forward any negative outlook on Apple will be known as a "Slappy".
  • mauszmausz Posts: 242member
    I find it quite astounding why so many people keep paying the apple tax. It might be worth it in some cases, but in any other business consumers would not accept such high margins for stuff they buy.



    Only product without any real 'apple tax' is the iPad in my opinion, but with the iPhone costing almost double (without contract) as an Galaxy S2 in my country it's hard to justify this price difference (even if you say ios is superior to Android, which I find debatable)
  • tallest skiltallest skil Posts: 40,492member
    Quote:
    Originally Posted by mausz View Post


    I find it quite astounding why so many people keep paying the apple tax.



    Because it's not the 90s anymore and there isn't one. Come off it.
  • tjwaltjwal Posts: 404member
    Quote:
    Originally Posted by Tallest Skil View Post


    Because it's not the 90s anymore and there isn't one. Come off it.



    With a margin of 44% the apple tax is alive and well.
  • just_mejust_me Posts: 591member
    Quote:
    Originally Posted by mausz View Post


    I find it quite astounding why so many people keep paying the apple tax. It might be worth it in some cases, but in any other business consumers would not accept such high margins for stuff they buy.



    Only product without any real 'apple tax' is the iPad in my opinion, but with the iPhone costing almost double (without contract) as an Galaxy S2 in my country it's hard to justify this price difference (even if you say ios is superior to Android, which I find debatable)



    Majority of Apples cash is overseas. They don't pay tax on
  • tallest skiltallest skil Posts: 40,492member
    Quote:
    Originally Posted by tjwal View Post


    With a margin of 44% the apple tax is alive and well.



    So do we call Dell's profit margin the Dell Tax? Sony's the Sony Tax? Amazon's the? oh, right, they lose money on what they sell.



    Every company makes profits. You don't need to sensationalize it for one of them, particularly when so many people visibly don't give a crap about it, as shown in their sales numbers.
  • crowleycrowley Posts: 4,624member
    Quote:
    Originally Posted by tjwal View Post


    With a margin of 44% the apple tax is alive and well.



    "Apple tax" was only a reason not to buy when Apple couldn't get economy on production. Apple are able to make things so much cheaper than anyone else that their high margin is mostly or completely absorbed. iPad often costs no more than comparable tablets; MacBook Air often costs no more than comparable ultrabooks, and iPhone often costs no more than comparable handsets, in the final case also because Apple are able to achieve a larger subsidy from carriers than other manufacturers.



    There was a time when Apple's products were just more expensive because they wouldn't fight a price war. Now they don't need to because they're winning the cost war.
  • digitalclipsdigitalclips Posts: 15,542member
    Quote:
    Originally Posted by ChristophB View Post


    My disbelief in Slapppy's actual existence is almost surpassed by my frustration that people here continue(d) to engage him.





    He is always so polite and never gets angry so I suspect he is an Apple employee sent here to instigate really cogent responses to his anti Apple comments.
  • christophbchristophb Posts: 1,370member
    Since the argument is an Apple Tax based on gross profit of 44%. . . In 2011 MSFT had $54B in gross profit on $72B in revenue. Is there an MSFT tax?
  • christophbchristophb Posts: 1,370member
    Quote:
    Originally Posted by digitalclips View Post


    He is always so polite and never gets angry so I suspect he is an Apple employee sent here to instigate really cogent responses to his anti Apple comments.



    A caricature of a caricature.
  • jragostajragosta Posts: 10,473member
    Quote:
    Originally Posted by tjwal View Post


    With a margin of 44% the apple tax is alive and well.



    Nonsense.



    "Apple Tax" is a phrase used to suggest that consumers are paying too much for an Apple product merely because of the name. Let's look at the major product lines:



    iPhone. The iPhone is roughly the same price as many high end phones from other suppliers. And with contract, the price is also about the same. No Apple Tax here.



    iPad. No one else has a comparable (10") tablet that significantly beats the iPad on price.



    iPod Touch. Marginal. Roughly the same price as a cheapo 7" tablet, but the iPod ecosystem is superior, so you could argue this one either way.



    iPod. You could argue that the iPod fetches a significant premium.



    MacBook Air. Intel had to subsidize the other vendors for them to even come close. Even with Intel's subsidy, competitor's ultralights are not that different in price - sometimes higher, sometimes lower.



    MacBook Pro. Like the iPod, you could argue that this fetches a premium, but there are other high end PCs that are in the same price range. Realistically, the 'premium' is simply a matter of Apple only producing high end laptops and not the $499 junk that you see at Walmart.



    Mac Pro. Try comparing a comparable dual core Xeon machine from HP or Dell and you'll see that Apple is not overpriced. In fact, they're generally LESS expensive.



    iMac. Like the MBP, if you compare the iMac to all other computers, it looks high. But when you compare it to COMPARABLE computers, it's well in line. Try pricing an i7 with 27" screen from someone else.



    The Apple Tax is largely a myth.
  • cvaldes1831cvaldes1831 Posts: 1,832member
    Quote:
    Originally Posted by mausz View Post


    I find it quite astounding why so many people keep paying the apple tax. It might be worth it in some cases, but in any other business consumers would not accept such high margins for stuff they buy.



    Only product without any real 'apple tax' is the iPad in my opinion, but with the iPhone costing almost double (without contract) as an Galaxy S2 in my country it's hard to justify this price difference (even if you say ios is superior to Android, which I find debatable)



    Quote:
    Originally Posted by tjwal View Post


    With a margin of 44% the apple tax is alive and well.



    Well, if saving money is so great, why aren't the owners of non-Apple products happier?



    Apple trounces their competition in every single relevant customer satisfaction survey.



    What happened to the netbook market? Those are cheaper than the iPad and are "real computers" not "toys." One can run "real software" like Microsoft Office on netbooks.



    And why does Apple own 70% of the music player market? After all you can get a 4GB iRiver MP3 player for about half the price of a 2GB iPod shuffle.



    Why did the Dell Adamo fail? It had very comparable specs to the MacBook Air, was attractively designed and similarly priced.



    And where are Android tablet sales? The only Android tablet that moved out the door was the HP Touchpad after it was priced at $99 to clear inventory of the discontinued product line. RIM Playbook was an abject failure and the Dell Streak is gone from the U.S. marketplace.



    Can money buy happiness? Well, maybe it can, if you're buying Apple products... And you can't use the "Apple fanboy" argument since Apple's recent growth is largely from people who are new to the Apple ecosystem. Remember that about half of Mac sales in Apple Retail Stores are to first-time Mac buyers.
  • digitalclipsdigitalclips Posts: 15,542member
    Quote:
    Originally Posted by ChristophB View Post


    A caricature of a caricature.



    Escheresque
  • digitalclipsdigitalclips Posts: 15,542member
    Quote:
    Originally Posted by Just_Me View Post


    Majority of Apples cash is overseas. They don't pay tax on



    As I understand it (and I may be wrong) it's not as if Apple move it offshore, it is simply earned off shore. To me at least, this is a huge difference.



    Terminology like "Majority of Apples cash is overseas" implies to many who don't know the details that, deliberately or not, Apple are like many US corporations that set up shell companies and move money to them to deliberately evade US taxes.
  • lkrupplkrupp Posts: 4,198member
    Quote:
    Originally Posted by tjwal View Post


    With a margin of 44% the apple tax is alive and well.



    With millions of people standing in line anxious to pay it, willingly paying it, gratified to pay it. In other words willijng to pay a premium price for a premium product that is superior to anything else on the market. All told almost 60 million of them this past quarter alone. Apple sold more iPhones than Samsung's combined line of smartphones. They sold more iPads than HP sold PCs. The "Apple tax", "sheeple", "rip-off" argument rings hollow. But then that's really all the haters have left these days.
  • tallest skiltallest skil Posts: 40,492member
    Quote:
    Originally Posted by jragosta View Post


    iPod. You could argue that the iPod fetches a significant premium.



    When no other company even bothers to try to sell a good PMP anymore, you can't really call it a premium.
  • xtrmtrkxtrmtrk Posts: 21member
    So at what point do we say Apple is gouging customers with their high margins? Would it be at 75% margins? 100%? 200%?

    Apple brought in over $13 billion in profits - not sales or revenues - profits. They don't even know what to do with all of this money and for the most part it's just accumulating. When do they start turning the pricing screws on their competition? At what point would it be best to give customers a price break? Is there something better they could do with their idle money than expand their market through price reductions?
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