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Apple's gross margins expected to improve as iPhone 4 'antennagate' ends

post #1 of 23
Thread Starter 
The end of Apple's free iPhone 4 case giveaway, along with improved production of the iPad, will help the company's gross margins improve, one analyst believes.

Apple Chief Financial Officer Peter Oppenheimer last week participated in a conference call with New York-based investment firm Gleacher & Company. Unsurprisingly, Oppenheimer did not reveal any incremental information about Apple, but analyst Brian Marshall did state he believes Apple's gross margin profile is in the process of bottoming.

"In fact, if we are correct in our assessment that 'antenna-gate' is behind us and the bumper give-away will cease soon, APPL's gross margin will automatically improve 100bps assuming all else equal (due to $175mil revenue deferral reversal)," he wrote. "If this happens, in our view, one of the greatest investor concerns will be lifted."

In the company's last quarterly earnings conference call, Apple said it would defer about $175 million to buy cases for the iPhone 4 Case Program. That cost will be recognized upon delivery to customers.

In July, Apple Chief Executive Steve Jobs announced that his company would give away free cases to all iPhone 4 buyers through Sept. 30. After that date, the company will review the situation and conclude whether or not it will continue the giveaway.

In addition to the potential conclusion of the iPhone 4 Case Program, Marshall also sees Apple's margins improving as production of the iPad continues to ramp up and the manufacturing process continues to improve.



Marshall also noted that the Mac is likely to see market share gains in the current quarter due to a strong back-to-school season. He also does not believe that the iPad is cannibalistic to any of Apple's other products, and he projected that the new iAds mobile advertising network could drive roughly $1 in incremental annual earnings per share when fully ramped.

Finally, Marshall also noted that Apple seems to launch "revolutionary products" on a three-year cycle: The iPod ramp took place in 2004, the iPhone was launched in 2007, and the iPad debuted in 2010. Next up for Apple, he believes, is the living room, perhaps in 2013.

"For now, we will have to be satisfied with Apple TV," he said.

Gleacher & Company reiterated its "buy" rating for AAPL stock, and has maintained a price target of $345.
post #2 of 23
Quote:
Originally Posted by AppleInsider View Post

.



Marshall also noted that the Mac is likely to see market share gains in the current quarter due to a strong back-to-school season.




Why should any of us care about market share gains?
post #3 of 23
these are .30 ct. cent bumpers ........

Why give such heavy weight to a very low cost item veers the over all cost to produce ?? Or is it the LOSS of 29 profit per bumper that sticks apple in the gut ???

dunno dept


9
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beatles
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beatles
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post #4 of 23
Quote:
Originally Posted by SendMe View Post

Why should any of us care about market share gains?

Well that means the IPAD IS NOT hurting imac sales.
I guess.



9
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post #5 of 23
Quote:
Originally Posted by AppleInsider View Post

Finally, Marshall also noted that Apple seems to launch "revolutionary products" on a three-year cycle

That may be more coincidence than intentional. If they've got something that's ready to sell, they're not gonna just wait around for their "cycle." AppleTV has been a "hobby" for several years now and I'm sure the only thing holding back the revamped model is content deals with the studios. Google is being aggressive in this space, and internet-connected TVs are starting to gain a little steam. 2013 may be too late.
post #6 of 23
As always, the voice of the unhappy is louder than the happy. I haven't heard much about the antenna since the press conference and was personally a non-issue for me.
post #7 of 23
Quote:
Originally Posted by ghostface147 View Post

As always, the voice of the unhappy is louder than the happy. I haven't heard much about the antenna since the press conference and was personally a non-issue for me.

I had all the antenna problems, to the point where it would even drop to no bars while standing next to a MicroCell if I held it normally in my left hand (to, say, tap with my right). The bumper case fixed it entirely, and now the reception is better than any previous iPhone. The question is whether Apple is going to keep giving them away or force people to buy them separately with every iPhone 4. I'm not sure they can get away with the latter-- they want antennagate to stay in the past and not to re-surface, and $100M a year is small change to keep the iPhone juggernaut rolling.
post #8 of 23
Setting aside $175 million to cover the cost of a dollar bumper (if that) is so sweet. Accountants and lawyers working together, what a joke.

I also have to dismiss this three year cycle BS. Apple could have some major winners on its hands right before Christmas. ITV for one has some potential but i think the big winners will be the FaceTime compatible iPods which ought to have a tremendous impact on sales.

Plus AIR could be refactored into something useful.

Of course you might say these are not new products, which is technically true. Simply putting FaceTime on iPods instantly makes them new products in the eye of the user. Compelling products for many actually. With FaceTime touch devices instantly become a new product.


Dave
post #9 of 23
This three-year cycle is hogwash.

The iPod launched in 2001. So much for researching your facts.
post #10 of 23
Quote:
Originally Posted by brucep View Post

these are .30 ct. cent bumpers ........

Why give such heavy weight to a very low cost item veers the over all cost to produce ?? Or is it the LOSS of 29 profit per bumper that sticks apple in the gut ???

dunno dept


9

It's the cost of the bumpers - that drops the profit margin by 1%... That concerns investors. Apple probably couldn't care less, they're selling every single iPhone4 and iPad they can make.

My prediction is that in October the free case program goes away particularly because internationally it's not really an issue. At worst Apple will maintain it for US customers only.

So starting October not only can we put antennagate behind us but we can grab the popcorn and watch Apple waltz into yet another most profitable quarter ever.
post #11 of 23
(vehemence retracted)
post #12 of 23
Quote:
Originally Posted by SendMe View Post

Why should any of us care about market share gains?

Quote:
Originally Posted by brucep View Post

Well that means the IPAD IS NOT hurting imac sales.
I guess.

9

Well that's one thing, yeah.
post #13 of 23
Quote:
Originally Posted by brucep View Post

Well that means the IPAD IS NOT hurting imac sales.
I guess.



9

iPad sales can hurt Mac sales when the former becomes mainstream. Not so fast!
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Same Apple. Same Mac. Different Take. Different Place. http://Applemacness.com
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post #14 of 23
Quote:
Originally Posted by striker_kk View Post

iPad sales can hurt Mac sales when the former becomes mainstream. Not so fast!

How many millions more do they have to sell before you would call the iPad "mainstream?"
Please don't be insane.
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Please don't be insane.
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post #15 of 23
Antennagate was of trivial consequence for Apple's margins.

I am far more concerned about the fact that millions of units of sales are perhaps being foregone because of production constraints, and the additional millions waiting for the white phone (some of whom might be tempted to switch to non-iPhones).

Why still no word on white?

Papermaster looks to have been a total disaster: overall, this has been an instance of extremely poor execution by Apple.
post #16 of 23
Quote:
Originally Posted by brucep View Post

these are .30 ct. cent bumpers ........

Why give such heavy weight to a very low cost item veers the over all cost to produce ?? Or is it the LOSS of 29 profit per bumper that sticks apple in the gut ???

dunno dept


9

cost of materials, manufacture, packaging AND shipping. probably a fair bit more than $0.30
post #17 of 23
Quote:
Originally Posted by irnchriz View Post

cost of materials, manufacture, packaging AND shipping. probably a fair bit more than $0.30

Also, they are sourcing some 3rd-party cases for this purpose, and that cost is almost certainly higher than bumper costs.
post #18 of 23
Quote:
Originally Posted by Dr Millmoss View Post

How many millions more do they have to sell before you would call the iPad "mainstream?"

If iPad emerges a winner in the face of competition, then it likely becomes mainstream. Let other bigwigs come with their tablets/slates.
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post #19 of 23
Quote:
Originally Posted by cvaldes1831 View Post

This three-year cycle is hogwash.

The iPod launched in 2001. So much for researching your facts.


so the iphone launched after 2 three year cycles

(sorry, i had to do that, this is VERY trolly)

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PC means personal computer.  

i have processing issues, mostly trying to get my ideas into speech and text.

if i say something confusing please tell me!

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post #20 of 23
Quote:
Originally Posted by striker_kk View Post

If iPad emerges a winner in the face of competition, then it likely becomes mainstream. Let other bigwigs come with their tablets/slates.

Sounds like inverted logic to me. It seems you are saying that if the iPad competes well with other (mainly yet to be seen) products in the category, then it may begin to eat into Mac sales. My feelings is that the risk to Apple and Mac sales is a failure to compete in this category, not to succeed in it.
Please don't be insane.
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Please don't be insane.
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post #21 of 23
Quote:
Originally Posted by anantksundaram View Post

Antennagate was of trivial consequence for Apple's margins.

I am far more concerned about the fact that millions of units of sales are perhaps being foregone because of production constraints, and the additional millions waiting for the white phone (some of whom might be tempted to switch to non-iPhones).

Why still no word on white?

Papermaster looks to have been a total disaster: overall, this has been an instance of extremely poor execution by Apple.

You said it, mate. Here in NZ you can't get new iPhones for love nor money (I have tried both).
Some peeps managed to get one in the small shipment that came in a couple of weeks ago, but I heard it was less than 10k of phones. Not much for a whole country!

If I don't get one before the end of September, then I will have to give up. I guess Apple doesn't want my money!

BTW the need to get a new phone is because it is dependent on selling my 3GS. If you have to wait too long for the new model you miss the resell cycle of the second hand market here.
Bummer.

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post #22 of 23
Quote:
Originally Posted by anantksundaram View Post

Antennagate was of trivial consequence for Apple's margins.

I am far more concerned about the fact that millions of units of sales are perhaps being foregone because of production constraints, and the additional millions waiting for the white phone (some of whom might be tempted to switch to non-iPhones).

Why still no word on white?

Papermaster looks to have been a total disaster: overall, this has been an instance of extremely poor execution by Apple.

I don't think it is extremely poor execution, the demand has been insane, really. First people thought the iPad would only do a few million, tops, in 2010. We're talking now an order of magnitude greater. This must impact resources and attention devoted to ramping up iPhone. As for the iPhone, people thought with antenna gate things were going to be bad. We're now looking at numbers and demand in countries far outstripping anything the iPhone 3GS experienced. Papermaster looks to have dropped the ball, particularly on the white iPhone, though Apple right now can probably sell more iPhones by devoting all manufacturing to the black. Poor execution, maybe, but only by Apple's own standards.

Quote:
Originally Posted by striker_kk View Post

If iPad emerges a winner in the face of competition, then it likely becomes mainstream. Let other bigwigs come with their tablets/slates.

Well, we know that iPad is now more mainstream than the Mac... And it hasn't even covered all the countries where Macs are sold, barely so. I would definitely right now think of iPad as a netbook/ ultralight laptop if I were any other computer manufacturer, regardless of who else comes out with a tablet.

Quote:
Originally Posted by lostkiwi View Post

You said it, mate. Here in NZ you can't get new iPhones for love nor money (I have tried both).
Some peeps managed to get one in the small shipment that came in a couple of weeks ago, but I heard it was less than 10k of phones. Not much for a whole country!

If I don't get one before the end of September, then I will have to give up. I guess Apple doesn't want my money!

BTW the need to get a new phone is because it is dependent on selling my 3GS. If you have to wait too long for the new model you miss the resell cycle of the second hand market here.
Bummer.

The problem is there are literally millions of others around the world wanting to give Apple their money too. I'm glad I got my iPad on the grey market here in Malaysia, paying about a 30% premium to US prices (meaning I paid UK prices muah ha ha ha lol) ... But I've all but given up on the iPhone4. One of the local carriers here had an email saying "stay tuned, it's soon" but that was almost 3 weeks ago now. Thank goodness my 3GS is still doing alright, and I think the iPad is *the real big thing* in the longer term.
post #23 of 23
Quote:
Originally Posted by SendMe View Post

Why should any of us care about market share gains?

Don't think of it as "market share." Think of it as "increased sales."

There. All better now?

Sent from my iPhone Simulator

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Sent from my iPhone Simulator

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