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

post #1 of 62
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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."
post #2 of 62
"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.
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post #3 of 62
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.
post #4 of 62
Apple's revenue this quarter = 1 Microsoft+2Google+3Yahoo. (from somewhere in internet)
post #5 of 62
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".
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post #6 of 62
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)
post #7 of 62
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.

Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already f*ed.

 

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Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already f*ed.

 

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post #8 of 62
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.
post #9 of 62
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
post #10 of 62
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.

Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already f*ed.

 

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Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already f*ed.

 

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post #11 of 62
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.

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post #12 of 62
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.
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post #13 of 62
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?
post #14 of 62
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.
post #15 of 62
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.
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post #16 of 62
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.
post #17 of 62
Quote:
Originally Posted by ChristophB View Post

A caricature of a caricature.

Escheresque
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post #18 of 62
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.
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post #19 of 62
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.
post #20 of 62
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.

Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already f*ed.

 

Reply

Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already f*ed.

 

Reply
post #21 of 62
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?
post #22 of 62
Quote:
Originally Posted by xtrmtrk View Post

When do they start turning the pricing screws on their competition?

When sales drop. Since they've been increasing every single quarter, this is unnecessary.

Quote:
At what point would it be best to give customers a price break?

If sales drop or someone actually creates meaningful competition to one of their products.

Quote:
Is there something better they could do with their idle money than expand their market through price reductions?

Yes, and that's what they're doing now.

Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already f*ed.

 

Reply

Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already f*ed.

 

Reply
post #23 of 62
Quote:
Originally Posted by island hermit View Post

From here forward any negative outlook on Apple will be known as a "Slappy".

Apple is Slapppyed™
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post #24 of 62
Quote:
Originally Posted by Tallest Skil View Post

When sales drop. Since they've been increasing every single quarter, this is unnecessary.



If sales drop or someone actually creates meaningful competition to one of their products.



Yes, and that's what they're doing now.

So respond from a position of weakness rather than strength? Hmmm....
post #25 of 62
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.

Quote:
Originally Posted by jragosta View Post

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.

The Apple Tax is Slapppyed™

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post #26 of 62
Apple prices (from phones to computers) are in line with the rest of the industry. (Not by CPU average but when compared fairly by specs and bundles—since Apple makes no low-end disposable computers; and of course iOS is where most of Apple’s profits come from. Compare an Apple and a non-Apple device of similar price, and you’ll find each has some higher specs and some lower, but on average reasonably close.)

Meanwhile Apple’s build quality, customer service, and attention to detail (metal instead of cheap plastic, etc.) are above average.

And they develop their own OS—nobody gives it to them free to feed users to advertisers!

And they spend big on marketing compared to most hardware-makers.

So they ought to be tightly squeezed on margins... yet their margins are still this good.

Conclusion: Tim Cook earns his paycheck! Great negotiating, great foresight, great efficiencies.
post #27 of 62
Quote:
Originally Posted by xtrmtrk View Post

So respond from a position of weakness rather than strength? Hmmm....

Sorry, maybe I've misinterpreted the purpose of a business. I was under the impression that they exist to make money, but that's obviously wrong since everyone seems to want to demand Apple make less money and have a worse time of meeting demand for absolutely no reason.

Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already f*ed.

 

Reply

Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already f*ed.

 

Reply
post #28 of 62
Quote:
Originally Posted by jragosta View Post

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.

Apple is also a retailer of its products, so we should expect a higher margin. They have expensive locations and expensive build outs.
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post #29 of 62
When I heard that part of the analyst call, it reminded me of the only other time I remember Apple having similar margins. Way back in the Scully era between 1987-1990, Apple had similar margins in the 45-50% range. I was an employee at Apple back then fresh out of college. Mac SEs were selling strongly and Mac IIs were the most powerful computer by far. During this time, Apple management was telling the field troops that they were looking to get 25% marketshare in the PC market (they had 10% at the time) and really make an assault on enterprise customers.

Apple the company was very healthy after the bad 1985 period when Steve Jobs was ousted. The company paid dividends back then and even had profit sharing for employees. Of course, we all know that in 1990, Windows 3.0 debuted and Apple really had no answer. The increased competition from Windows through the early 90's exposed Apple's weak spots....software engineering that couldn't match the power of Windows NT...horrible forecasting and even worse logistics for building new product....finally a management team who couldn't change fast enough.

It's unbelievable how different Apple is now from where it was back then on all levels.
post #30 of 62
Quote:
Originally Posted by Sevenfeet View Post

When I heard that part of the analyst call, it reminded me of the only other time I remember Apple having similar margins. Way back in the Scully era between 1987-1990, Apple had similar margins in the 45-50% range. I was an employee at Apple back then fresh out of college. Mac SEs were selling strongly and Mac IIs were the most powerful computer by far. During this time, Apple management was telling the field troops that they were looking to get 25% marketshare in the PC market (they had 10% at the time) and really make an assault on enterprise customers.

Apple the company was very healthy after the bad 1985 period when Steve Jobs was ousted. The company paid dividends back then and even had profit sharing for employees. Of course, we all know that in 1990, Windows 3.0 debuted and Apple really had no answer. The increased competition from Windows through the early 90's exposed Apple's weak spots....software engineering that couldn't match the power of Windows NT...horrible forecasting and even worse logistics for building new product....finally a management team who couldn't change fast enough.

It's unbelievable how different Apple is now from where it was back then on all levels.

There was an end to innovation at Apple with Scully and post Steve, they ran out of steam and their crown jewels were being deployed on PCs as Windows. It was a bad few years after that era.
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post #31 of 62
Quote:
Originally Posted by island hermit View Post

From here forward any negative outlook on Apple will be known as a "Slappy".

Too general. It's never black and white. It's a question of degrees - degrees of Slappy.
post #32 of 62
\
Quote:
Originally Posted by tjwal View Post

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

I think tjwal and Slappy are related somehow
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post #33 of 62
Quote:
Originally Posted by Tallest Skil View Post

Sorry, maybe I've misinterpreted the purpose of a business. I was under the impression that they exist to make money, but that's obviously wrong since everyone seems to want to demand Apple make less money and have a worse time of meeting demand for absolutely no reason.

Apple could afford to drop their prices by 5%. But I am not sure it would make much of a difference to many people. If they cut prices by a 3'rd it would be a big deal. It would also be a very silly thing to do. Instead it would be nice if they gave us all extended warranties They already give us an amazing customer service IMO so I am not complaining but rather than dropping prices I'd like to see more incentives to come aboard for prospective switchers and for the rest of us to feel even more smug about our choice of computing platform.
post #34 of 62
I love Apple products and have at least a dozen Macs and other computers. That said, I understand that using Chinese slave labor does save on costs in manufacturing. I think Apple has t come clean on this issue. Yes, the Chinese workers "earn" about $2/day working 12-14hr shifts and living in dorms on the Foxconn City campus. But, face it, Apple is using these people to make record profits at the expense of American workers.
post #35 of 62
Quote:
Originally Posted by Bruceedits View Post

China

How about we have just ONE THREAD where this doesn't come up for absolutely no reason.

Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already f*ed.

 

Reply

Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already f*ed.

 

Reply
post #36 of 62
Quote:
Originally Posted by Tallest Skil View Post

How about we have just ONE THREAD where this doesn't come up for absolutely no reason.

You have to admit... Apple has high margins and record profits only because it is the only company that uses Chinese factories to produce its goods.

[/s]
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post #37 of 62
Quote:
Originally Posted by paxman View Post

Apple could afford to drop their prices by 5%. But I am not sure it would make much of a difference to many people. If they cut prices by a 3'rd it would be a big deal. It would also be a very silly thing to do. Instead it would be nice if they gave us all extended warranties They already give us an amazing customer service IMO so I am not complaining but rather than dropping prices I'd like to see more incentives to come aboard for prospective switchers and for the rest of us to feel even more smug about our choice of computing platform.


Apple is doing something even better with the iPhones. They are keeping the older phones around longer and offering then free with a contract. If 5% would make a difference, free should seal the deal.
post #38 of 62
Quote:
Originally Posted by paxman View Post

Too general. It's never black and white. It's a question of degrees - degrees of Slappy.

Maybe Slapppy Seconds
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post #39 of 62
Quote:
Originally Posted by Bruceedits View Post

I love Apple products and have at least a dozen Macs and other computers. That said, I understand that using Chinese slave labor does save on costs in manufacturing. I think Apple has t come clean on this issue. Yes, the Chinese workers "earn" about $2/day working 12-14hr shifts and living in dorms on the Foxconn City campus. But, face it, Apple is using these people to make record profits at the expense of American workers.

And when the PRC wants to solve it the PRC can. They aren't the PRA(pple); they are a sovereign nation. At that point many companies will see their margins shrink or the price of the product rise until a different country comes along and decides to undercut another.
post #40 of 62
Quote:
Originally Posted by island hermit View Post

You have to admit... Apple has high margins and record profits only because it is the only company that uses Chinese factories to produce its goods.

[/s]

I read and reread. Then again - before I noticed the /s. Well done.
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