Originally Posted by Wiggin
Point taken...your first point. I amend my statement to Apple will maintain it's incredibly high profit margins. I have been paying attention to Apple for quite some time. Yes, Apple said about a year ago that there might be slightly lower profit margins...a foreshadowing of the release of the iPad mini. But your previous past that price has nothing to do with cost, and an example of a lower priced item actually costing more, are quit irrelevant to Apple. They would simply never do that.
To your second point about maximizing user experience, yes Apple tries to do that. But THAT has very little to do with the price-cost ratio. I am not so naive to believe that Apple is still the altruist company they used to be, championing the user above all else. Profit is very much a goal of theirs, as it should be for any public company. But you are correct that Apple, unlike so many other companies, does not treat it as a short term goal. But it is a goal nonetheless.
Profit is not the same as margins. Apple in fact never ever guaranteed margins in any conference call, nor make any statements about being a high margin company. People assume Apple want high margins, but they keep high margins until they can't, and then they don't. See the margins on the iPod. On release the only model cost $399, and the next year prices went up not down, to $499 for a higher specced model. Ignoring the shuffle etc, the "standard" iPod is the touch and this years model is $229. ( Another confusing point for people who think it is all about profits, or margin. I don't think that removing the camera saved $70, ergo margins decreased).
What they do say is that they are prepared to cannibalize themselves. Which means that if the market for phones is being commoditised they will have to cannibalize themselves, or somebody else will. Saying "we are prepared to cannibalize ourselves" is code for "we are prepared for lower margins".
As for the market it has already priced in lower margins, and Apple can maintain stock with buybacks, so it is safe there. In fact all of its actions seem to indicate they are going to reduce margins, or expect to have to.