Why would Wolf highlight this? The fact that he did is evidence to me that he does not think clearly, and does not adhere to a substantive interpretation of the data.
Per-unit profit margin is meaningless unless it correlates directly to the earnings multiple. And in Apple's case, there is so much cash on hand that it makes no sense to care about the per-unit margin per se. What matters is the earnings, and there simply is no strong, absolute connection between per-unit profit and earnings. Some companies have minimal per-unit profit with high earnings, while other companies have enormous per-unit profit with unimpressive earnings. The fact that their per-unit margins are as high as they are, reveals next to nothing beyond the fact that people really like their products (because we know that Apple's manufacturing cost is not lower than the industry norm).
I'm just tired of this myth that says that Apple is doing an excellent job because they have high per-unit margins. It is a myth, and it doesn't help for an analyst such as Wolf to propagate this myth. If this were a board game (or computer game) where each player were restricted to selling the same number of units as all the other players, then this would make perfect sense. But to the extent that there is any restriction of this sort, it is only because Apple has put it in place for themselves.
Beyond all that, it is most likely true that when Apple went to the unibody design, that the per-unit manufacturing cost increased and squeezed the per-unit margins. It is likely the case that if they had not gone down that path, that the per-unit manufacturing cost would have gone down, and that they could have lowered the retail price while still increasing the per-unit margin. The per-unit margin would have increased along with the number of units sold, and the earnings associated with the product line, since they switched to the unibody design, would have been significantly greater than what they have been.
Cash on hand is utterly unrelated to margins. I can't understand why you would try to link the two.
I am also puzzled by your assertion that volume might be more important than margins. Perhaps in a commodity market it is, but Apple is not manufacturing steel, but consumer products. In a consumer products market, product differentiation is the key to success. In fact, you can think of margins as the measure of how well a consumer products company has managed to build the perception of value into their products. This is part of the extra that a consumer is willing to spend to buy Product A rather than Product B, even though Product B costs the same to produce, or even might be cheaper to buy. I'm sure we could all reel off dozens of examples of consumer products that sell for higher markups over the cost of production than others, because they are perceived by consumers to be superior in some way.
What you seem to be suggesting is that Apple should fundamentally alter their approach to the market, by making their products cheaper instead of focusing on the successful strategy of building a higher perception of value. I don't see any evidence for the utility of doing this.
I am also puzzled by your assertion that volume might be more important than margins. Perhaps in a commodity market it is, but Apple is not manufacturing steel, but consumer products. In a consumer products market, product differentiation is the key to success. In fact, you can think of margins as the measure of how well a consumer products company has managed to build the perception of value into their products. This is part of the extra that a consumer is willing to spend to buy Product A rather than Product B, even though Product B costs the same to produce, or even might be cheaper to buy. I'm sure we could all reel off dozens of examples of consumer products that sell for higher markups over the cost of production than others, because they are perceived by consumers to be superior in some way.
Not everyone needs to drive a Mercedes.
Public schools are accountable to public oversight, and if all they need is email, the web, and a handful of EDU-specific apps, why pay a premium price just for the pride of ownership?
Study: Average Mac Computer Price More That Twice That of Average PC
Taken together, the market share of all three versions of Windows dwarf that of Mac OS X: 91.3 per cent to just over 5 per cent. The Mac OS has seen a gradual ? if marginal ? decline since its market share peaked in March of this year at just over 5.3 per cent.
Public schools are accountable to public oversight, and if all they need is email, the web, and a handful of EDU-specific apps, why pay a premium price just for the pride of ownership?
Study: Average Mac Computer Price More That Twice That of Average PC
So? All you are really saying is that Apple has been successful at selling at higher margins. It's the market they want to be in, the market they know how to address, the one where they have learned to be profitable, and possibly most importantly, the market consumers expect them to to address.
So? All you are really saying is that Apple has been successful at selling at higher margins. It's the market they want to be in, the market they know how to address, the one where they have learned to be profitable, and possibly most importantly, the market consumers expect them to to address.
Yes, we agree that in the pursuit of the boutique consumer market Apple has effectively ceded the bulk of EDU market to other platforms.
So? All you are really saying is that Apple has been successful at selling at higher margins. It's the market they want to be in, the market they know how to address, the one where they have learned to be profitable, and possibly most importantly, the market consumers expect them to to address.
Gotta love how he either is trying to spin it or simply doesn?t realize that Apple is choosing not to license their OS to any and all PC vendors and DIYers on the planet. Does he even realize that comparing the business model of Apple?s Mac PC to MS? Windows OS is pretty much the most foolish metric in computing that we have?
You may be right, it could be that they're trying but after 20 years are still failing.
Let us know when they get to 20%....
Failing at what, exactly -- selling at very low margins, but not making it up in volume, like the rest of the PC industry? If so, bring me more of that kind of failure.
Failing at what, exactly -- selling at very low margins, but not making it up in volume, like the rest of the PC industry? If so, bring me more of that kind of failure.
...so the fox said, "I'll bet those grapes taste sour anyway."
I'm sure those sales reps are, and do. But I don't think it's a priority for the corporation, or they'd offer deeper educational discounts, major educational partnerships, and release educational software for MacOS and iOS (maybe iLearn next to iWork and iLife?).
Quote:
Originally Posted by hamiltonrrwatch
Dead on Booga. I'm frustrated by the lack of commitment on Apple's part in this area. These folks tell me they want to get back into the K-12 market but I'm paying real close to full freight to bring their hardware into the district
Ahh... Now, That sounds just like the Apple I dealt with 30 years ago... lots of verbal support by the local Apple reps-- but no resulting action by the Corporation.
Tell me, does Apple have an "Education Evangelist"?
If so, that's the person you need to get to!
In the old days Evangelists like Guy Kawasaki had the ear of Steve and other higher-ups. If you could present a reasoned case of cost vs benefits [to Apple] of doing what your asking Apple to do-- someone like Guy would listen, discuss and possibly be convinced. If convinced, Guy would see that the case was presented to the right people within Apple.
You may not get the results you wanted, or any results at all-- but the message would have been sent.
Analyzing %s by themselves can be very misleading: i.e. If you're comparing 100 units sold to a previous base of 1000 the % increase will be a lot smaller than if your previous base was 100. I think Apple is still doing very well in the education marketplace.
Yes, and they grew 200%. That is truly impressive, given how huge Apple's market share was before.
You may be right, it could be that they're trying but after 20 years are still failing.
Let us know when they get to 20%....
You let us know when you realize that 20% would be up there with the PC vendors that sell $300 PCs to the masses around the world. Then let us know when you realize that Apple’s business model makes it virtually impossible for them to ever reach 20% when they only cater to the top tiers of the consumer market. Then once you’ve figured that out, let us know when you realize that comparing an OS that is designed for a single vendor’s HW can’t be compared to an OS that is licensable to an an infinite number of PC vendors and DIYers without making yourself look like a troll and/or an idiot. Finally, let us know when it dawns on you that every PC vendor in the world is envious of Apple’s position of not relying on a 3rd-party OS nor having to scrape the bottom of the barrel just to turn a profit in PC sales that is well below Apple’s take of the market.
You let us know when you realize that 20% would be up there with the PC vendors that sell $300 PCs to the masses around the world.
I buy a lot of those myself. I have an array of cloud servers in my office, each costing less than half the price of a Mac Mini. Indeed, a good value, and more interestingly their standby wattage is less than half that of Apple's best, making them far greener solutions for always-on systems.
Quote:
Then let us know when you realize that Apple’s business model makes it virtually impossible for them to ever reach 20% when they only cater to the top tiers of the consumer market.
Agreed: Apple has ceded the bulk of the market to others.
Please note that I never said that was a bad thing in the consumer space. On the contrary, I have a few Macs myself and enjoy them, just as we have a Mercedes in the garage next to a more rugged vehicle for more adventurous travel. Apple has the highest margins in the industry, and as an Apple shareholder I appreciate that as it lets me use the proceeds to buy more servers.
But the EDU space is a very different beast than boutique consumer niches. Public ed is beholden to public oversight, and for many districts the cost of goods still matters.
Commenting as a teacher and school administrator, Apple dropped the ball years ago in the education market. Specifically, districts already hard up for funding, didn't receive any significant discounts for using Apple products. PC makers ran with that opportunity which is why most K-12's in the country are using PC's.
My hope is that Apple utilizes the potential of the iPad to its fullest in the educational sector. I'd love to see printing support without using third-party apps.
And yet, AAPL still can't break out of the pack. What is it with this wavering around $250? With all this great sales and profitability data why in the world isn't it stretching toward $300? Baffling. Are there that many sheep in Wall Street?
Two large hedge funds are closing their doors and I suspect others may be pulling back. AAPL has been the favorite in their holdings. Also, the macro fears are bringing the indexes down... and AAPL is part of them too.
The good news is that, unless the demand collapses in September, the company could make $4-4.50/s... or even more. They have guided 18.1B/Q4 sales and they could blow those numbers. Run rate PE could be 13... and that includes $40+B in cash. Take that out and the enterprise PE becomes 12. Unless the global demand tanks, it is a value stock.
I buy a lot of those myself. I have an array of cloud servers in my office, each costing less than half the price of a Mac Mini. Indeed, a good value, and more interestingly their standby wattage is less than half that of Apple's best, making them far greener solutions for always-on systems.
Agreed: Apple has ceded the bulk of the market to others.
Please note that I never said that was a bad thing in the consumer space. On the contrary, I have a few Macs myself and enjoy them, just as we have a Mercedes in the garage next to a more rugged vehicle for more adventurous travel. Apple has the highest margins in the industry, and as an Apple shareholder I appreciate that as it lets me use the proceeds to buy more servers.
But the EDU space is a very different beast than boutique consumer niches. Public ed is beholden to public oversight, and for many districts the cost of goods still matters.
See ya' at the Beverly Hills PTA meeting...
I too am an AAPL share holder but I care greatly about education. Given Apple's massive profits and wealth, perhaps they should consider supplying genuine educational needs at a very special price. Like the GI bill, sometimes rewards come way down the line.
Two large hedge funds are closing their doors and I suspect others may be pulling back. AAPL has been the favorite in their holdings. Also, the macro fears are bringing the indexes down... and AAPL is part of them too.
The good news is that, unless the demand collapses in September, the company could make $4-4.50/s... or even more. They have guided 18.1B/Q4 sales and they could blow those numbers. Run rate PE could be 13... and that includes $40+B in cash. Take that out and the enterprise PE becomes 12. Unless the global demand tanks, it is a value stock.
Comments
Why would Wolf highlight this? The fact that he did is evidence to me that he does not think clearly, and does not adhere to a substantive interpretation of the data.
Per-unit profit margin is meaningless unless it correlates directly to the earnings multiple. And in Apple's case, there is so much cash on hand that it makes no sense to care about the per-unit margin per se. What matters is the earnings, and there simply is no strong, absolute connection between per-unit profit and earnings. Some companies have minimal per-unit profit with high earnings, while other companies have enormous per-unit profit with unimpressive earnings. The fact that their per-unit margins are as high as they are, reveals next to nothing beyond the fact that people really like their products (because we know that Apple's manufacturing cost is not lower than the industry norm).
I'm just tired of this myth that says that Apple is doing an excellent job because they have high per-unit margins. It is a myth, and it doesn't help for an analyst such as Wolf to propagate this myth. If this were a board game (or computer game) where each player were restricted to selling the same number of units as all the other players, then this would make perfect sense. But to the extent that there is any restriction of this sort, it is only because Apple has put it in place for themselves.
Beyond all that, it is most likely true that when Apple went to the unibody design, that the per-unit manufacturing cost increased and squeezed the per-unit margins. It is likely the case that if they had not gone down that path, that the per-unit manufacturing cost would have gone down, and that they could have lowered the retail price while still increasing the per-unit margin. The per-unit margin would have increased along with the number of units sold, and the earnings associated with the product line, since they switched to the unibody design, would have been significantly greater than what they have been.
Cash on hand is utterly unrelated to margins. I can't understand why you would try to link the two.
I am also puzzled by your assertion that volume might be more important than margins. Perhaps in a commodity market it is, but Apple is not manufacturing steel, but consumer products. In a consumer products market, product differentiation is the key to success. In fact, you can think of margins as the measure of how well a consumer products company has managed to build the perception of value into their products. This is part of the extra that a consumer is willing to spend to buy Product A rather than Product B, even though Product B costs the same to produce, or even might be cheaper to buy. I'm sure we could all reel off dozens of examples of consumer products that sell for higher markups over the cost of production than others, because they are perceived by consumers to be superior in some way.
What you seem to be suggesting is that Apple should fundamentally alter their approach to the market, by making their products cheaper instead of focusing on the successful strategy of building a higher perception of value. I don't see any evidence for the utility of doing this.
I am also puzzled by your assertion that volume might be more important than margins. Perhaps in a commodity market it is, but Apple is not manufacturing steel, but consumer products. In a consumer products market, product differentiation is the key to success. In fact, you can think of margins as the measure of how well a consumer products company has managed to build the perception of value into their products. This is part of the extra that a consumer is willing to spend to buy Product A rather than Product B, even though Product B costs the same to produce, or even might be cheaper to buy. I'm sure we could all reel off dozens of examples of consumer products that sell for higher markups over the cost of production than others, because they are perceived by consumers to be superior in some way.
Not everyone needs to drive a Mercedes.
Public schools are accountable to public oversight, and if all they need is email, the web, and a handful of EDU-specific apps, why pay a premium price just for the pride of ownership?
Study: Average Mac Computer Price More That Twice That of Average PC
http://gizmodo.com/5033865/study-ave...-of-average-pc
Taken together, the market share of all three versions of Windows dwarf that of Mac OS X: 91.3 per cent to just over 5 per cent. The Mac OS has seen a gradual ? if marginal ? decline since its market share peaked in March of this year at just over 5.3 per cent.
http://www.theregister.co.uk/2010/08...t_share_stats/
Not everyone needs to drive a Mercedes.
Public schools are accountable to public oversight, and if all they need is email, the web, and a handful of EDU-specific apps, why pay a premium price just for the pride of ownership?
Study: Average Mac Computer Price More That Twice That of Average PC
http://gizmodo.com/5033865/study-ave...-of-average-pc
So? All you are really saying is that Apple has been successful at selling at higher margins. It's the market they want to be in, the market they know how to address, the one where they have learned to be profitable, and possibly most importantly, the market consumers expect them to to address.
So? All you are really saying is that Apple has been successful at selling at higher margins. It's the market they want to be in, the market they know how to address, the one where they have learned to be profitable, and possibly most importantly, the market consumers expect them to to address.
Yes, we agree that in the pursuit of the boutique consumer market Apple has effectively ceded the bulk of EDU market to other platforms.
So? All you are really saying is that Apple has been successful at selling at higher margins. It's the market they want to be in, the market they know how to address, the one where they have learned to be profitable, and possibly most importantly, the market consumers expect them to to address.
Gotta love how he either is trying to spin it or simply doesn?t realize that Apple is choosing not to license their OS to any and all PC vendors and DIYers on the planet. Does he even realize that comparing the business model of Apple?s Mac PC to MS? Windows OS is pretty much the most foolish metric in computing that we have?
Yes, we agree that in the pursuit of the boutique consumer market Apple has effectively ceded the bulk of EDU market to other platforms.
No, we don't agree on that.
No, we don't agree on that.
You may be right, it could be that they're trying but after 20 years are still failing.
Let us know when they get to 20%....
You may be right, it could be that they're trying but after 20 years are still failing.
Let us know when they get to 20%....
Failing at what, exactly -- selling at very low margins, but not making it up in volume, like the rest of the PC industry? If so, bring me more of that kind of failure.
Failing at what, exactly -- selling at very low margins, but not making it up in volume, like the rest of the PC industry? If so, bring me more of that kind of failure.
...so the fox said, "I'll bet those grapes taste sour anyway."
I'm sure those sales reps are, and do. But I don't think it's a priority for the corporation, or they'd offer deeper educational discounts, major educational partnerships, and release educational software for MacOS and iOS (maybe iLearn next to iWork and iLife?).
Dead on Booga. I'm frustrated by the lack of commitment on Apple's part in this area. These folks tell me they want to get back into the K-12 market but I'm paying real close to full freight to bring their hardware into the district
Ahh... Now, That sounds just like the Apple I dealt with 30 years ago... lots of verbal support by the local Apple reps-- but no resulting action by the Corporation.
Tell me, does Apple have an "Education Evangelist"?
If so, that's the person you need to get to!
In the old days Evangelists like Guy Kawasaki had the ear of Steve and other higher-ups. If you could present a reasoned case of cost vs benefits [to Apple] of doing what your asking Apple to do-- someone like Guy would listen, discuss and possibly be convinced. If convinced, Guy would see that the case was presented to the right people within Apple.
You may not get the results you wanted, or any results at all-- but the message would have been sent.
That's about all you can ask.
.
Analyzing %s by themselves can be very misleading: i.e. If you're comparing 100 units sold to a previous base of 1000 the % increase will be a lot smaller than if your previous base was 100. I think Apple is still doing very well in the education marketplace.
Yes, and they grew 200%. That is truly impressive, given how huge Apple's market share was before.
Why doesn't Apple put Blu-Ray drives in their computers?
BDU is a bag of hurt and Apple would never inflict anything like that on us users, no matter how much money it might put into Steve's pocket.
You may be right, it could be that they're trying but after 20 years are still failing.
Let us know when they get to 20%....
You let us know when you realize that 20% would be up there with the PC vendors that sell $300 PCs to the masses around the world. Then let us know when you realize that Apple’s business model makes it virtually impossible for them to ever reach 20% when they only cater to the top tiers of the consumer market. Then once you’ve figured that out, let us know when you realize that comparing an OS that is designed for a single vendor’s HW can’t be compared to an OS that is licensable to an an infinite number of PC vendors and DIYers without making yourself look like a troll and/or an idiot. Finally, let us know when it dawns on you that every PC vendor in the world is envious of Apple’s position of not relying on a 3rd-party OS nor having to scrape the bottom of the barrel just to turn a profit in PC sales that is well below Apple’s take of the market.
...so the fox said, "I'll bet those grapes taste sour anyway."
Or as Br'er rabbit said to the fox, "please don't throw me in that briar patch."
You let us know when you realize that 20% would be up there with the PC vendors that sell $300 PCs to the masses around the world.
I buy a lot of those myself. I have an array of cloud servers in my office, each costing less than half the price of a Mac Mini. Indeed, a good value, and more interestingly their standby wattage is less than half that of Apple's best, making them far greener solutions for always-on systems.
Then let us know when you realize that Apple’s business model makes it virtually impossible for them to ever reach 20% when they only cater to the top tiers of the consumer market.
Agreed: Apple has ceded the bulk of the market to others.
Please note that I never said that was a bad thing in the consumer space. On the contrary, I have a few Macs myself and enjoy them, just as we have a Mercedes in the garage next to a more rugged vehicle for more adventurous travel. Apple has the highest margins in the industry, and as an Apple shareholder I appreciate that as it lets me use the proceeds to buy more servers.
But the EDU space is a very different beast than boutique consumer niches. Public ed is beholden to public oversight, and for many districts the cost of goods still matters.
See ya' at the Beverly Hills PTA meeting...
Commenting as a teacher and school administrator, Apple dropped the ball years ago in the education market. Specifically, districts already hard up for funding, didn't receive any significant discounts for using Apple products. PC makers ran with that opportunity which is why most K-12's in the country are using PC's.
My hope is that Apple utilizes the potential of the iPad to its fullest in the educational sector. I'd love to see printing support without using third-party apps.
I hope so too.
And yet, AAPL still can't break out of the pack. What is it with this wavering around $250? With all this great sales and profitability data why in the world isn't it stretching toward $300? Baffling. Are there that many sheep in Wall Street?
Two large hedge funds are closing their doors and I suspect others may be pulling back. AAPL has been the favorite in their holdings. Also, the macro fears are bringing the indexes down... and AAPL is part of them too.
The good news is that, unless the demand collapses in September, the company could make $4-4.50/s... or even more. They have guided 18.1B/Q4 sales and they could blow those numbers. Run rate PE could be 13... and that includes $40+B in cash. Take that out and the enterprise PE becomes 12. Unless the global demand tanks, it is a value stock.
I buy a lot of those myself. I have an array of cloud servers in my office, each costing less than half the price of a Mac Mini. Indeed, a good value, and more interestingly their standby wattage is less than half that of Apple's best, making them far greener solutions for always-on systems.
Agreed: Apple has ceded the bulk of the market to others.
Please note that I never said that was a bad thing in the consumer space. On the contrary, I have a few Macs myself and enjoy them, just as we have a Mercedes in the garage next to a more rugged vehicle for more adventurous travel. Apple has the highest margins in the industry, and as an Apple shareholder I appreciate that as it lets me use the proceeds to buy more servers.
But the EDU space is a very different beast than boutique consumer niches. Public ed is beholden to public oversight, and for many districts the cost of goods still matters.
See ya' at the Beverly Hills PTA meeting...
I too am an AAPL share holder but I care greatly about education. Given Apple's massive profits and wealth, perhaps they should consider supplying genuine educational needs at a very special price. Like the GI bill, sometimes rewards come way down the line.
Two large hedge funds are closing their doors and I suspect others may be pulling back. AAPL has been the favorite in their holdings. Also, the macro fears are bringing the indexes down... and AAPL is part of them too.
The good news is that, unless the demand collapses in September, the company could make $4-4.50/s... or even more. They have guided 18.1B/Q4 sales and they could blow those numbers. Run rate PE could be 13... and that includes $40+B in cash. Take that out and the enterprise PE becomes 12. Unless the global demand tanks, it is a value stock.
Thank you, good to hear