Price Increase Inevitable?

Posted:
in Future Apple Hardware edited January 2014
No, not because of 970's ... (though that may factor in)



... but I'm afraid it appears the "Almighty Dollar" ain't so all-mighty lately, having lost about 10% of it's value (depending on who you measure it against) over the last couple of months.



Considering how carefully ballanced Apple's margins are (and I'm sure they're calculated to an almost razor sharp degree of profit extraction), a kick in production and part costs from over-seas suppliers and assemblers, in and around the %10 mark, would almost certainly have to work it's way into an upward effect on the price of systems.



Has Apple ever encountered this before? If so, what was the result then? (though I doubt the last time anything like this happened it was even near as big or as fast a dollar decline, this is starting to look pretty "historic", for lack of a better term).



I wonder how exposed Apple's competitors like Dell are to dollar fluctuations?





Comments

  • Reply 1 of 14
    programmerprogrammer Posts: 3,409member
    Quote:

    Originally posted by OverToasty

    No, not because of 970's ... (though that may factor in)



    ... but I'm afraid it appears the "Almighty Dollar" ain't so all-mighty lately, having lost about 10% of it's value (depending on who you measure it against) over the last couple of months.



    Considering how carefully ballanced Apple's margins are (and I'm sure they're calculated to an almost razor sharp degree of profit extraction), a kick in production and part costs from over-seas suppliers and assemblers, in and around the %10 mark, would almost certainly have to work it's way into an upward effect on the price of systems.



    Has Apple ever encountered this before? If so, what was the result then? (though I doubt the last time anything like this happened it was even near as big or as fast a dollar decline, this is starting to look pretty "historic", for lack of a better term).



    I wonder how exposed Apple's competitors like Dell are to dollar fluctuations?




    US prices might rise but the prices everywhere else wouldn't and might even drop, which would be a nice change!
  • Reply 2 of 14
    brussellbrussell Posts: 9,812member
    I don't know that much about it, but I would think that they could extract more profit from non-US sales, which accounts for about half of Apple's sales. So perhaps the increased parts costs would balance out by having increased profits overseas?
  • Reply 3 of 14
    johnsonwaxjohnsonwax Posts: 462member
    Quote:

    Originally posted by OverToasty

    Considering how carefully ballanced Apple's margins are (and I'm sure they're calculated to an almost razor sharp degree of profit extraction), a kick in production and part costs from over-seas suppliers and assemblers, in and around the %10 mark, would almost certainly have to work it's way into an upward effect on the price of systems.



    Has Apple ever encountered this before? If so, what was the result then? (though I doubt the last time anything like this happened it was even near as big or as fast a dollar decline, this is starting to look pretty "historic", for lack of a better term).



    I wonder how exposed Apple's competitors like Dell are to dollar fluctuations?




    Two points:



    1) Apple's margins I suspect are unusually robust to these kinds of things. More and more of their profit is coming from software, services, and very high margin products like the iPod, etc. Variations in currency values and even component costs are cushioned with higher margins. Products like the eMac and iBook might get their margins pushed very low, but the drop in the dollar should spur international sales which would help offset a domestic decline in margins.



    2) Apple, Dell, pretty much anyone dependent on currency fluctuations will hedge against those fluctuations. It's SOP for any substantial invesment to minimize downside risk. Think of it like insurance - you pay a bit for protection against some potential loss.



    Apple will take some hit here, but probably not as much as you might think. Fred Anderson, by all accounts, is VERY good at what he does. Apple has gone through this in the past and come out just fine. If Apple can ship 970 systems in the next quarter, and Panther appears worth the $129, then I don't think the margin issue will be a big problem - it'll be made up in other areas.
  • Reply 4 of 14
    costiquecostique Posts: 1,084member
    Generally, the cheaper your currency is, the more exporters' margins are. I don't think Apple is losing anything since about half of their profit comes from international sales.
  • Reply 5 of 14
    eugeneeugene Posts: 8,254member
    Huh? The economy is headed into a deflationary period which we have not seen the likes of since 1929. Domestic prices don't get higher when this happens, they get lower...and that's not really a good thing.
  • Reply 6 of 14
    liquidrliquidr Posts: 884member
    Quote:

    Huh? The economy is headed into a deflationary period which we have not seen the likes of since 1929. Domestic prices don't get higher when this happens, they get lower...and that's not really a good thing.



    by Eugene



    Yes, but we've also been in an artificially high inflationary period since the 80s. And this isn't due to an increase in the disposable income in the American houshold. This is due to the greater availability and use of credit, which results it greater growth in consumer sales, which results in greater inflation, and with the slow growth of the wage rate results in a lower real wage. I think may be good for the average American to hit a deflationary period, may cause a few people to reconsider saving vs credit, but I doubt it.
  • Reply 7 of 14
    johnsonwaxjohnsonwax Posts: 462member
    Quote:

    Originally posted by LiquidR

    Yes, but we've also been in an artificially high inflationary period since the 80s. And this isn't due to an increase in the disposable income in the American houshold. This is due to the greater availability and use of credit, which results it greater growth in consumer sales, which results in greater inflation, and with the slow growth of the wage rate results in a lower real wage. I think may be good for the average American to hit a deflationary period, may cause a few people to reconsider saving vs credit, but I doubt it.



    Yeah, I think that inertia is working double-time against deflation being in any way a postitive thing for the U.S. I agree that the use of credit needs to be seriously curtailed, but that's been the case for at least 20 years now. We need to develop a responsible culture of saving, but even a brief deflationary stint won't do that. The people that need to learn the lesson are the same ones that don't get that paying 2% on a 20% annual interest rate will drive you quickly to poverty - and there are tons of them out there.



    Besides, a longer deflationary period will have to take a back seat to the State of California sinking into the Pacific due to gross mismanagement and a general economic meltdown. That might be Apple's bigger problem. It's really quite difficult to overstate how bad things are in CA. I think the state needs to adjust $70M per DAY over the next year to balance the budget.



    Anyhow... a declining dollar does improve export margins, however, Apple imports much of it's parts and labor these days, so I'm not sure the balance works in their favor.



    Declining domestic prices are problematic for a whole range of industries, but not so much the computer industry. If the price of computers and software declined due to deflation, who would know? That won't be a problem.
  • Reply 8 of 14
    vr6vr6 Posts: 77member
    Knowing that they rely on imports for most of their manufacturing and assembly, and given their conservative CFO, I expect that Apple has hedged their currency exposure using futures for several years. This is a very common practice among international firms.



    The impact of foreign exchange rate fluctuation is likely non-existent for Apple in the short term as a result. Tis is good news for their U.S. customers, but probably bad news for foreign customers who would expect the weak U.S. dollar to mean local price reductions in their countries. Unfortunately, Apple probably is hedged against their customers' currencies as well and cannot offer them relief.



    The only way to take advantage is to buy a system in the U.S. and take it with you to your home country. Much easier for Canadians than anyone else I'm afraid.
  • Reply 9 of 14
    matsumatsu Posts: 6,558member
    Price Increases?



    Are you mad? Been eating too much beef?



    I'm just going to do my pricing dance and leave it at that.



    What's the single most important factor to generating sales?



    PRICE



    PRICE



    PRICE



    PRICE



    PRICE



    PRICE



    PRICE



    PRICE





    Thank-you for coming, we have daily matinees, and weekend wine and cheese tour packages, follow your ushers on the way out.
  • Reply 10 of 14
    mrmistermrmister Posts: 1,095member
    Man, I love it when he does that dance.
  • Reply 11 of 14
    kidredkidred Posts: 2,402member
    Quote:

    Originally posted by Eugene

    Huh? The economy is headed into a deflationary period which we have not seen the likes of since 1929. Domestic prices don't get higher when this happens, they get lower...and that's not really a good thing.



    Thanks, saved me some typing. In a few months, it will be a great time to buy a car. Ford (not for me) publicly stated they will be lowering the prices of all or some of their vehicles. Can't remember the last time I heard that.
  • Reply 12 of 14
    bigcbigc Posts: 1,224member
    Quote:

    Originally posted by Matsu

    Price Increases?



    Are you mad? Been eating too much beef?



    I'm just going to do my pricing dance and leave it at that.



    What's the single most important factor to generating sales?



    PRICE



    PRICE



    PRICE



    PRICE



    PRICE



    PRICE



    PRICE



    PRICE





    Thank-you for coming, we have daily matinees, and weekend wine and cheese tour packages, follow your ushers on the way out.






    Performance!!!
  • Reply 13 of 14
    gizzmonicgizzmonic Posts: 511member
    Quote:

    Originally posted by Matsu

    Price Increases?



    Are you mad? Been eating too much beef?



    I'm just going to do my pricing dance and leave it at that.



    What's the single most important factor to generating sales?





    Thank-you for coming, we have daily matinees, and weekend wine and cheese tour packages, follow your ushers on the way out.




    Hahaha...Matsu, you're so right.



    PS This thread is garbage.
  • Reply 14 of 14
    overtoastyovertoasty Posts: 439member
    Quote:

    Originally posted by Gizzmonic

    Hahaha...Matsu, you're so right.



    PS This thread is garbage.




    Well, Matsu's sure right about one thing: you can bet Apple will have to dance - one way or the other - if it's profit margins get too squeezed. Most likely, it'll drop expensive features that it might otherwise have included in the new Macs, just to hold previous price points, but either way - in the USA, Mac prices are probably either going to go up, or the price increase will be hidden behind slightly downsized hardware features.



    Either way, if you're not in the States, your Mac's will be cheaper, if you are, oh well - apparently that's not worth talking about.



Sign In or Register to comment.