Apple reveals plans for cheaper new products in the pipeline
After announcing spectacular Q4 results, Apple's Chief Financial Officer Peter Oppenheimer explained to analysts that the company is projecting lower growth in future revenues and profit margins due to cheap new products in the company's pipeline.
"Greater value, lower gross margins"
In response to questions from Richard Gardner of CitiGroup asking "why gross margin should be down as much as you have it" in the company's future guidance, Oppenheimer answered, "we expect gross margin to decline about 34% primarily due to four factors.
"First," Oppenheimer said, were "new products we have and will announce, delivering greater value, lower gross margin than predecessors."
Oppenheimer later mentioned that Apple had already introduced products with "lower ASPs [average selling prices]," referencing new lower priced MacBooks that resulted in the company's notebook sales gobbling up a 74% share of all Mac sales.
Apple had also introduced its cheapest ever iPhone offering this summer, although Chief Operations Officer Tim Cook also noted, in response to a question about how the $99 iPhone 3G impacted sales of the new iPhone 3GS, that "the demand for the [iPhone] 3GS did exceed expectation; we quickly changed our orders for components." Cook added, "I think it shows there's an intense appetite for Apple's latest technology and we were very pleased with the result."
Other impacts on future profits
"Second," Oppenheimer said, "a seasonally higher mix of iPods" will push down margins and the company also expects "Snow Leopard box sales to be less."
Cook later said that, "the upgrade sales of Snow Leopard, which we include family and box sets, were more than double what we experienced from Leopard over the same 5-week sales period [following the release of each]. That was much more than we planned, very pleasantly surprised."
"Third," Oppenheimer said, the company expects to pay "significantly more air freight, while fourth, Apple anticipates having to face "higher component costs than September quarter."
Cook later explained that costs associated with "air freight is not related to the iPhone. Generally speaking, it's planned to get enough units into the channel in time for the holidays." He said that Apple expects freight costs to be "more than normal," adding that while "in general we spend more in freight in [holiday] Q1, but this increase is larger than usual. I'm sorry, I can't be specific on the product, but it's an abnormal sequential increase."
"Regarding revenue, as you know, the education and back-to-school seasons are over," Oppenheimer added. "The December quarter is typically driven by holiday purchases. Our guidance includes double-digit revenue growth from last year."
Apple trading premium margins for volume
The company's efforts to reach broader markets for its products rather than simply servicing existing customers with premium priced, high end alternatives to PCs and music players is not entirely new.
Apple has aggressively pushed down iPod prices to remain competitive with other vendors. For example, Apple has now undercut Microsoft's Zune offerings with lower priced alternatives for three years in a row.
The company also dropped the original iPhone's price so rapidly that it created a controversy resulting in rebates to early adopters, and followed up with the second generation iPhone 3G using cheaper construction materials to achieve an even lower price point.
Apple's latest MacBook introductions this summer scaled down prices dramatically while still delivering high end engineering features, and the company is expected to release significantly cheaper desktop Macs this fall in time for the holiday shopping season.
"Greater value, lower gross margins"
In response to questions from Richard Gardner of CitiGroup asking "why gross margin should be down as much as you have it" in the company's future guidance, Oppenheimer answered, "we expect gross margin to decline about 34% primarily due to four factors.
"First," Oppenheimer said, were "new products we have and will announce, delivering greater value, lower gross margin than predecessors."
Oppenheimer later mentioned that Apple had already introduced products with "lower ASPs [average selling prices]," referencing new lower priced MacBooks that resulted in the company's notebook sales gobbling up a 74% share of all Mac sales.
Apple had also introduced its cheapest ever iPhone offering this summer, although Chief Operations Officer Tim Cook also noted, in response to a question about how the $99 iPhone 3G impacted sales of the new iPhone 3GS, that "the demand for the [iPhone] 3GS did exceed expectation; we quickly changed our orders for components." Cook added, "I think it shows there's an intense appetite for Apple's latest technology and we were very pleased with the result."
Other impacts on future profits
"Second," Oppenheimer said, "a seasonally higher mix of iPods" will push down margins and the company also expects "Snow Leopard box sales to be less."
Cook later said that, "the upgrade sales of Snow Leopard, which we include family and box sets, were more than double what we experienced from Leopard over the same 5-week sales period [following the release of each]. That was much more than we planned, very pleasantly surprised."
"Third," Oppenheimer said, the company expects to pay "significantly more air freight, while fourth, Apple anticipates having to face "higher component costs than September quarter."
Cook later explained that costs associated with "air freight is not related to the iPhone. Generally speaking, it's planned to get enough units into the channel in time for the holidays." He said that Apple expects freight costs to be "more than normal," adding that while "in general we spend more in freight in [holiday] Q1, but this increase is larger than usual. I'm sorry, I can't be specific on the product, but it's an abnormal sequential increase."
"Regarding revenue, as you know, the education and back-to-school seasons are over," Oppenheimer added. "The December quarter is typically driven by holiday purchases. Our guidance includes double-digit revenue growth from last year."
Apple trading premium margins for volume
The company's efforts to reach broader markets for its products rather than simply servicing existing customers with premium priced, high end alternatives to PCs and music players is not entirely new.
Apple has aggressively pushed down iPod prices to remain competitive with other vendors. For example, Apple has now undercut Microsoft's Zune offerings with lower priced alternatives for three years in a row.
The company also dropped the original iPhone's price so rapidly that it created a controversy resulting in rebates to early adopters, and followed up with the second generation iPhone 3G using cheaper construction materials to achieve an even lower price point.
Apple's latest MacBook introductions this summer scaled down prices dramatically while still delivering high end engineering features, and the company is expected to release significantly cheaper desktop Macs this fall in time for the holiday shopping season.
Comments
Keep the prices, at least for some products, do as you've done with the MacBook, and offer a cheap edition of the iMac, and then offer some, almost up to date, editions for those who will rather have a fast Mac than a cheap
I hope the tablet is aggressively priced.
I want one.
Keep the prices, at least for some products, do as you've done with the MacBook, and offer a cheap edition of the iMac
I never got why Apple didn't put the nVidia 9400M in the iMac. I'm sure that would lower the cost by at least 100.. then you stay with core 2 for the lower edition and quad core for the higher edition so you can shave another 100 off the price so the iMac is now an aluminum desktop under 1K! But then again, some people have said Apple doesn't do cheap...
I never got why Apple didn't put the nVidia 9400M in the iMac. I'm sure that would lower the cost by at least 100.. then you stay with core 2 for the lower edition and quad core for the higher edition so you can shave another 100 off the price so the iMac is now an aluminum desktop under 1K! But then again, some people have said Apple doesn't do cheap...
Uh... but they DO use the 9400M in the iMac. It's part of the base model. If you're referring to the 9600GT discrete that is paired with the 9400M in some MBPs, the equivalent in the iMac would be the GT120 option, which is roughly the same silicon with a higher clock speed. But I don't see how changing up the graphics chips effectively brings the price down, because you could easily say go back to 17" screens, remove the iSight camera, make it out of cheaper plastic instead of aluminum, etc. etc. etc. The point is there's about a dozen things that COULD be done to bring the price down, but all of it is basically a compromise of some sort, one which Apple clearly does not feel it needs to make (it's earnings results are a testament).
The balancing act of design, performance, and cost is a tough one, but one in which I think Apple excels compared to its competitors. None of the individual components within the iMac or MBP are necessarily the absolute fastest, but if you take a step back and appreciate for a moment the total balance that Apple's achieved, it's quite remarkable. The PC world is littered with machines that tout the fastest quad-core CPUs, but then mate that to slow chipsets and weaker graphics relative to their super-fast CPU counterpart. I think Apple has done a good job of providing relatively quick overall performance, attractive design, and good value considering how long the average life span is on Macs.
For that reason, I actually take issue with AI's assertion that Apple's comment about lower gross margins and new products in the pipeline representing greater value necessarily means cheaper products. Earlier this year Apple claimed that it had lowered pricing on a number of product lines. But really, it wasn't that the price points had changed dramatically, but rather that for the SAME price point, Apple was giving you more computer. Yes, in a sense you could argue that Apple is now selling the higher end models at a cheaper price, but it really masks the fact that the cost of entry into the Mac world remains the same. I think Oppenheimer's comments more likely point to updated ("new") Macs that pack more compute power at the existing price points, hence the comment that the new products will provide more "value" as opposed to "lower/cheaper prices".
I never got why Apple didn't put the nVidia 9400M in the iMac.
See www.apple.com/imac/specs
that's plural
where are all the tablet fans?
i don't believe in the tablet format...i think it will have to have a wow factor to it, don't know what it could be...
A tablet is also likely. If they do have a new category product like the tablet it seems likely they'd try to get it into the Christmas shopping season if humanly possible. They're racing the clock on that one though so the comments about expenses for air shipments do fit.
I'm betting we'll see a new MacMini, MacBook, and iTablet very soon. A new iMac is also a likely possibility.
What i am fussed over though is the fact of the price difference between the US store and the AUS store being that the US$ is doing so badly.
currently (as posting this) the $ value is
United States Dollars\t \tAustralia Dollars
1 USD = 1.07796 AUD\t \t1 AUD = 0.927677 USD
BUT the price difference between buying off of the AU store compared to the US store is as follows
std spec:
3.06GHz Intel Core 2 Duo8GB 1066MHz DDR3 SDRAM - 2x4GB500GB Serial ATA Drive @ 5400 rpmSuperDrive 8x (DVD±R DL/DVD±RW/CD-RW)MacBook Pro 15-inch Antiglare Widescreen DisplayKeyboard,User's Guide,M96-AUSAppleCare Protection Plan for MacBook Pro (w/or w/o Display) - Auto-enroll
AU Price = A$ 6,427.99 or US$ 5,963.10
compared to
US Price = US$ 3,998.00 or AU$ 4,306.58
Thats a difference of over $2000 no matter which way you look at it.
(and these prices are before any educational discounts etc and include free shipping)
What happens when the AU$ reaches parity with the US$ (as estimated by Dec 09) or passes it and hits $1.10/US$ (as expected by march 10)
Maybe apple needs to implement a standard payment system across the board and use a pay-pal type system that allows the user to purchase over the net and pay in local currency. OR just chance the prices every fiscal 1/4 to match current trends in currency. (i'm all for making a profit but these are HUGE markups)
Lower prices: Chop $100 off the Mac mini and white Macbook
Lower margins: Expensive 'Clarksfield' processors in the iMac and Macbook Pro
new stuff is coming. for sure
The last product releases for 2009 will come tomorrow (iMac, Mac Pro, and Mac Mini/AppleTV). I feel it in my bones.
Logic would say that Apple would hold out a week to let the media absorb this news but, on the other hand of logic, the holiday season is short and now is the time to release new product to blow out Q1 estimates.
Apple trading premium margins for volume
The company's efforts to reach broader markets for its products rather than simply servicing existing customers with premium priced, high end alternatives to PCs and music players is not entirely new.
Apple has aggressively pushed down iPod prices to remain competitive with other vendors. For example, Apple has now undercut Microsoft's Zune offerings with lower priced alternatives for three years in a row.
The company also dropped the original iPhone's price so rapidly that it created a controversy resulting in rebates to early adopters, and followed up with the second generation iPhone 3G using cheaper construction materials to achieve an even lower price point.
Apple's latest MacBook introductions this summer scaled down prices dramatically while still delivering high end engineering features, and the company is expected to release significantly cheaper desktop Macs this fall in time for the holiday shopping season.
[ View this article at AppleInsider.com ]
Some of us have been saying this all along. Apple seems to be changing their long term strategy and going for a larger market share and the lower priced market as well.
I am really excited to see what new products and price cuts they will come up with for the Holiday season!
Im not too fussed over the prices of the macs in general atm.
What i am fussed over though is the fact of the price difference between the US store and the AUS store being that the US$ is doing so badly.
currently (as posting this) the $ value is
United States Dollars\t \tAustralia Dollars
1 USD = 1.07796 AUD\t \t1 AUD = 0.927677 USD
BUT the price difference between buying off of the AU store compared to the US store is as follows
std spec:
3.06GHz Intel Core 2 Duo8GB 1066MHz DDR3 SDRAM - 2x4GB500GB Serial ATA Drive @ 5400 rpmSuperDrive 8x (DVD±R DL/DVD±RW/CD-RW)MacBook Pro 15-inch Antiglare Widescreen DisplayKeyboard,User's Guide,M96-AUSAppleCare Protection Plan for MacBook Pro (w/or w/o Display) - Auto-enroll
AU Price = A$ 6,427.99 or US$ 5,963.10
compared to
US Price = US$ 3,998.00 or AU$ 4,306.58
Thats a difference of over $2000 no matter which way you look at it.
(and these prices are before any educational discounts etc and include free shipping)
What happens when the AU$ reaches parity with the US$ (as estimated by Dec 09) or passes it and hits $1.10/US$ (as expected by march 10)
Maybe apple needs to implement a standard payment system across the board and use a pay-pal type system that allows the user to purchase over the net and pay in local currency. OR just chance the prices every fiscal 1/4 to match current trends in currency. (i'm all for making a profit but these are HUGE markups)
But they do adjust prices. And in fact just a few months ago when the AUD was worth what 65 US cents Apple products sold in Australia were the cheapest in the world relative to the home US market. And so because the US dollar was so strong in the earlier part of the year Australian prices and UK prices were raised. So you can expect a price drop when Apple refreshes its products if the USD continues to be weak.
The last product releases for 2009 will come tomorrow (iMac, Mac Pro, and Mac Mini/AppleTV). I feel it in my bones.
Logic would say that Apple would hold out a week to let the media absorb this news but, on the other hand of logic, the holiday season is short and now is the time to release new product to blow out Q1 estimates.
Do you think there will be a case/design change or just a spec bump with a potential price change, because typically Apple does have a Special Event for Macs for the holiday quarter with about 5 days notice to the media and does an event if there are any significant changes to their products.
With Win7 officially launching Thursday, would not be best to have there event a week or two from now?