Yesterday, during the conference call following Apple’s stellar results for the fourth quarter of 2009, Apple talked about its forecasts for the coming quarter, which included a drop in revenues and lower margins. The web has drawn conclusions that this means Apple will be lowering its prices – but I’m kind of missing where the conclusion comes from.
Richard Gardner of CitiGroup askedApple’s Chief Financial Officer Peter Oppenheimerabout the forecasts, in which Apple warned for lower revenues and margins in the coming holiday quarter. Oppenheimer said they expect margins to drop 34% over the next quarter due to four reasons. AppleInsider transcribed it like this:
“First,” Oppenheimer said, were “new products we have and will announce, delivering greater value, lower gross margin than predecessors.”
“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.”
“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.”
Various websites around the world have now concluded that Apple is going to lower some of its prices between now and the holidays. These news sites are most likely influenced by the barrage of rumours over the past few weeks and months concerning price drops on Apple’s laptops, the Mac mini, and the iMac.
However, that is not what I’m reading out of Oppenheimer’s comments. In fact, what I read from it is that Apple will continue to do what it has always done: offer newer, improved models for the same prices as the old models. It has been doing this for a very long time, and it fits in perfectly with the “greater value, lower gross margins” Oppenheimer is talking about.
That’s because margins can decrease even without price drops – in fact, in theory, margins could even decrease with a price increase. If your production or component costs go up, then your margins will automatically suffer. Oppenheimer even points to this very thing happening. For instance, the new iMacs might switch to the more expensive Core ix architecture from Intel, which would drive component costs up, and, consequently, push margins down. It could even be that Apple’s laptops will transition to Intel’s brand-new Arrandale chips, which are expected for late 2009, or early 2010.
In any case, nowhere does Apple state it is going to lower its prices. Maybe even the Mac community succumbs to the wishful thinking of lower prices for Macs – and in fact, they might arrive anyway – but Apple didn’t confirm anything during the conference call.
…if it could mean a new product which is priced with much lower margins than normal?
Suppose they released a tablet for instance which sells for a much closer to cost price due to competition in the netbook areana?
Just a thought…
I do agree that traditionally Apple does tend to set updated models at the same price as those that came before it, which could incur a penalty from time to time (tech price tends to drop, but not always, especially if adding new components such as BluRay (it could happen) or a new “touch” mighty mouse etc)…
…as I write this (almost 2am South Australian time – lol) both the US and Aus Apple Stores are down… Something coming perhaps?