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Technology Stocks : Apple Inc.

AAPL 270.11

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Nov 5 3:59 PM EST

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To: Sam Scrutchins who wrote (17450)	8/31/1998 3:20:00 PM
From: Eric Yang	Read Replies (2) of 213172

"Just one question: You apparently believe that the big iMac advertising campaign will have little effect on margins, based on your 25.4 vs 25.7% quarter to quarter reduction in margin." I think margin on iMacs should remain fairly high. Many people think the margin of iMacs are in the 20% or even in the teens but I think it should be over 25%. This is a new product so the margin should be fairly good. There are no SCSI, serial ports, floppy, PCI...nada. The high unit volume should also help Apple negotiate for better component pricing. The margin on G3s seems to be in the 35% range at intro. iMac margin in the mid to high twenties at intro seems reasonable to me since Apple is expected to lower the price or bump the specs up by year end. As for ad cost, I think Apple would have spent $70-90 million between Q4 and Q1 99 anyway out of its ad budget. Bumping it to $100 mil will increase cost but shouldn't be too significant...especially when it is spread over two quarters. Our cost has been trending down but with the ad cost etc...I've bumped it up to $300 mil. Eric

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