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Technology Stocks : Apple Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Road Walker who wrote (143598)	10/26/2012 9:51:08 AM
From: Guth	Respond to of 213181

Just my take. Its all about the iPhone. Its a new form factor and we know it's difficult to assemble and they have had some QC problems. At this point It's more expensive to manufacture than the 4S. Last year's FQ1 GM was ~43%. No way this year was going to come close to that, but it will be better than 36%. And it will improve throughout the year.

To: Road Walker who wrote (143598)

10/26/2012 11:52:13 AM

From: John Koligman

3 Recommendations Read Replies (1) | Respond to of 213181

Specifically in regard to the mini, I did see a piece the other day that talked about the new screen technology being in short supply and expensive. So who knows...

Regards,
John

A New Theory on Why the iPad Mini Costs So Much

Published: Thursday, 25 Oct 2012 | 2:40 PM ET

There have been a bunch of theories about why Apple decided to put a $329 price tag on the iPad Mini when well-reviewed competitive tablets from Amazon and Google are priced at $199.

The theories include:

Because Apple [AAPL 597.88

-11.658 (-1.91%)

] can charge this much—its fans are either so brainwashed or so locked-in to Apple's ecosystem that they'll pay anything

All of those theories probably factored into the decision.

And now there's a new report out of Asia that adds a fourth theory, one that also makes sense: Apple's iPad mini production, at least for the time-being, is supply-constrained.

According to Siu Han and Alex Wolfgram at DigiTimes, Apple can't get enough of the screens for the new iPad mini, and the ones it can get are expensive:

The US $329 price tag for Apple's iPad mini is largely due to low yield rates for the device's GF2 (DITO film) touch screen technology, according to industry sources.

The sources said the DITO film sensor is having mass production issues, which has been a big contributor to why the device is approximately 40-50% more expensive compared to other 7-inch tablets that have OGS or G/G structures.

The sources said that GF2 touch screen modules are only about roughly US$5 cheaper than G/G ones for the 9.7-inch iPad models.

So, in other words, rather than stimulate absolutely massive demand for the new tablet by pricing it competitively, Apple is actually trying to control demand (and protect its profit margin) by pricing it higher.

Apple did this with the original iPhone, you will recall—pricing it at a positively usurious price in the early going, and then rapidly cutting that price when its supply chain and carrier networks ramped up. And the strategy certainly paid off then.

The circumstances now are very different, though: Apple's competitors are already in market with high-quality much lower-priced tablets. So Apple does run the risk that it will alienate some potential customers, cannibalize sales of the bigger iPads, and lose some gound in the platform market-share war.

To: Road Walker who wrote (143598)	10/26/2012 12:59:50 PM
From: pyslent	Respond to of 213181

Google has said that they are selling Nexus 7 at cost. All Apple said was that the iPad mini had margins below the corporate average at 40%. That means the $329 mini costs at least $200 to make. Historically, the iPad has gross margins in the 30% range, which would mean the mini's COGS is $230. Apple could and probably should have priced it at $199, but I also think they should drop the price across the whole iPad product line. If they want to truly own the tablet space, they can't leave openings for the competing platforms.

To: Road Walker who wrote (143598)	10/26/2012 1:13:49 PM
From: Doren	Read Replies (1) \| Respond to of 213181

Message # 143602 from Guth at 10/26/2012 9:51:08 AM Last year's FQ1 GM was ~43%. No way this year was going to come close to that, but it will be better than 36%. That profit margin thing has me interested too. Message #143609 from John Koligman at 10/26/2012 11:52:13 AM Apple did this with the original iPhone, you will recall—pricing it at a positively usurious price in the early going, and then rapidly cutting that price when its supply chain and carrier networks ramped up. And the strategy certainly paid off then. So Apple does run the risk that it will alienate some potential customers, cannibalize sales of the bigger iPads, and lose some gound in the platform market-share war. I have a suspicion that because Apple knows their supplies are going to be constrained, they are putting a tax on early adopters. I'm guessing that means that they think supplies are going to be constrained up to xmas. They'd also like to sell more full sized pads obviously, so they are making those more cost effective vs the smaller pad which hurts their cash flow. I'm also guessing that they will lower prices after xmas to stimulate demand. Another guess: the massive growth of touch screens is putting a strain on the supplies world wide. Apple may not have been able to cut the kind of deals they have previously. They may also be factoring in the fact that they no longer can cut those kinds of deals unilaterally as smaller vendors wither and die and the huge vendors play the same game Apple has been playing. They probably have the power to cut a lot of deals just not every deal. Another track: Apple may have come to the conclusion that they can no longer charge such large premiums. As products become more generic they may have to rely more on cash flow rather than profit margin. So they may start to cut prices to more competitive levels. It would be interesting to be a fly on the wall.