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

To: rhet0ric who wrote (17606)	9/6/1998 12:05:00 PM
From: Andrew Danielson	Read Replies (3) \| Respond to of 213174

Rhetoric, RE: margin estimate While I believe that your 25.7% figure is not out of the question given last Q's margin, the 30% you casually mention is way out of the ballpark. I have no reason to believe that even if iMac's margin is high, that it is higher than the Pro G3 line. And the G3's, both Pro and Powerbook, accounted for 80% of revenues last quarter--all before the price cuts that have been instituted this quarter. Hence, even selling almost exclusively G3's at the highest, pre-price cut margins produced only 25.7/25.8% margin. And even if the iMac margin is WAY higher than any other computer, remember that even selling 400,000 iMacs means they account for about 25% of total revenue. To single-handedly drive up the margin that way would require the iMac to have something like 47+% margin. Not possible. Moreover, many sites have reported that the profit margin for the resellers is extremely thin for the iMac. I doubt the resellers would stand for that if they knew AAPL was getting a massive profit on each sold iMac. Share and share alike. Finally, the rumors bandied about talking of $999 iMacs for Christmas are still just that, rumors. They sound a little too much like rumors coming from people who are talking more about what they would like to see AAPL do vs. what they expect them to do (often without an understanding of the underlying profit equation). Even if true, however, that doesn't mean anything about today's pricing structure. I believe AAPL would only drop the iMac's price that far when the product is near to end-of-life and a faster iMac is ready to take center stage. That means the 233 chip, for one thing, will be dirt cheap. That also means overall iMac production, including speedier models, will be much higher than even now. The parts (like the monitor), consistent between models, will be cheaper for AAPL because of increased volume discounts. That said, I believe your revenue figure is achievable (very close to my own estimate). I estimate margin to drop this quarter, not only because of price cuts but because I believe the iMac has low (but still healthy) margins. My 24.8% estimate, however, is intentionally conservative and will probably be surpassed.