Component costs

Piper Jaffray today maintained its 'outperform' rating on Apple, saying it does not believe that Apple will be affected by the same pricing and Dell. In a research note to clients, the firm said that Apple had already factored component pricing into its quarterly guidance adn that Apple is typically not affected by the same types of pricing pressures. Despite lower guidance from both Dell and Gateway in recent weeks--due in part to higher commodity pricing expected in the fall, Apple had indicated during its last quarterly conference call that it expected price increases for DRAM and flat-panel displays as well as "lower than historical" declines for hard drives due to component shortage. [updated]

Apple's Tim Cook said during the conference, "going into Q4, primarily due to the typical industry-wide seasonal demand that occurs in this period of time for back-to-school, we see DRAM increasing from the lows that we experienced last quarter. We also see certain sizes of flat-panel displays rising. And finally, we see that declines in hard drives are likely to be lower than historical norms due to component shortages in that industry. Other commodities we believe will likely follow this trend."

Since the Macworld Expo conference in January, Apple has essentially maintained average selling prices, accordign to the firm. The firm also said that "unless there has been a significant shift to lower end Macs, which we have not seen any evidence of, we believe Apple will not be materially impacted by the average-selling-price issues seen by Dell and Gateway."

The firm noted that Apple's domination in digital music is a critical piece to the company continued success, but that there were other opportunities for growth. "Indirectly, we expect iPod to continue to be a foundation for growth in other parts of Apple's business, and we expect that by the end of CY05 more than 35m iPods will have shipped, providing Apple with a greater scope of awareness for various products ('halo' effect). It appears that this phenomenon has begun to take effect, with 1.18m Macs shipped in the June quarter."

Piper Jaffray maintains an "outperform" rating for Apple with a target price of $52.

by MacNN Staff