updated 04:10 pm EDT, Fri October 21, 2005
Apple\'s gross margin
The percentage of revenue left after subtracting product costs for Apple in its September-ended quarter was 28.1 percent, narrower than the 29.7 percent in the June-ended quarter, which leads some analysts to believe that over time. Shaw Wu, an analyst at American Technology Research estimates the gross margin average of all iPod models is approximately 22 percent, narrower than the margin earned on its higher-end Macintosh computers, according to a report from Reuters. "You look at last quarter, their gross margin went down a bit sequentially," Wu said, referring to Apple. Chris Whitmore, a Deutsche Bank analyst noted "as music and iPods continue to outpace computer hardware sales we expect that shift to drive lower profit margins, but that will continue to translate into pretty strong operating-income dollars and earnings per share."
Analysts say the cost of flash chips, which is expected to decrease over time, is a factor that can push Apple's gross margin in either direction. "As those costs go down, Apple's likely to respond by lowering prices because they're anxious to fend off competitors," said Roger Kay, principal of market research firm Endpoint Technologies Associates. Operating income as a percentage of revenue in the company's most recent fourth quarter was 11.4 percent, more than double the 5.5 percent in the year-ago quarter. "Apple has offset the gross margin pressure by managing its business better," Wu said.