Apple talks mysterious 'product transition'
updated 11:00 pm EDT, Mon July 21, 2008
Apple's mystery transition
One of the most interesting things to come out of Apple Apple's Investor Conference Call today has to do with what CFO Peter Oppenheimer would not talk about –- a mysterious "product transition." Oppenheimer told analysts that the transition will affect earnings in the September quarter and into next year, but –-- in keeping with Apple's long-standing policy of not commenting on future products –- he did not elaborate. Apple's profit margin in the third quarter was about 35 percent. The company's forecast calls for that margin to drop to 31.5 percent in the current quarter.
Besides the product transition, Oppenheimer says margins are also being impacted by a back-to-school promotion that gives Mac buyers a free iPod and by accounting charges related to the iPhone. The company says rising component prices and product development costs will continue to put pressure on margins into next year. Oppenheimer says Apple is also keeping an eye on the current economic climate, but so far the downturn has had little impact on sales.
Apple's iPod sales remain brisk at 11 million, although customers seem to be snapping up a lot more of the cheaper Shuffle models. Oppenheimer says the company is also seeing "some cannibalization," of iPod sales by customers who buy an iPhone instead. But he said if "there's going to be cannibalization, we'd rather it be by the iPhone."
Reaction from Wall Street was less than positive. Even though Apple reported its best June quarter earnings ever, investors appeared focused on the future, with the after-hours stock price down nearly 10 percent. Still, Oppenheimer says the outlook is largely positive, with new products in the pipeline. And it may be important to note that Apple has a long record of issuing conservative earnings forecasts, only to top them.
Here's a scenario
07/21, 11:51pm reply
Apple transitions it's highest storage level iPod from the iPod Classic to the iPod Touch. They ditch the iPod Classic and declare their entire lineup to be hard drive free. Steve cuts the price of the 32GB iPod Touch to $399 and introduces the 64GB iPod Touch at $499. (that's where they loose some money).
The crowd oohs and ahhs.
dagamer34
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Joined: Apr 2007
actually
07/22, 12:20am reply
The product transition is Steve's retirement due to his health. Why do you think the stock took a 10% dive tonight in after hours?
robttwo
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Joined: Nov 2005
Hot air, cool-aid
07/22, 05:16am reply
This phrase is important:"Apple introduces new products that initially cost more because they deliver a new level of value to the customer. Then drive costs down and staying out of reach of our competitors. Apple will follow this plan again in the future."Macs and ipods can use a small pricecut and/or update but they are not hugely overpriced, the MacBook Air on the other hand is overpriced and has to compete against $300 mini laptops. A low-cost laptop or small tablet / big ipod seems like a nice addition to the current product lineup. Fingers crossed
Peter Bonte
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Joined: Aug 2001
hey
07/22, 07:45am reply
didn't they talk of a product transition sometime in the last couple of quarters as well?
testudo
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Joined: Aug 2001
Don't foam at the mouth
07/22, 09:51am reply
It is amazing to see the Mac faithful on other sites project all their product fantasies onto the slightest hint of a change at Apple.
I take this to be purely financial: you don't decrease margins by introducing radical new market-shaking products, you do so by either cutting price or increasing cost on products that you already have. This is the CFO talking, not product engineering.
I would look for increases in memory capacity on iPods or a large shift in iPod pricing. That's where Apple has competitors, even if they are weak.
Guest
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Joined: Nov 1999
Re: Here's a scenario
07/22, 09:53am (2 replies) reply
It's "lose", not "loose"! You lose your car keys. You dog gets loose and attacks the neighbor's cat.
Why can't people freakin' get these words correct???
testudo
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Re: Re: Here's a scenari
07/22, 10:11am reply
testudo: Would you marry me?
Nai no Kami
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Joined: Aug 2000
My Bet
07/22, 10:29am (1 reply) reply
I'm guessing the "product transition" is Apple making a move to license Mac OS X to Dell, HP, and others.
sgirard
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Joined: Aug 2005
Product Transition
07/22, 10:36am reply
This is just a shot in the dark. Last I checked Intel wasn't the only X86 cpu maker in the industry. Maybe AMD is talks with Apple regarding a value proposition that Intel can not match. I.E. ATI Graphics AMD CPU AMD motherboard..... at least for the consumer level products. What do you guys think?
Guest
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Joined: Nov 1999
GM
07/22, 10:59am reply
With a gross margin almost 35%, they could easily lose 25% if the retail pricing and still be profitable.
Like going up 0.2G in CPU speed, it costs them about 50 bucks but they extract 800 bucks at retail. And from reading the posts around the web, it sure seems LOTS of folks are going for such things...
paulc
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Joined: Aug 2000