Piper on Apple margins

Apple's predictions on future gross margins may be overly conservative, say analysts with Piper Jaffray. The group notes that Apple has warned people of lower margins for its September quarter, guiding them down 330bps to 31.5 percent; the average sequential decrease over the past two September quarters is said to have been 220bps. Piper suggests that the new figure is too low, and is keeping to its estimate of 32 percent.

The firm notes, for instance, that although Apple based its margins on the promise of new products with lower margins, its only announcements in September were updated iPod nanos with old prices, and new Touches with a 23 percent price cut. While this might nominally hurt Apple, NAND memory pricing is said to be "at least in-line with typical seasonality," and so unlikely to affect the company. Similarly, the recent Back-to-School promotion -- which in some cases gave out free Touches -- is said to be unlikely to have had serious impact on Apple, at least in part because it should have increased Mac and/or iPod sales.

The situation is less clear moving into FY09, in which Apple has forecast margins of "about 30 percent" based on yet unrevealed lower-margin items. It is expected that cheaper, redesigned MacBooks will be released in October, possibly below the $1,000 mark, but this may actually be considered a plus by investors despite influencing Apple's profits.

Piper observes that if Apple's September-quarter results show a gross margin 1 percent higher than expected, it could produce a bonus of $0.06 GAAP EPS. The announcement of details is expected on October 21st.

by MacNN Staff