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  • lewandowski.gregory lewandowski.gregory Aug 27, 2013 11:07 PM Flag

    How Apple Will Defend Its Margins

     

    How Apple Will Defend Its Margins

    By Doug Ehrman | August 27, 2013

    With the release of the next wave of Apple (NASDAQ: AAPL ) iPhones growing ever-closer, it seems a near certainty that Cupertino will be releasing two models: the iPhone 5S and the iPhone 5C. So confident have the pundits and prognosticators become that a recent Financial Times article details the release of the two handsets as fact. Investors are concerned that rolling out a lower-cost device will seriously cut into Apple's margins. The concern is not without merit, but I think there are two real ways that the company will defend its margins: improving product mix, or by making margins significantly less important.

    A quick look at the iPhone 5C

    While the existence of the iPhone 5C is not even officially confirmed, FT's Tim Bradshaw offered some possibilities. Essentially, Apple is targeting a lower-cost device, available in multiple colors, that doesn't degrade the cool factor, demonstrates Cook's leadership style, and will allow Apple to achieve better market penetration in China. What this has to do with margins is that if the strategy is successful, which I believe is likely, then Apple will sell a lot of iPhone 5Cs. Selling a large number of units is a cornerstone of the first line of defense for Apple's margin.

    Improving product mix

    In June, Morgan Stanley's Kathy Huberty release a research note defending the idea that a cheaper iPhone could actually help Apple's margins. Her thesis was very straightforward: The margins on iPhones (even a cheaper one) are better than Apple's margins on its other products, and if the company can significantly increase the number of units it sells, the product mix shifts favorably and the company's overall margin can actually improve. While the idea has a bit of "that's just so crazy it might work," her numbers are both reasonable and compelling. By upping the overall sales figures for iPhones, Apple could see a small improvement in margins, and see revenue

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    • You might be able to argue with 5 or 10 people with little or no credibility about Apple's future. If you have to argue with 100 of the top analyst, fund managers and institutional investors in the world, you better know what you're talking about.

      This board is full of idiot's who haven't a clue as to what the market's all about or the companies in it. Apple has a list of the who's who of the business world behind it. Apple will run to $575 by third quarter. If Apple has truly worked out a deal with China Mobil. Which looks to be a done deal. Apple will move back into double digit growth. Maybe that's why growth funds are buying on weakness?

      Sentiment: Strong Buy

      • 1 Reply to suzie2450
      • Are these the same experts who said Apple to $1000 when it was $700 plus?..and failed to predict fall. Same guys who said buy Real Estate in 2005? Said sell gold at $300 and buy it at $1900? When will people EVER learn to think and not be herded around like sheep? Obviously never. Here for sure, where sheeples follow old Ram, but will be left sheered, after being thououghly screwed.LOL

        Sentiment: Strong Sell

    • They can't, won't and shouldn't.

      AAPL market shares on all products exceot Mac line are shrinking dramatically in 2013. Margin is the last thing AAPL management should worry about. Right now AAPL longs think they are safe on $385 support. Wait for one month. The true support is $200 if we go to war and stock market have the true crash in 5 years. People playing now have totally forgot 2007-2009.

      Sentiment: Strong Sell

 
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