Apple Refuses to give away Computers: This investor Cheers!!

$899 computer....  

Apple said their margins were going to get squeezed over the next year and the whole world thought.  Oooohh Apple's giving away free stuff!  (However unlikely I thought it was a possibility too)

Real back of the envelope stuff here but here it is.  Apples PPU (Price per unit) on computers of all kinds fell only 80 bucks from the year ago quarter.  

If Apple dropped the price of the lowest price laptop by $200 bucks and since the product mix favors sales of the lower price laptops a $200 price drop would have an outsized effect on the average.  combine that with the falling price on the Air and average PPU could drop by $200 would mean that just to maintain revenue equal to last quarter they would have to sell 20% more computers just to maintain their 3.6 Billion in Revenue.

So here is the take home.  If the business is growing. and revenue is growing.  Don't give up margin.

Apples cost to make a less expensive (at retail) computer is only pennies cheaper than making a more expensive one.  Apples strategy has and apparently will be (until it is not) to try and add further value to convince us that we do not want a $600 laptop.  (In fact Apples average PPU will be crushed this quarter anyway because of the Back to School promo but will be similar YOY)

I will write some more later on the effect this has on Earnings Growth prospects for next year.

Here are some related links

Reasons for Narrower Margins

Earnings release next week

Apple Crushes Dell

Why Apple should pay a dividend

Is Apple stock cheap?

Writer is Long Apple and is depressed that the Red Sox cannot beat the team from Tampa.  If your depressed you may be a Red Sox Fan too.  Don't love the Red Sox it only brings pain.  Love Apple but not because of Writer OR the Red Sox

iBrick: "Revolutionary" SALES Process...

Look There may be a "Revolutionary Manufacturing process" code named iBrick (I LOVE code names!). But in advance of being proven incorrect. I call bullshit.

1, Customers do not care about "Process" if it makes the product better GREAT we love it but sans improvement no sales. So for example the laptop were more ridged or significantly lighter or better at dissipating heat. it would be killer.

2, If there is a "process" why would it have to be here and Apple building factories? Double Bullshit!. One of the reasons Apple is so Profitable is they do not own factories or huge backlogs of inventory. It also provides them flexibility in product design, and does not mary them to plant and equipment that can (READ WILL) become obsolete.

3, As an example. Dell and AMD have BOTH announced in recent weeks that they are selling off factories and ramping up orders from third party manufacturers in an effort to cut costs. I point this out just as a corporate reality of the immense cost of owning manufacturing. Dell and AMD are not companies that Apple should generally be emulating (Apple=good, Dell=huh?)

Really revolutionary would be having the iBrick sold on street corners by Earthfriend Jen. "Would you like some water or Hemp with that?"

I'm just sayin.