Neil Hughes
Difficulties in manufacturing the iPhone 5 are expected to affect Apple's gross margins for the near term, as the company is predicted to absorb some of the quality control costs associated with producing its latest handset.
Ahead of this Thursday's Apple quarterly earnings report, analyst Shaw Wu with Sterne Agee said he expects "vintage conservative" guidance from the company ahead of a big holiday quarter. The key reason for that expectation, he said, is he believes Apple will partially absorb quality control costs associated with the iPhone 5.
Wu believes Apple's near-term gross margins will be between 40.5 percent and 41.5 percent. That's lower than Wall Street consensus between 42 percent and 43 percent.
The prediction comes less than a week after an unnamed official with Foxconn, Apple's assembly partner, said the new iPhone 5 is the Most difficult device the company has ever assembled. The complex design of the iPhone 5 has apparently resulted in low yields, which has led to constrained supplies in the market.
Source: @rollermog via Twitter
Beyond the iPhone 5, Wu believes that Apple's margins will also be pushed lower by the anticipated launch of a smaller 7.85-inch iPad. He expects Apple will sell its so-called "iPad mini" at lower margins than the full-size iPad, at least initially, allowing the company to achieve a lower price point and take on competitors like the Amazon Kindle Fire HD and Google Nexus 7.
For the September quarter, Wu believes Apple sold between 25 million and 26 million iPhones, slightly lower than Wall Street consensus of 27 million. He has also predicted iPad sales of 16.5 million, just below consensus of 17 million to 18 million. And for the Mac, he sees Apple having sold 4.8 million units, at the upper end of Wall Street consensus of 4.7 million to 4.8 million.
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22 Comments
I can wait. My iPhone 4 with iOS 6 will certainly tide me over. If only the battery wasn't losing its "fizz"... :-/
I went into a Vodafone store here in the UK. Not only where both the iPhone 5s not connected to any power source, (batteries discharged too), but the black one had pot marks all around the edge. Not sure why Vodafone are intentionally not promoting the iPhone 5 (all the other brands of phone were connected and working fine), but I could guess that they may be intentionally discouraging purchase because of the potential for returns. BTW, whilst I have seen people leaving stores with an iPhone 5, yet to see one out in the real world. I think this phone may well be the beginning of Apple's undoing. Google's model is way more robust and cloud centric than Apple's and it will only take on 'tipping point' incident to begin to knock Apple down, and if an expensive to 'service' product such as the iPhone 5 is it, then things are about to get interesting. And this before the all new Googlised Motorola begin to launch their next generation devices in 2013... #battlestations
Apple is Doomed™
Expecting a 42-43% margin. That's ridiculous.
I went into a Vodafone store here in the UK. Not only where both the iPhone 5s not connected to any power source, (batteries discharged too), but the black one had pot marks all around the edge. Not sure why Vodafone are intentionally not promoting the iPhone 5 (all the other brands of phone were connected and working fine), but I could guess that they may be intentionally discouraging purchase because of the potential for returns.
I've heard that salesmen at Future Shop (electronics retail chain here in Canada) dislike Apple products because they don't get the same kickbacks from Apple that they do from other companies. Could be the same story at Vodafone.
As someone who works creating technology, it pisses me off to think that not doing gladhanding becomes a barrier to the marketplace. Innovation and quality should be the highest goals one reaches for in the industry, not trying to get things to market as quickly and cheaply as possible and then using the money you saved to buy off the supply chains. Alas, if the average consumer doesn't care one way or another, this is exactly what will become the "winning" strategy for companies.
A world of bland, mediocre, half-baked, copycat technology. *shudder*. Though I guess that describes what sells best in any market.