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Apple says iPad mini margins to apply downward pressure on profits

During Apple's fourth quarter conference call, CEO Tim Cook said the iPad mini is being sold at a price that will net lower gross margins than is typical with other products, revealing that the company is being aggressive with its push into the small form factor tablet market.

When asked about the newly announced iPad mini's price tag, Cook said that Apple didn't set out to build a cheaper tablet, and instead wanted to offer a "full iPad experience" in a smaller package. The resulting cost of materials and labor are reflected in the $329 price, which some have complained is too high compared to other "mid-size" tablet offerings.

"It's not a cheaper tablet, it's a smaller iPad," Cook explained. "It's a full iPad with expensive components. It costs more."

He went on to note that the iPad mini has a larger display than competing tablets, boasts two "great" cameras versus the typical one and runs the speedy A5 processor. Finally, Cook reiterated the fit and finish of the tablet, noting that it's breathtaking to hold.

iPad mini


Despite media reports bemoaning the comparatively high price, a sentiment echoed on Wall Street after the mini's announcement on Tuesday, Apple is adopting an aggressive market stance as in deviating from its usual high-margin price structure.

According to Cook, gross margins are "significantly below corporate average," meaning Apple's takeaway is likely far less than the iPhone, one of the company's margin leaders.

It was recently reported that the iPad mini's build cost ranged from $195 to $254, depending on the model, meaning the entry-level $329 sales price will net Apple a 40 percent gross profit margin. In comparison, the iPhone 5 is estimated to boast margins of at least 68 percent.

In typical Apple fashion, Cook explained that the iPad mini didn't cut corners, but was designed and built to the standards of every other product coming out of Cupertino.

"Apple will not make a product that people feel good about, but when they get it home, they don't use it," Cook said.

Preorders for the iPad mini are set to go live on Friday, with shipments arriving a week later alongside availability at brick-and-mortar Apple Stores.