FQ1 Gross Margins

  • Posted: 11 December 2010 11:09 PM

    I’m working on a set of revisions to my preliminary FQ1 estimates. My most current estimate is based on a gross margin of 37.5% , influenced by the September quarter’s gross margin of 36.9%. My eight-quarter data tables indicates an average gross margin in FY2010 of 39.6% and an 8-quarter average of 39.9%. Year-ago gross margins were about 40.9%. Apple’s guidance for the quarter is 36%.

    The December quarter is the third quarter of release for the Apple iPad, the second full quarter of sales for the iPhone 4 and some year-end Mac Pro purchases will factor into the revenue totals. Also, Mercel has often mentioned the benefit of some deferred revenue from the iPhone case episode.

    In all, I’m considering increasing my GM estimate to 38%.

    What say the members of the AFB?

         
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    Posted: 12 December 2010 12:35 AM #1

    DawnTreader - 12 December 2010 03:09 AM

    I’m working on a set of revisions to my preliminary FQ1 estimates. My most current estimate is based on a gross margin of 37.5% , influenced by the September quarter’s gross margin of 36.9%. My eight-quarter data tables indicates an average gross margin in FY2010 of 39.6% and an 8-quarter average of 39.9%. Year-ago gross margins were about 40.9%. Apple’s guidance for the quarter is 36%.

    The December quarter is the third quarter of release for the Apple iPad, the second full quarter of sales for the iPhone 4 and some year-end Mac Pro purchases will factor into the revenue totals. Also, Mercel has often mentioned the benefit of some deferred revenue from the iPhone case episode.

    In all, I’m considering increasing my GM estimate to 38%.

    What say the members of the AFB?

    Jan 2008 should tell you my feelings.

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    Posted: 12 December 2010 12:40 AM #2

    It looks to be in the proper ballpark.  Out of the ballpark would be 39.

         
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    Posted: 12 December 2010 12:40 AM #3

    MB, please explain. Just looked through a bunch of Jan08 postings (really interesting, depressing and perspective-inducing). Wow…

    [ Edited: 12 December 2010 01:50 AM by ChasMac77 ]      
  • Posted: 12 December 2010 12:57 AM #4

    Tetrachloride - 12 December 2010 04:40 AM

    It looks to be in the proper ballpark.  Out of the ballpark would be 39.


    Based on strong iPhone sales and a continuing rise in international sales activity I think 38% is more realistic. An increasing number of Apple retail stores also helps margins.

         
  • Posted: 12 December 2010 01:15 AM #5

    I’m at 37.375%.  Apple priced MBA’s aggressively as they did with the iPads. Anything above 37.5% will be part of any “upside surprise.”

         
  • Posted: 12 December 2010 01:58 AM #6

    Mercel - 12 December 2010 05:15 AM

    I’m at 37.375%.  Apple priced MBA’s aggressively as they did with the iPads. Anything above 37.5% will be part of any “upside surprise.”

    The Mac has a diminishing contribution to Apple’s revenue mix. It’s the subject of my Eventide post for tomorrow. Consequently, although the MacBook Air will boost the Mac’s unit sales and the revenue for the quarter, the impact of aggressive pricing on the MBA on overall gross margins will be mitigated. I suspect we will see some end-of-year Mac Pro sales that will benefit Mac ASPs and gross margins just a bit.

    [ Edited: 12 December 2010 02:00 AM by DawnTreader ]      
  • Posted: 12 December 2010 07:09 AM #7

    DawnTreader - 12 December 2010 05:58 AM
    Mercel - 12 December 2010 05:15 AM

    I’m at 37.375%.  Apple priced MBA’s aggressively as they did with the iPads. Anything above 37.5% will be part of any “upside surprise.”

    The Mac has a diminishing contribution to Apple’s revenue mix. It’s the subject of my Eventide post for tomorrow. Consequently, although the MacBook Air will boost the Mac’s unit sales and the revenue for the quarter, the impact of aggressive pricing on the MBA on overall gross margins will be mitigated. I suspect we will see some end-of-year Mac Pro sales that will benefit Mac ASPs and gross margins just a bit.

    DT are you able to elaborate on the Mac Pro sales? I haven’t seen one in the wild for quite some time - do you think they still contribute much in revenue?

         
  • Posted: 12 December 2010 12:41 PM #8

    IOSWeekly.com - 12 December 2010 11:09 AM

    DT are you able to elaborate on the Mac Pro sales? I haven’t seen one in the wild for quite some time - do you think they still contribute much in revenue?

    The refreshed Mac Pros represent the first change in chip architecture in well over a year. The contributions to revenue are much higher than the unit sales would suggest because of the higher price tag. With the higher price comes higher margins. The comment is in the context of overall Mac gross margins.

         
  • Posted: 12 December 2010 01:40 PM #9

    DawnTreader - 12 December 2010 03:09 AM

    I’m working on a set of revisions to my preliminary FQ1 estimates. My most current estimate is based on a gross margin of 37.5% , influenced by the September quarter’s gross margin of 36.9%. My eight-quarter data tables indicates an average gross margin in FY2010 of 39.6% and an 8-quarter average of 39.9%. Year-ago gross margins were about 40.9%. Apple’s guidance for the quarter is 36%.

    The December quarter is the third quarter of release for the Apple iPad, the second full quarter of sales for the iPhone 4 and some year-end Mac Pro purchases will factor into the revenue totals. Also, Mercel has often mentioned the benefit of some deferred revenue from the iPhone case episode.

    In all, I’m considering increasing my GM estimate to 38%.

    What say the members of the AFB?

    I have no problem with that number.  I’m in at 38.2% myself.

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  • Posted: 12 December 2010 01:52 PM #10

    DawnTreader - 12 December 2010 04:41 PM
    IOSWeekly.com - 12 December 2010 11:09 AM

    DT are you able to elaborate on the Mac Pro sales? I haven’t seen one in the wild for quite some time - do you think they still contribute much in revenue?

    The refreshed Mac Pros represent the first change in chip architecture in well over a year. The contributions to revenue are much higher than the unit sales would suggest because of the higher price tag. With the higher price comes higher margins. The comment is in the context of overall Mac gross margins.

    I think Mac Pro unit sales are over rated.  The people (creative professionals) that would be the primary customers of a Mac server haven’t been buying them.  As an industry “creatives” are relatively stagnant in size, representing less than 1% of the computing market.

    I posted about 10 years ago, on the AOL Apple Board, that Apple could abandon the ‘creative professional’ in favor of general computing and do much better.  What Apple did was make being creative much easier for the general public, and sales have skyrocketed.  The point was that Apple focused the general computing public.  Focusing on the creative professional segment constrained Mac sales through the ‘90s, and almost drove the firm to extinction.

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  • Posted: 12 December 2010 04:02 PM #11

    Gregg Thurman - 12 December 2010 05:52 PM

    I posted about 10 years ago, on the AOL Apple Board, that Apple could abandon the ‘creative professional’ in favor of general computing and do much better.  What Apple did was make being creative much easier for the general public, and sales have skyrocketed.  The point was that Apple focused the general computing public.  Focusing on the creative professional segment constrained Mac sales through the ‘90s, and almost drove the firm to extinction.

    This issue now relates more to the power of the iMac. Usually I would purchase a pro-level Mac for my Web and content creation work. The new class of iMacs renders that unnecessary. There’s been a big shift among “prosumers” and independent creative professionals from the Mac Pro line to the high-end iMac line and for good reason. An iMac costs a fraction of the cost of a Mac Pro and with the exception of a desire for expandability meets most needs.

    Still, the Mac Pro is a workstation class computer and the rising presence of Macs in the enterprise market makes this an appealing product line. More than one year passed between chip architecture changes and I expect some demand for the Mac Pro line as we head to the end of the tax year.