Apple: Falling Flash Memory Prices Should Help Gross Margins

Includes: AAPL, MU, WDC
by: Eric Savitz

The price of Flash memory continues to tumble. That may not be good news for SanDisk (SNDK) and Micron (NASDAQ:MU), but it provides Apple (NASDAQ:AAPL) with a healthy dose of gross-margin helper.

In a research note yesterday, Pacific Crest’s Andy Hargreaves notes that prices for flash memory in January fell 27% for 2GB chips, and 33% for both 4GB and 8GB. He expects the trend to continue - and finds that the trend will result in an extra $3 of gross profit for every iPod Nano sold in the March quarter.

Hargreaves says that should lift gross margin by 30 basis points, and EPS by a penny a share, assuming 5 million Nanos sold. He adds that Apple is unlikely to pass along the cost savings in the form of price cuts. He also notes that Shuffle margins aren’t going to change much, since 1 GB Flash pricing has been relatively stable.

In pre-market trading, Apple shares were up yesterday 33 cents at $84.27.


  • Micron: Jefferies Downgrades On Weaker Than Expected DRAM and NAND Prices (February 5, 2007)
  • SanDisk Swoons On Weak Q1 Outlook; Flash Prices Cratering (January 31, 2007)
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