Market Currents
Sharp (SHCAY.PK) has "nearly halted production" of displays for the regular iPad as demand...
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Friday, January 18, 10:43 AM ETSharp (SHCAY.PK) has "nearly halted production" of displays for the regular iPad as demand shifts towards the iPad Mini and Apple (AAPL -0.6%) attempts to manage inventory, Reuters reports. Many analysts have already forecast the Mini, which is thinner and much lighter than the 4th-gen regular iPad, will account for a majority of iPad sales in Q1. Higher Mini sales benefit display suppliers AUO and LPL. Due to lower price tags, Apple's average gross profit on Mini sales appears to be lower than its average gross profit on regular iPad sales.
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This news story has 50 comments:
Crackerjack financial reporting, this.
You are adamant in defending the rumours that get posted, reposted and reposted again here as 'news'. The reach here to underline that the gross profit is less for a mini is laughable. First it was gross margin that wasn't high enough. Now it's gross profit that's not high enough.
Your idiotic comparison of the iPad to PCs doesn't highlight my logic disconnect, but rather yours. Unless you also want to compare the gross profit of an ipad mini to a tractor? Or maybe women's perfume?
He doesn't even say electronics in his post, but you wouldn't compare a desktop to the Sony space in New York up for sale would you?
It's not an automatic hit on their overall profit.
Maybe comparing PCs with the iPad isn't a perfect analogy, but the point holds that price tags and gross profits aren't always related even with similar products. If the Mini used much cheaper components than the regular iPad, it could easily carry a higher gross profit. I thought it was worth pointing out to Apple followers this doesn't seem to be case.
Like some others, you seem to be emotionally attached to Apple and become indignant whenever something negative is reported. While I'm glad to hear constructive criticism, rude and intellectually dishonest behavior such as yours has no credibility in my book. But sadly, it's all too common when popular stocks are discussed on the Internet.
Not sure what all the emotion's about. But AAPL threads always seem to devolve into religious wars, LOL.
(no position in AAPL)
In fact most of the market currents are summarized news from other news sources with hardly any opinions, just facts. I personally like this. I do not have to keep track of several news sources to get the most up to date news on the stocks I am following. Of course news from other sources gets "repeated"...it is a summary after all.
If you have read the original news source there is no need for you to read it again here. If however you genuinely do not like to read news that could threaten your own investment thesis maybe you should consider avoiding all sorts of media and just hope all is fine.
In any case, there really is no need for this kind of pointless verbiage here on SA, especially on currents.
Back in March, iSuppli estimated the $499 3rd-gen iPad costs $316 to make, giving it a gross profit of $183. I doubt the 4th-gen model has a much different manufacturing cost. It might even be lower due to typical component price declines.
http://dthin.gs/VbbCgy
In absence of hard data yet, decide your beliefs and place your bets! ;-)
Margin is expressed in a percentage form; profit in numerical, usually currency.
Gross margin is the gross profit divided by revenue (in this case, on the iPad mini product). How is the "higher margin" not "higher gross profit" if the mathematics are correct (and based on a single-unit volume, not aggregate?)... what margin is being referred to?...
The Mini appears to have a smaller gross profit in spite of having a slightly higher gross margin (based on teardown data) because its selling prices are on average much lower. To give an extreme example, a 50% gross margin on a $2 item yields less gross profit than a 20% margin on a $10 item.
The iPad mini has a base selling price that's roughly 34% below the base price for the 4th gen. iPad. So a 40% margin on a base-model iPad mini would be $132 in gross profit, and a (lower) 35% margin on a base-model full size iPad would be $175 in gross profit.
the gross profit is much better when more of the 32gb, 64gb, and LTE units are sold....and im sure apple was smart enough to upsell the higher margin versions by limiting the number of lower priced margin mini's available.
The net effect on revenue may not be that bad....we'll see on the 23rd....
Of course an item with a lower selling price will have a lower gross profit even if its margins are high - but higher than what? Jhonsa wasn't clear in his one-liner in Currents that he was saying that the mini may have higher margins than the larger iPad, but its actual profits will be lower because of the base model's selling price being lower.
That said, one would say - really? No kidding! That's not anything "news" there. The iPod shuffle probably has a huge margin but since it sells for some lower number (what, $89?) of course a 70% margin on that is lower than 40% on a mini. The point refers to an ongoing discussion about margins in general.
That is, ultimately the problem with the mini was (or is) two-fold - will its sales cause an overall decline in that never-ending analyst topic of AAPL's total gross margin (which, according to this potential fact, it won't necessarily) or will it cannibalize enough larger iPads such that gross profit itself (and ultimately EPS) will suffer. And that won't be known until we see the mix of iPad sales in total.
Confusion could have been assuaged by adding "...however, depending on the sales mix between minis and larger iPads, this may affect total iPad segment gross profit and ultimately EPS."
You have to have psychic powers to come up with that bit of psychoanalysis from what he posted.
My analysis of his post is based on what he presented which had nothing to do with any criticism of Apple, it was a criticism of the author stating what he perceived to be the obvious. I would agree that in the context of that particular item, it is obvious.
My lifestyle is such that I have no interest or use for a mini. If my lifestyle was different, I might have no use for a full sized iPad and only want a mini. And then my lifestyle might be different and I want both.
Either way, Apple is going to make more profit this year than any other company on the planet. I also expect Apple is also going to make more profit this quarter than AMZN has made in it's entire history.
If someone wants to critize Apple they can find a way to critcize them.
If they don't go for the low end market they're giving up market share.
If they do go for the low end market they're lowering their margins and their ASP.
If Apple introduced a new product, you can bet someone would criticize Apple for introducing a new product that's DOA. Remember the analyst that deemed the first iPad as the iFlop?
What does Apple know about smartphones? ... when Apple first introduced the iPhone.
What if Apple's margins drop from 39% to 36%? OMG, Apple is about to file for Chapter 11!
I recently saw a list of analyst's estimates of iPad sales; both mini and full size. The spread was, from 16 million to 32 million, if I recall correctly. The market talks about the "consensus" estimate. There is NO "consensus" estimates. It's an average of all the wrong estimates, that they pretend is a consensus. And companies share price lives or dies based on whether they meet, beat or miss the average of all the wrong estimates.
Yesterday's trading volume on Apple was relatively low, trading around 16 million shares. 2 million shares of that in the last 15 minutes. The prior 10 day average was 20 million shares. That's a about $10B on the buy side and $10B on the sell side exchanging bodily fluids. For ONE day.
If anyone thinks that has anything to do with "fundamentals" you're fooling yourself. If the talking heads on CNBC had a shred of integrity at the end of the day they would simply say that Apple was up or down based on the mood of the day traders and high frequency trading that went on.
Author: 20+ divided by 9 is something less than 2.
Commenter: No, you mean more than 2.
Author: Less than 2. The 20 is only an estimate. But it is something greater than 20. Divided by 9 should be less than 2.
Commenter: Do the math. By your own assumptions, the answer is at least 2.22!
Author: You're so emotional. You really shouldn't fall in love with numbers.
I have a lot of respect for Apple, that should be clear from some of my posts and comments. But it's a company for me, not a religion. I'm not sure the same can be said for those who throw around insults, conspiracy theories, and unfounded accusations of bias and malicious intent whenever they catch wind of negative news or opinions.
Regarding the Mini's impact on regular iPad sales, things like surveys, retail checks, and supply chain checks do give investors some clue of how things are trending ahead of an earnings report. Though investors might not always like what's reported, the people doing this work are providing them with useful information, and more often than not either have no rooting interest (like Reuters) or are bullish (over 4/5 of all analysts).
Personally, I think Apple had no choice but to release a Mini, even if it cannibalizes some regular iPad sales. In fact, if I was them, I'd sell it even cheaper (at $299) to keep Amazon and Google from taking too much low-end share.
As for the cost for the mini coming down, I would tend to disagree. The next mini will most likely have a retina display and the price remain the same. Retina displays are not only more expensive, they would need a bigger battery and faster powered processor to power them (A5X could do but I think A6 would be more likely). This would increase the cost furthermore, unless they use IGZO displays. I have read somewhere that those are cheaper but I am not familiar with this.
Btw, I'd appreciate it if you could admit the prior complaints I took the time to respond to were unjustified before launching a fresh complaint (now also discredited). I consider that simple courtesy.
Lets face it, if the total overall revenue from the mini and the regular I pad is the same, then Apple will make MORE not LESS money if the mini canibalizes some of the regular I pad. If you replace 100% of the revenue from the regular I pad with the same amount of revenue from the mini, Apple will make MORE not less money. I cant help but think that the gist of the article is misleading.
"If you replace 100% of the revenue from the regular I pad with the same amount of revenue from the mini, Apple will make MORE not less money."
That's quite possible, but for that to happen, unit volumes have to increase, since the Mini's ASP is lower. That's the big question: does the Mini boost total iPad volumes enough to offset the profit impact of any regular iPad cannibalization? This might or might not be true over the short-term, but I think it'll be true over the long-term, given how consumers have taken a liking to smaller tablets.
The 5th-gen iPad is supposed to be thinner and lighter, and also have smaller bezels similar to the Mini. That should make it more competitive relative to the Mini.
No?
Well, of the handful of remaining honest news outlets, those that verify with real sources before publishing as old fashioned responsible journalism requires, they all say the WSJ article was bogus. Even the Journal disavowed their own numbers within hours of publishing. But the infotainment media had already seized their negative AAPL headline and they've kept at it all week. So, this entire discussion of margins, iPad vs iPad mini vs Mac Pro vs Mac Air is ridiculous, driven by Monday's WSJ tripe that somehow refuses to abate. I guess it suits the hedges and naked traders to sustain any instability, but it is dishonest to the point of fraud.
I am long AAPL and relishing the 23rd. Time to whack the bears. They've more than earned a spanking.