Apple forecast shortfall shows cost of year-end product rush

“Apple Inc. traded industry-leading margins for a revamped product line in time for the holiday shopping season, a sign of the rising costs of rivalry with Samsung Electronics Co., Microsoft Corp. and Inc,” Adam Satariano reports for Bloomberg.

“The trade-off was outlined yesterday when Apple said profit in the current quarter will be about $11.75 a share on sales of $52 billion. That compares with $15.49 a share on sales of $55.1 billion predicted by analysts surveyed by Bloomberg,” Satariano reports. “Gross profit margin, the proportion of sales left after deducting production costs, will fall to about 36 percent, the lowest level in more than four years, Apple said.”

Satariano reports, “Apple Chief Executive Officer Tim Cook has introduced a new iPhone and iPad, while updating the iPod and Mac computer lines. The overhaul stands to give Apple products an advantage against new phones and tablets from competing electronics makers, such as Samsung, which today reported record third-quarter profit on demand for its Galaxy smartphones. It also means rising production costs and narrower profit margins. ‘They are going to have a big holiday quarter, a big March quarter, and then you have to wonder after that,’ said Shaw Wu, an analyst at Sterne Agee & Leach Inc. ‘They could be doing this to address competition.'”

Read more in the full article here.

MacDailyNews Take: Shaw might be wondering, but sane people are not.


    1. I love all the completely disingenuous “wondering” by ANALysts who’ve been incorrectly predicting Apple FAIL for a mighty long time. I “wonder” if these analysts spend any time at all actually analyzing and knowing what they are talking about or do they just pull it out of their superstitious ass?

  1. Clearly Wall Street doesn’t understand anything that involves manufacturing – It cost money, time and efficiencies to ramp up new products and Apple just revamped everything except Macbook Airs and towers.

  2. The stock market shows the politics of human behavior really well. The Sky is FallinG!! Or is it some kind of dominance thing, the analysts resenting AAPL for showing them for the asses they are, so they are taking as many pot shots as they can as AAPL continues to grow at a healthy and steady clip year in and year out. Don’t pay attention to the noise.

  3. They way they are pushing Apple’s stock down to buy it before the end of the month is ridicules. You would think Apple lost money not the they put billions in the bank again.

    1. They just want to get in before the next two blockbuster quarters, because especially if capital gains taxes go up, there will be no other company in their gaming world or the industry, better to own than Apple…dividends and rocket fuel enertia…

  4. “That compares with $15.49 a share on sales of $55.1 billion predicted by analysts surveyed by Bloomberg” who have no real financial information as does Apple’s CFO. They pull numbers out of thin air, based on speculation and guesses, and then punish Apple for not meeting them. For years they were embarrassed every quarter by being 20% to 40% low in their predictions. It took them a minimum of 5 years to come to the realization that their models sucked. Now their wild guesses are just as inaccurate on the high side and the stock, and all of us investors suffer for their incompetence every quarter.

    The article touts Samsung as reporting record profits this quarter. I have news for this myopic author, SO DID APPLE! Moron!

    1. Apple has always had premium products and premium life long customers that appreciate the fact that value comes at a premium and is worth every penny of it- they never whine about price.

  5. It boggles the mind that these estimate #’s by so called Analysts have any bearing.

    AAPL continues to grow every year in both top and and bottom yet is portrayed in the bought out media as failing to beat the street. What a sham WallStreet is.

  6. What is going untold here? Apple’s industry leading margins fell from 40 to 36% The other side of the coin? Apple’s 36% margin is still by far the industry leader. Who is the competition? Amazon which sells at cost or below in hopes of selling some content?

  7. Margin erosion is a serious business problem to which analysts correctly alert investors. It’s an early indication of market maturation, increased competition, or operations inefficiency that management fails to address.

    Apple could be facing these problems and failing to address them although it would need another quarter or two to confirm. Analysts can be wrong on many things when it comes to Apple, but let’s give credit where credit is due.

    1. A 4% drop during the reimaging of almost every product line is hardly ‘erosion’. Again, look at the patterns for the last 15-17 years.

      Introduce new products, or MAJOR revisions of existing products, margins fall for a quarter because of retooling manufacturing lines. Next quarter when production is scaled up for volume, margins return. Its neither Brain Science or Rocket Surgery, but rather an artificial excuse to punish Apple.

      1. A 4% margins shrinkage over one quarter is huge; and although product launch costs may be the major contributors, market maturation and increased competition also play a role. How big of a role they play? We know more in a quarter or two.

        1. In this case, probably 2. The F1 holiday quarter is going to be huge. The FQ213 Jan-March will be telling. If Apple can beat FQ2 year over year like it has the last 3 years safe to say the 4% was a mere manufacturing product intro molehill (not even a speedbump). Analcyst FUD mongering mountain makers need not apply.

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