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Apple hints at lower prices as iPod, notebook refresh on tap

By | July 22, 2008, 3:58am PDT

Summary: Amid all the chatter about Apple’s fiscal third quarter results, which were strong, most concerns about the future revolve around two words: Gross margins. The big takeaway for technology buyers: Those lower margins hint at cheaper iPods and notebooks in the not-to-distant future. Following Apple’s typical strong quarter with a side of conservative guidance (Techmeme), CFO [...]

Amid all the chatter about Apple’s fiscal third quarter results, which were strong, most concerns about the future revolve around two words: Gross margins. The big takeaway for technology buyers: Those lower margins hint at cheaper iPods and notebooks in the not-to-distant future.

Following Apple’s typical strong quarter with a side of conservative guidance (Techmeme), CFO Peter Oppenheimer and COO Tim Cook noted that gross margins would be 31.5 percent for the September quarter and about 30 percent in fiscal 2009. It could be that Apple is lowballing again with its outlook, but there are good reasons to think that your Mac notebooks and iPods will come cheaper in the future.

Overall, I think you’re going to see Apple play the volume game a bit. It is the No. 3 PC maker in the U.S. and has a lot of open field before it bumps into Dell and HP in those top two spots. Part of the margin pressure is back to school promotions, but executives also noted that there will be an undisclosed product transition that will also lower prices and hurt margins.

Oppenheimer said “we’ve got a future product transition that I can’t discuss with you today” as he explained the gross margin outlook. In fact, Oppenheimer said that exact phrase three times according to the SeekingAlpha conference call transcript.

So what will these product transitions be? It’s a safe bet that you may get new portables from Apple, lower priced MacBook Airs and newfangled-but-less-expensive iPods with touch navigation. For instance, Oppenheimer noted that there has been some strong demand based on Apple’s iPod Shuffle price cut. Apple is walking the line between its premium pricing heritage and stoking demand.

Piper Jaffray analyst Gene Munster outlines his case in a research note:

We believe Apple is readying new iPods and new portables that will apply downward margin pressure in the Sept. quarter and into FY09. We believe there is an 80% chance Apple will introduce redesigned MacBooks and possibly new MacBook Pros at lower price points. Specifically, Apple may re-enter the $999 price point (currently $1099)with the MacBook, or test the $1,799 price point with the MacBook Pro (currently $1999). In addition, we expect slightly redesigned iPods in the Sept. quarter, with lower-cost touch-based iPods for the holiday season. We believe Apple is getting slightly more aggressive with its pricing; but overall the company is not diverting from its strategy of premium pricing.

Munster’s take is most likely correct. Apple can easily play in a lower price point with out getting into the $599 weeds where other PC manufacturers roam. And psychologically that $999 price point matters to the retail consumer. As for iPods, it only makes sense that touch becomes the primary navigation.

The other item to note here is that the margins on the iPhone aren’t likely to boost the September quarter because of the way revenue is recognized.

Oppenheimer’s full explanation about the outlook:

We are targeting revenue of about $7.8 billion, which is 25% growth over last September. We have included in our revenue guidance the full quarter ASP impact of the back-to-school promotion, a future product transition that I can’t discuss today, and also the elasticity that we’ve seen from the iPod Shuffle price reduction and its result on ASP.

I would tell you that we are very happy with our revenue growth and we’ve just reported the best Mac quarter ever and double-digit iPod growth, and are off to a fantastic start with the iPhone 3G.

We expect to sell more iPhones this quarter than we have in any previous quarter, but this will have a limited impact on the September quarter but will build significant revenue and earnings, which we’ll report in future quarters. If iPhone sales were reported as revenue when sold, the September revenue guidance would be significantly higher.

Bottom line: If you’re in the market for an Apple iPod or notebook a little procrastination may not hurt given the company’s comments.

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Topics

Notebook, Apple iPod, Apple MacBook, Apple Inc., Peter Oppenheimer, September, Digital Music, Digital Media, Personal Technology, Consumer Electronics, Larry Dignan

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic.

Disclosure

Larry Dignan

Larry Dignan has nothing to disclose. He doesn’t hold investments in the technology companies he covers.

Biography

Larry Dignan

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CNET News.com. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism and the University of Delaware.

For daily updates, follow Larry on Twitter.

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RE: Apple hints at lower prices as iPod, notebook refresh on tap
tomlin21-24319035676893835085146735905770 11th Oct
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0 Votes
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Winner if they don't sacrifice quality
scott1329 22nd Jul 2008
This move would be a winner as long as Apple doesn't sacrifice quality. If they lower prices by making lower quality products, game over. If they just shave off price overhead, that's great. If they start matching the quality of computer products in Wal-Mart, forget it. One thing that impressed me about my Everex gPC was how the parts inside were from quality vendors. They lowered the price but kept good parts (Maxtor, Sony, etc) instead of putting no-brand parts into the machine to keep the price low.
0 Votes
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Well in "THEORY"....
James Quinn 22nd Jul 2008
Increased sales volume means you can get the same quality
parts for less.

Pagan jim
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I don't know . . .
JLHenry 22nd Jul 2008
whether to take exception to your statement or not. I've never had a problem with anything I've bought at Walmart. They even sell iPods, and Zune's if you want 'em (I noticed the Zune boxes are a little dusty, however wink ). I even bought an Acer laptop for my church there, with no complaints from the treasurer (primary user) yet.

I think that if Apple could have the machines made in the volume that Walmart would demand, the price would drop like a rock (If they don't mind a lower profit margin, but get a bigger overall gross . . .). But even so, if they had a model (or two) designed to sell at Wally-world made with lower price (but still good parts), they wouldn't sully their rep, and stand a pretty good chance of approaching #2 . . .
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I don't understand
tikigawd 22nd Jul 2008
This gloom and doom view of Apple making low-end Macs. If you consider normal Macs to be good why would you think cheaper ones would not be good as well? They would come from the same company, right?
If anything the trade-off would be less processing speed and/or graphics horsepower... It's not like they're suddenly going to get parts from a different part of the world than the ones they're using now...

PS: too bad on those dusty Zunes at Walmart. The 2nd gen ones are pretty solid. My 80GB player definitely beats the iPod equivalent in features alone.
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After all the time they've been on sale . . .
JLHenry 22nd Jul 2008
I STILL don't know anyone who owns a Zune personally. Just people I've talked to on the net . . .

And I think that was my point about a Low end MAC. The elitists could continue to buy their Macs in a Boutique at a high cost, and still feel superior to the rest of us who "had" to get ours from a *Walmart* . . .
0 Votes
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HEY! NOW We Know Why Apple's Demanding PsyStar Recall Their Clones!
drprodny 23rd Jul 2008
The WalMart Mac! >:)
0 Votes
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Yeah, i don't know anyone else with a Zune
tikigawd 24th Jul 2008
But I have one.
Unfortunately, MS got into the MP3 player game waay late. The iPod had long dominated it.

Nevertheless, the Zune is still a fine player. I did my research and played with both 80GB Zune and iPod (I wasn't willing to plunk down $500 on the lame 32MB iPod touch when I could get a nice HDD base player for half the price and 2.5 times the space), and the Zune beat the iPod all around IMO.

Apple seemed to add useless "features" to the iPod Classic while not improving on existing ones whatsoever.
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Everybody beats the iPod equivalent in features
jorjitop 23rd Jul 2008
The iPod just works better, and is nicer to use. Apple products often lack features, but they sell because of their design and ease of use.
0 Votes
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And "features" mean what?
James Quinn 23rd Jul 2008
The biggest feature that the Zune lacks is it's only half a
product. It does not come with something like iTUnes which
makes the iPod a complete product. Consumers like easy
and they don't purchase cars for example without wheels nor
do they want to buy a toaster without a power cord or an
MP3 player without an easy out of the box way to download
and use music. The Zune is not a whole product.

Pagan jim
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Since you say Zune is half a product it must be true
tikigawd 24th Jul 2008
The biggest feature that the Zune lacks is it's only half a product.
If you say so...

The only thing I did with iTunes was sync my old iPod.

Pray tell what "complete" means to you?
I must guess that by "complete" you must mean that you can buy songs through iTunes in the locked down DRM-beauty of m4p? Because about that's the only thing you can't do on Zune that you could do on iTunes, as far as an MP3 player is concerned. Similarly, you can't buy MS-locked music on iTunes; you need Zune for that. That is if buying DRM'd music is your cup of tea.

But all of that is immaterial to me since I like buying CDs and ripping them, not getting tied down to buying songs on a proprietary format.

As for your beloved iTunes, it's S L O W as molasses. And I got tired of the Apple look. Sorry, I don't like my Windows to look lika a Mac. If I wanted the Mac look, I would uhhhhh, get a Mac.
I like how the Zune software looks and feels much better than iTunes. And I like the Zune pad better than the Apple click wheel. Aaand I like my radio. Aaaand I like my big screen that let's me see the complete cover art along with the song, artist, and album info at the same time. Aaaand I like being able to sync the player wirelessly. Aaaand I like it that when the Zune is plugged in to my computer and I'm messing around in the Zune software (creating playlists, downloading podcasts, riping CDs) it all gets automatically synced, on the fly, without me having to hit the sync button.

So how do you like them apples?
0 Votes
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If Ballmer were Jobs, not even he would be that stupid
Jeff Dickey 24th Jul 2008
...as to sacrifice quality to goose the margins by a few
points. What's the use? Apple is to computers as Rolex or
Omega are to watches and Sony used to be to audio and
video equipment. You don't tick your customers off by
reducing quality while still marketing to the high end.
(Actually, Sony did, and that's one major reason their
stock's tanked since 2000.) Apple also heavily market ease
of use, stability and consistency (especially compared to
Windows PCs); why give up the high ground when you own
it? (#3 sales of computers, #1 sales of $1000+ computers.)

I bought a new iMac two months ago; the effective price
here in Singapore has dropped a couple of hundred dollars
in that time (we've a huge nationwide sale on). Am I upset
that Joe User can walk in and pay less than I did two
months ago for the same overall kit? Not in the slightest. If
I (conservatively) estimate that my 2 non-Mac systems take
a couple of hours a week each to babysit and clean up
after, and figure what my time's worth, I'm still money far,
far ahead. And compared to a Dell or Compaq? "Dude," I'm
NOT going to Hell anymore...at least in this life!
0 Votes
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RE: Apple hints at lower prices as iPod, notebook refresh on tap
tucker@... 22nd Jul 2008
Wonderful idea because I am sorry I would never buy a Mac at the current price. You can get a comparable PC with more memory, a larger hard drive and other options for 300 to 400 less than a Mac. Sure Mac's look cool and they are great to look at when you go to a trendy coffee shop but in this economy what a device cost is more important than what it looks like. At least it is for me.

-Tucker
0 Votes
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The make has always been more than the sum
James Quinn 22nd Jul 2008
of it's parts. It's not the hardware or the OS. It's the
combination of all pieces to make a whole. Sure a Mac looks
good and well it should. But that is not the essence of a Mac
it's the way all it's parts including the software and OS go
into making the whole widget. A hand n glove relationship
between the pieces.

Pagan jim
0 Votes
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RE: Apple hints at lower prices as iPod, notebook refresh on tap
EricinOly 22nd Jul 2008
Apple did try this before and failed miserably because they did turn out crap. I would love to be able to justify the extra dollars..let's hope they maintain quality.
0 Votes
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Apple will always be a premium company
Narg 22nd Jul 2008
...and not worth it IMHO.
0 Votes
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Opinions vary.....:P
James Quinn 22nd Jul 2008
Pagan jim
0 Votes
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RE: Opinions vary.....:P
richdave 22nd Jul 2008
That they do. Some folks like a flashy, overpriced box with an emasculated OS and some like Windows. Some of us prefer a very full featured, robust, extensible, scalable, highly configurable, desktop/works station/file server/mail server/etc. Funny how all of that is available at a price point far below either Apple or Windows. But then, as you said. opinions vary.
0 Votes
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And many an opinion holder miss the point....
James Quinn 23rd Jul 2008
Besides the very negative and emotional statements you do
have a point burried within...:P

Sure Apple and it's wares are different. They don't follow
the same path as MS or Open Source both more shall we
say "Open" with Open Source being the more open than
MS. Now since Open Source and MS exist already Apple
chose a different path. You as the consumer get a wide
range of options and or choices here and you should be
glad for it. Apple's way of doing business is to control it's
hardware and OS as well as applications to a degree to that
the whole widget is well planned out and works together
hand n glove. Now because of that there is a down side
you don't get to install everything under the sun or do
everything you might wish to your Apple system. However
on the positive side "IF" you can get everything you need
from Apple you KNOW it will work and you never have to
deal with the mysteries of hunting down incompatabilities.
Again it's a choice and I for one am glad of it. I being a
desktop support specialist as my company chooses to call
me can praise Apples way of doing business because when
you get those Mac's setup to run production that is what
they do day after day after day Our Windows setups are
not always so reliable and more often than not it's due to
one of two main problems component issues related to
those famous low margin sales. Or software difficulties
due to such issues as drivers, OS and or utilities that just
do not mix well with the whole widget concept.

Pagan jim
0 Votes
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RE: Apple hints at lower prices as iPod, notebook refresh on tap
lcarliner@... 22nd Jul 2008
It is past time. For far, far too long, Apple's pricing policies has been and still continues to be "rotten to the core"! As soon as Windows came to market, had Apple been willing to engage in timely loss-leader aggressive price cutting, the face of the industry would have been far, far different and far, far better!

Louis A, Carliner
Masaryktown, Florida
0 Votes
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Have you ANY idea.......
James Quinn 22nd Jul 2008
How many PC manufacturers have come and gone playing
that very same game? How many who remain are not
doing so well? Apple stands alone in many ways one of
which is being one of the oldest in the Personal Computer
industry and one of the healthiest at that. I wonder if
Apple would have been just another casualty of the price
wars if they had given it a try? I think the odds are good
that they would have been.

Pagan jim
0 Votes
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I wonder if...
cslycord@... 22nd Jul 2008
Apple had tried that would Microsoft ever have needed to bail them out?
0 Votes
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I wonder as well.....
James Quinn 22nd Jul 2008
At the time Apple still has plenty of cash on hand. MS
needed Apple viable to try and counter it's "Hey we do
have competition claim in it's Monopoly abuse trial" MS
and Apple had ongoing litigation that was settled by this
so called bail out. I think beyond the money the
agreement to continue to make MS Office was the real deal
for Apple. Apple had money enough to last. So who
bailed out who? They both has litigation against one
another. MS lost it's monopoly trial. Apple continued on
and MS made money on it's initial stock purchase none
voting stock that is.

It's an interesting page of both there histories. Yet the
point is in the end Apple still stands while countless other
hardware vendors are but memories of days gone by. A
much smaller number of OS vendors also litter the
graveyard. They all tried to do it they way MS and Dell has
and lost. I think in the end Apple's way has proven to be
better.

Pagan jim
0 Votes
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RE: Apple hints at lower prices as iPod, notebook refresh on tap
Rodney0123@... 22nd Jul 2008
Even a hint at a price reduction for Mac computer is good news to me. I am disabled and living on a very low, fixed income. I have owned almost every Windows operating system, and really the next new hyped up version is usually not much better than the last one. I've always heard about the Macintosh, but the price range is always kind of kept me away. But I have already stated. I've given Bill Gates, enough of my money for not much advancement. I want a computer that has a high level of excellence and works straight out of the box.I currently have an XP and a Vista sitting side-by-side on my desk in order to work all the programs I usually run. Every new system Microsoft comes out with is never compatible with many of the programs I am already used to running. I'm tired of that. I want a computer I can pull out-of-the-box run my programs, and not have to return to the computer store to buy all kinds of new software to run my previous programs. Macintosh may be a little more costly, but that will be my future choice on my next computer.the price reduction will be a great bonus.
0 Votes
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If you're looknig for backwards compatibility
tikigawd 22nd Jul 2008
"out of the box" you better do your research before picking up a Mac.

Especially since once you get the Mac none of those Win programs will run natively on your new Apple machine.

As new OSes come out they are designed for new hardware, in order to take advantage of it. There will always be some level of incompatibility associated with that change in technology. Mac OS is no different.
0 Votes
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Go for it
Partners in Grime 22nd Jul 2008
Macs are worth it. There is a learning
curve but it's not as difficult as some
folks make out. About the only thing I
lament is that I didn't switch to a Mac
sooner.
0 Votes
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RE: Mac Mini is to be discontinued???
iluvmacs 22nd Jul 2008
Apple should simply keep developing a better AppleTV product and stop wasting there time and money supporting the Mac Mini. They clearly are not making enough money on the Mac Mini product line. Ipods, MacBooks, and AppleTV are all geared towards portable media and business minded consumers. They are all revenue generating devices even after the initial purchase. That is why Apple's future will continue to get exponentially better as more people continue to buy their products. They seem to be focusing on never having a one-off sale for there products.
0 Votes
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not making money on mini?
vince@... 22nd Jul 2008
Links to evidence of this claim, please. I know a lot of people with Minis, and they're quite happy with them. Not everybody tries to use them as as pseudo-AppleTV. Some people just like a small, inexpensive computer. I got one for my kids, and it's perfect for them, taking up less space on their desk than a dictionary.

"Geared towards portable media" customers? Well, the best-seller at our local Mac retailer is the iMac. Hardly a portable. In fact, as a desktop system it doesn't get much more portable than the mini.
0 Votes
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Going to the next level
softwareFlunky 22nd Jul 2008
I think Apple has learned from the master, Microsoft, and is going to the next level of spreading FUD: spreading it in the PC manufacturing world. So, how does Apple expect other manufacturers to react to this news and how does Apple profit from it?
0 Votes
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RE: Apple hints at lower prices as iPod, notebook refresh on tap
phatkat 22nd Jul 2008
Are you crazy?! I love my Mac Mini because I share desk space with a Windows PC so this prefect for those who doesn't want screen of an iMac or space for a MacPro. Mac Mini was one of the best ideas Apple had for the "dual life" family or small desk space.
Log live Mac Mini!
0 Votes
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$1799 is a low starting price?
A_Pickle 22nd Jul 2008
This is news to me...
0 Votes
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Frigging moron
Kaiwai 22nd Jul 2008
Why the hell are you referencing a price for a PROFESSIONAL LAPTOP!?
0 Votes
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well said (NT)
evilkillerwhale@... 23rd Jul 2008
NT
0 Votes
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Missing the beauty of the new INTEL MACS
3D_Animator 22nd Jul 2008
I do a lot of video editting, 3d graphics creation and effects as well as music and beats creation. I had high hopes for Windows Vista. I thought it was going to improve on what XP did well and shore up its lacking areas. I was greatly dissappointed!
So first I bought an older G4 Mac running the Tiger OS just to see what all the hype was about. The graghics software I was using had Mac versions that ran quite well, in fact better than windows versions ran on Vista and just a little better than it ran on XP Pro. So I went to stores that sold the new Intel Macs and one of the sales persons showed me their personnal machine running XP in boot camp. I was sold!
I bought a Mac Pro 2.4 ghz laptop(I have always been an AMD guy until now). It cost about the same as any high powered PC laptop and performs better than Vista for what I use it for.
The sweet thing is the tons of oldy but goody windows software that I have is able to run on the Mac laptop running XP Pro in boot camp. I feel I have the best of both worlds and as impressed as I have been with this MacBook Pro (Caught it on a sale at B*** B** for $1,844 which included a Canon printer/scanner/copier, wireless laser mouse and 2gb flash drive for 18 months no interest in a package deal) I will probably never buy a Pc again.

I think it finally boils down to what your needs are. If you're a power user with some heavy duty software that needs raw clean processing power and your software has a Mac version, go for it. If you have a lot of Windows stuff the Intel Mac will run that too. If Apple makes a cheaper less robust machine for the non power user whose just piddling around on the net and a little word apps it might fly. But the Pro user whose making money with his machine or the serious hobbyist who wants professional performance is not unaccustomed to premieum price for equiptment that delivers. These are the users that will be unhappy with a cheaper product that delivers low budget results.
0 Votes
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Boot Camp?
Arm A. Geddon 21st Aug 2008
Forget dual booting. happy Have you heard of Virtualbox?

http://www.virtualbox.org/wiki/Editions
0 Votes
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My Guess: Apple's $499 Laptop
brian.hayashi@... 23rd Jul 2008
Given the magnitude of the drop in gross margins, along with Apple's experience in value manufacturing, I project Apple will sell their "iPad" for $499.

I previously worked for Dynamac, the first manufacturer of portable Apple computers. Later today I'll provide projected hardware and software specs, along with an analysis of pricing drivers at http://www.connectmenetworks.com
0 Votes
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RE: Apple hints at lower prices as iPod, notebook refresh on tap
argoddess 26th Jul 2008
hey,
how long ago did you get that great deal on the macbook pro at B*** Buy? I am thinking of switching from pc to mac, & have my eye on the macbook pro...do they regularly put macs on sale there? thanks
0 Votes
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To 3D_Animator:
argoddess 26th Jul 2008
hey,
how long ago did you get that great deal on the macbook pro at B*** Buy? I am thinking of switching from pc to mac, & have my eye on the macbook pro...do they regularly have mac sales there? thanks
0 Votes
+ -
RE: Apple hints at lower prices as iPod, notebook refresh on tap
tomlin21-24319035676893835085146735905770 11th Oct
Many thanks a superb offer for sharing this fantastic composed subject material! Searching for forward mulberry bags to seeintg considerably more!

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