Why there's no Mac tablet this quarter

Why there's no Mac tablet this quarter

Summary: The Mac blogosphere wants a tablet Mac for this quarter's "product transition." Here's why they won't get it.


The Mac blogosphere wants a tablet Mac for this quarter's "product transition." Here's why they won't get it.

Good news: the Internet isn't making us stupid Apple's CFO mentioned a product transition driving gross margins down. Most commentators don't seem know what gross margin means, and the analysis goes down hill from there.

Bad news: we were stupid to begin with This will only hurt for a minute. Gross margin is defined as the difference between the cost of sales and the net sales.

The cost of sales is the direct cost of making the product, like CPUs and labor. It doesn't include R&D, selling, advertising, marketing, administrative or other overhead.

Finance for techies So a statement such as

In order for a product change to influence earnings, it would either need to have thinner margins than existing products, or reduce sales in some way.

is just Wrong. We aren't talking earnings, we're talking GM. Earnings come after you've paid for R&D and Steve's jet. Nor are "reduced sales" going to reduce GM unless Apple stops managing inventory. You can bet they aren't planning that.

The $150 million question Earlier, I estimated the product transition cost at about $150 million. It could be +/- $50 million.

There are two main ways a product transition could affect the gross margin.

First, the gross margins on existing products could be reduced by building them with more expensive components. Replacing a $25 DVD burner with a $100 Blu-ray burner would increase cost of sales by $75.

Second, Apple could be building up inventories. In accounting terms, cost of sales is equal to the beginning inventory plus the cost of goods purchased minus the ending inventory.

This second option is what partisans of the Mac tablet or other mythical products are pinning their hopes on.

But the numbers don't lie: $150 million would mean an increase of 30% above normal growth in Apple inventories. Assuming Apple has an $8 billion quarter they'd have to sell over $2 billion worth of this magical new product. In one quarter?

No. Way.

This isn't inventory build-up. It is margin pressure from new components.

But what about the software? Another goofy suggestion: the software in the product will reduce margins. Uh, guys? Take a look at Microsoft's margins. Bits are free - they don't increase product cost. Just R&D.

The Storage Bits take Apple traditionally maintains certain price points, relying on component cost declines to increase gross margins.

MacBooks are Apple's single largest product line. They've gone the longest without a design refresh. Thus the obvious conclusion: portable Macs are getting costly new components.

Expect to see Blu-ray burners, quad core processors, LED backlights, more solid-state drives, energy-efficient motherboards and improved battery life and/or slimmer and lighter notebooks. Not all on everything, but as appropriate. Some long shots: high-def webcam; Wi-Max; Mac OS in flash; and full 64-bit hardware across all 'Books and iMacs.

These are all leading edge, currently low-volume, products. And expensive. Ever notice how the new toys show up on the high-end? Well, Apple owns the high-end notebook market and they plan to keep it.

One more prediction. The design language of the new MacBook Pros will look like the MacBook Air. The slab is so last year.

Comments welcome, of course. Blu-ray drives will likely go on everything except Mac Mini's and entry level MacBooks and iMacs. And I hope Compressor gets an update to deliver Blu-ray output.

Topics: Apple, Enterprise Software, Hardware, Laptops, Mobility, Tablets

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  • Apple would have to rewrite the OSX ...

    ... core to support the DRM required for BluRay by the MPIA. That is not trivial. You are not going to see BluRay in an Apple any time soon.
    • Actually they do not have to rewrite OSX...

      to have a Blu-Ray Disk.

      XP Pro SP2 can playback Blu-Ray Disk HiDef Content.
      Also if you just want it for a optical drive you do not have to worry about all the DRM crap.
    • Rewrite Kernel for DRM?

      Why? OSX is incapable of running a VM for DRM? How is that
      different than running Parallels or VMWare? It seems that
      BD+ is already cracked, last March; the bar is much lower.
      • The requirements from the MPIA require ....

        ... a protected path implimentation that requires you to be able to revoke playback when the system has been comprimised or hacked. The method is to embed the functionality through out the OS.
        • oh dont even shadetree

          You obviously have no idea what you're talking about. Stop making a fool of yourself.
          • What is obvious to you ....

            ... doesn't make it so. Try learning how to argue constructively like pointing out where I am wrong and why!
    • Nonsense

      Well, 'oldTree, for your comment to have any link to reality,
      you would have to assume Apple is just about to start work
      on BluRay. Judging by Apple's recent history, I'm willing to
      bet they have long been working on both prospective
      standards--and just moved resources over to BluRay when it
      became THE standard. I'm therefore willing to bet at least
      some Mac models will incorporate BluRay at the very next
      product release event. We shall see, and you will be wrong--
      • Please link the ...

        ... last time I was wrong. As to BluRay in the next product cycle, I would take that bet!
        • Apple's on the Blu-ray Board,

          and has been since March 2005. I think they saw it coming and have been busy since then.
          • While it is true they ....

            ... are a member that hasn't led to a product yet and it has been three years. What makes you think this is the launch?
  • Please don't try to confuse me with the facts...

    I got it from a good source that there will be an iTablet before October. Or at least some sort of MacBook/iPhone thingy.
    Mac Hosehead
  • RE: Why there's no Mac tablet this quarter

    I'm just hoping there will be a faster CPU for the Mini.
    I already have a good 24" screen and new imac keyboard so I don't want to
    fork out $3000+ for a 3GHz iMac, but I think NZ$1500 for 1 2GHz Mini with
    only 2GB RAM is too pricy, but I would pay that if it was 2.5 or 3GHz or
    even 2GHZ but quadcore (not likely because of power and heat)

    I've only ever bought 4 screens in my life, but I replace my desktop every
    couple of years (my old desktops become my servers and run fine without a
    screen and keyboard). I can't be the only one who does this so it always
    confuses me that Apple never have a medium desktop tower option, or a low
    power version of the pro. This is pretty much the only reason the
    hackintoshes exist as because this is a big hole in their product line.
    • Refurbished iMac 24-inch 3.06GHz Intel Core 2 Duo

      • Different Currency

        chromeronin stated price in NZ$, you can't even get a refurbished 3Ghz imac in the NZ store, alone for $1899!
  • RE: Why there's no Mac tablet this quarter

    Mostly agreed with the article. It'll be a new hardware

    I'd say it could happen on any or all of their all-in-ones. I
    also think it would be something that's not easily able to
    be copied by competitors straight off... so I'm tending
    away from BD drives.

    My thoughts: Touch screens on all laptops, iMacs, Cinema

    ps. all the 'books and iMacs are already 64bit - or is there
    something I'm missing?
  • RE: Why there's no Mac tablet this quarter

    I'd like to see Apple's take on a touch screen computer as in
    comparision to the HP Touchsmart (which I think is very cool)
    Universal Indie Records
  • RE: Why there's no Mac tablet this quarter

    Nice educated guessing. But I think it's no accident they're giving
    away an iPod touch with purchase. Last year they gave Nanos &
    a couple of weeks later brought out the new models of them.
    Exactly what's next is up for guesses good & bad, & when we see,
    some will like it & some won't(obviously).
  • RE: Why there's no Mac tablet this quarter

    The quad core addition to me is over kill. Why would you
    need it in a laptop and what would you do with the extra
    heat without affecting battery life, and how could you make it
    thinner with the heat issues?? You cannot make them too
    much thinner or you kill the MacBook Air sales. I would like
    to see flash card reader, PC card slot, drop the 400 firewire
    and go with LED backlit. Nice to have dedicated video card
    across the Macbook line, but maybe keep a low end MacBook
    and reduce price to $799.
    • Video encoding?

      Takes a lot of horsepower!
    • Quad-core MacBook Pro

      I could definitely use a quad-core 'Book for video work. 8 GB
      of RAM to go with it would be nice.

      Thinner I don't need. Lighter and longer battery life would be

      R Harris