Regarding Margin-Reducing ‘Product Transitions’

There’s an awful lot of pants-wetting this morning regarding Apple CFO Peter Oppenheimer’s repeated references during yesterday’s quarterly analyst call to a “significant product transition that can’t be discussed today”. This product transition is one of the reasons Apple specified for their 31.5 percent gross margin guidance for their next quarter (compared to the 34.8 percent gross margin they reported yesterday for the just-completed June quarter).

Oppenheimer also said:

“We are working to develop new products that contains technologies that our competition will not be able to match. I cannot discuss these new products, but we are very confident in our product pipeline.”

This sort of statement isn’t exactly unprecedented. A year ago, Oppenheimer said pretty much the exact same thing:

Finally, Oppenheimer said, there will be a β€œproduct transition I can’t get into.”

A “product transition” that reduces profit margins in the interests of building market share could mean nothing more than price cuts, like, say, for the iPod Touch.

β˜… Tuesday, 22 July 2008

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