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Wednesday, July 24, 2013

Apple faces new problem

Apple said it sold 31.2 million iPhones, a record for the June quarter, compared to 26 million last year.But profit was down 22% from the same period a year earlier as its profit margins shrank to 36.98% from 42.8%.From BBC

It appeared directly in China. More details here.

Apple sold 14% fewer iPads in the quarter that ended June 30 than during the same stretch in 2012, while the revenue it earned from those sales plummeted by 27%.

Analysts tied the decline in revenue to the iPad Mini, Apple's smaller, lower-priced tablet that has significantly cannibalized sales of the pricier, 9.7-in. original. But ironically, they urged Apple to reduce prices of the Mini even more.

The iPad Mini now starts at $329 for a 16GB model, with prices climbing in $100 increments as the storage space doubles to 32GB, then again to 64GB.

Cutting the price may be a risk -- it would further depress ASPs and result in lower margins for Apple -- but the analysts agreed that it's a move the Cupertino, Calif. company should make if it wants to stay in the game as it faces ever-fiercer competition.

"They need to take big steps to show there's a difference between an iPad Mini and a Nexus 7," said Gottheil, referring to Google's flagship 7-in. tablet. Earlier today, Google unveiled the newest Nexus 7, and said the high-resolution tablet -- it uses a 1920 x 1200-pixel display, almost triple the pixel count of the Mini's 1024 X 768 screen -- would sell for $229 (16GB) and $269 (32GB).

"If Apple can come up with a Retina iPad Mini at $329, and can lower the price of the existing Mini to $249, and do that profitably, that's a killer," said Gottheil.

"Apple's margin declines are permanent," said Baker, echoing Gottheil in arguing that Apple must first acknowledge as much, then realize that cutting prices won't be its doom. "After all, they're so much better than anyone else in hardware, even now."

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