Apple’s Profit Margins Will Have To Decrease

in Apple, Mac OS, Operating Systems | by Jon-Paul Raymond | 0 15.02.2013
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“It will be almost impossible for Apple to maintain the margins it’s had in the last few years” -David Yoffie, Professor, Harvard Business School

The layman in the the video is certainly correct about Apple’s falling stock prices, but may be unaware that although Apple did recently release new laptops, even those are now seeing price reductions as well.

It’s not too often that Apple gives you an improved, faster version of one of their most recent products at a lower price, but starting yesterday Apple has now done just that with the MacBook Pro with Retina, as well as the MacBook Air.

The MacBook Pro 13” just received a 2.6GHz processor update and also saw a $200 price drop to $1499. The 15” version now has the option of 2.4 or 2.7GHz quad-core processors, in addition to it now topping of with a capacity of 16GB of RAM (from 8GB). It now sells for $2199 instead of $2799.

The price drops come only after Apples latest high end laptops were released just 4 months ago.

What’s going on with Apple? The production line has not been flowing nearly as smoothly as perhaps Apple would like it to. In September of last year, they announced the iMac, which practically no one is still able to get their hands on due to stock issues. In December of last year the iPhone 5 saw supply issues and Apple lost sales due to it. The iPad mini has also had a shortage issue.

Apple is know to have some of the highest profit margins in their product markets. Whether phone, tablets or otherwise, Apple is widely known as one of the most costly brands. With Apple slashing prices on products such as their latest laptops though, it’s clearly a sign that people are not standing in line trying to get their hands on the items, and Apple is trying to make some sales.

Has Apple seen the end of its high profit margins? The IrishTimes says that, “Apple’s profit margins are falling back to levels not seen since sales took off after the 2007 debut of the iPhone, as competition and lack of breakthrough products pressure the company to lower prices.”

Apple sustained a such profit margins through innovation. The iPhone, iPad and similar products landed Apple in unchartered territory where a world of new devices were introduced to a public that was craving simple mobile computing technology. It’s somewhat evident that for Apple to keep their high profit margins, they must continue to innovate. Apple must once again to truly standout from the competition, but with competition such as Samsung and the world’s expectations hanging on even their upcoming products, the competition seems to be just too much for Apple to maintain the high profit margins that the company came to be known for, investors loved and sustained Apples astronomical stock price which is now tumbling as confidence and hope in Apples future is questioned. The stock reached a peak of about $700 in September of 2012. It now trades at about $460.

Without innovation, Apple’s profit margins will have to decrease.

Related Links:

Apple: The Company That Earns So Much, They’re In Need Of Nothing – Yet
The Mobile War: Apple Down, Samsung Up

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