It’s NOT Lower Prices, You Eejits! It’s iPod Air!

I’ve been tooling around the Net reading some of the — ahem! — “analysis” of the Apple Mystery Product(s) hints and one of them suggested Apple will be slashing prices to gain more market share.

How frikkin tragic is that tinythinking?

Especially when Apple itself has said that’s not what’s going to happen in the conference call transcript:

Mark Moskowitz – J.P. Morgan

Thank you. Good afternoon. A few questions; Peter, I want to get back to David and Keith’s question regarding the commentary on margins going forward. Is it safe to say then you are kind of suggesting, without announcing your new products, that Apple could introduce a more flexible pricing structure across the product lines in terms of not having the reputation of being the high-priced configuration provider of old? And maybe being a lot more volume driven, particularly on the Mac side of the house?

Peter Oppenheimer

Again, I can’t get in to what we will do in the future but as I look at our products today, I think we are incredibly well-priced from a competitive perspective. With the iPod, we start at $49 and go up to about $400, with many choices in between for customers, and I think we are as competitive today on the Mac as we’ve even been in the 12 years that I’ve been with Apple, so I’m very comfortable with our pricing.

Emphasis added by me.

And how did all these brilliant minds who are paid to write their — ahem! — “analyses” miss this gem? —

Katy Huberty – Morgan Stanley

Thanks. Peter, I understand this is a low base, but inventory did increase 50% sequentially, so is it fair to assume that that number normalized post the 3G launch?

Peter Oppenheimer

Katy, the increase in inventories related primarily to a buy ahead we did to — largely related to the launch of the iPhone 3G.

Emphasis added by me.

He almost let it slip. Almost!

How much more clearer could Apple be that it’s not about price, it’s about something Really Freakin New? —

Yair Reiner – Oppenheimer & Company

Got it. And on iPods, ASPs obviously down quite a bit in the quarter because of the higher Shuffle mix. Is this the mix that we should look at moving forward? And how do you see the overall iPod business developing now that it’s clearly getting some competition, at least, from the iPhone?

Peter Oppenheimer

We don’t provide guidance at the product level. We were very happy with our iPhone sales in the June quarter. We grew 10% in the U.S., 15% internationally, gained share internationally, which we were very happy with.

As a result — as regards the iPhone, it’s hard to precisely tell but there likely was some element of cannibalization and our view is that if there is going to be iPod cannibalization, we want it to be from the iPhone.

Yair Reiner – Oppenheimer & Company

Got it. Just a final question on the gross margin guidance for the following quarter; I understand the comments about new product innovation. I don’t quite understand why that would impact gross margins rather than OpEx and the R&D line; if you can help us think through that, it would be great.

Peter Oppenheimer

Sure. We have been introducing state-of-the-art new products that have technologies and features that our competition just can’t match. And when we do that early in introduction, our costs are higher and then we work to bring costs down over time with value engineering and with volume manufacturing.

Yair Reiner – Oppenheimer & Company

So just to be clear, this implies that these new products will actually be shipping or being built in this quarter?

Peter Oppenheimer

I can’t get into our new product pipeline but I have told you regarding the September quarter, that one of the reasons that we see gross margin being down sequentially is because of a product transition, yes.

Emphasis added by me.

Product transition. Product transition. Product transition.

Slapping a touchscreen onto an OS X notebook is not a product transition. Pulling the optical drive out of an OS X notebook to market it as the MacBook Air is not a product transition.

Taking an iPod Touch, making it bigger — and adding a bundled productivity suiteis a product transition. How much clearer can it be?

This is what Oppenheimer said earlier this year:

“We view the iPod market as bigger than the market for simple music players,” said Peter Oppenheimer, Apple’s chief financial officer. “We believe one of the iPod’s future directions is to become the first mainstream Wi-Fi mobile platform.”

Net Pad. Net Pad. Net Pad!

The iPod Air.

How do these people manage to get a paycheck every week when they can’t figure out something as basic as that?

Previously here:

And So The iPod Air Is Coming After All!

Explore posts in the same categories: Tech - Apple

2 Comments on “It’s NOT Lower Prices, You Eejits! It’s iPod Air!”

  1. nimbus Says:

    I’d rather the “iPod Air” use Mac OS X so that the sales would actually help their marketshare. But if it did use Mac OS X, it’d probably have to be Snow Leopard and that’s not due until Summer 2009.

  2. mikecane Says:

    I am still convinced until Apple releases — or leaks — something otherwise that it will run iPhone OS. Small, thin, fast light OS is the way to go for Net access.


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