Apple depends on the iPhone more than previously thought

The story on Apple’s margins is even more interesting when you look at how high its iPhone margins are. Analysts have calculated that the gross margins on the iPhone are nearly twice the margin on the iPad. And this suggests that Apple depends heavily on iPhone sales to maintain margins. What does this mean about Apple going forward? Well, to the degree that Apple wants a positive high margin/high growth mix they need to have an iPhone product cycle that sells a lot of units. If their product cycle is slow then both volume and margins fall as the product mix skews away from the iPhone. The reason Apple’s quarter was so bad was because of this.

The question is whether there are some sort of hysteresis effects, meaning that the lost momentum from one upgrade cycle feeds through negatively to the next upgrade cycle. Another question is whether the shift from non smartphone handsets to smartphones favors Android and therefore Samsung due to price. If so, the platform network effects could become a significant headwind for Apple as they attempt to keep both margins and growth high. I don’t think they can do it. I believe margins or growth will slow… or both. And I believe that’s what we are seeing right now.

Apple’s margins on the iPhone 2x that of the iPad — Apple News, Tips and Reviews

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Amazon’s profit margin rises as new businesses grow | Reuters

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Google Details Its 1 Gigabit Fiber Network In Kansas City, Will Come With TV Service, 1TB Of Cloud Storage, Nexus 7 | TechCrunch

Apple denied German injunction of Galaxy Nexus, Galaxy Tab 10.1N

Amazon revenue jumps, but forecast cautious | Reuters

INDUSTRY INSIDER: Here’s How Apple Blew It On The iPhone – Business Insider



Angela Merkel and Francois Hollande pledge to back euro – Telegraph

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Bundesbank Stays Opposed to Bond Buys –

EZB als Euro-Ausputzer?: „Draghi ist ein Plünderer des Bürger-Spargroschens“ – Deutschland – Politik – Handelsblatt

Spain discussed $366 billion bailout with Germany: source | Reuters

FT Alphaville » What’s the ECB going to do next?

Germany says will do all it can for euro, just like ECB | Reuters

Plan concerté entre les Etats et la BCE pour sauver l’euro

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Stundenlohn: Viele Arbeitnehmer verdienen weniger als 8,50 Euro – Nachrichten Wirtschaft – WELT ONLINE

Felipe González: “Todo el mundo sabe que España no va a bajar el déficit” | Economía | EL PAÍS

Castilla-La Mancha no descarta pedir ayuda, aunque no de “manera urgente” | Política | EL PAÍS


Other links

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More than 70% of Illinois land suffering extreme drought –

Andy Warhol and Nico as Batman and Robin, 1967 | Retronaut

Starbucks reports third-quarter net income below expectations | Business |

Analysis: India’s shopping malls lose bustle as economy cools | Reuters

New record average mortgage rate: 3.49%! – Lansner on Real Estate : The Orange County Register

Argentina: lots of Evitas needed | beyondbrics

Calculated Risk: Lawler on Builder Results

S&P 500 Poised to Reach 1,380 by September, Laszlo Birinyi Says – Bloomberg

Stocks Surge, But Analysts Skeptical About Draghi’s Comments – MarketBeat – WSJ

Why Regulation Won’t Fix Finance – CNBC

How Our Brains Stop Us From Achieving Our Goals (and How to Fight Back)

BBC News – Ford profits fall 57% on European losses

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