Margins lower than company average

[KPOM]

At least right now. Some of that may be startup costs, etc, but it seems that Apple is selling this at less of a markup than its other products, and expects most of the sales to be of the lower-priced band/watch combinations.

 

[foxkoneko]

any actual evidence or just a random thought?

 

[JoEw]

I imagine there were significant R&D costs to get this category going.

 

[KPOM]

any actual evidence or just a random thought?

Tim Cook said so on the earnings call.

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I imagine there were significant R&D costs to get this category going.

R&D is a period expense. It doesn't affect gross margin (it does affect operating income, though). However, if they had higher setup costs for equipment and tooling, that could affect margin. Higher costs of goods sold (e.g. higher priced materials, higher labor costs) would affect margin, as well.

 

[sjinsjca]

Please. It's a rev. 1 product.

 

[KPOM]

The WSJ live-blogger definitely read something into Tim Cook's response to the "hardball" question on the Watch. Apple's reaction is a bit more subdued than in past launches. I wonder if sales are skewing more toward the Sport than they expected, or if it is more just the inability to meet demand and have stock in stores.

http://blogs.wsj.com/digits/2015/04/27/apples-q2-earnings-and-call-with-analysts-live-blog/

 

[Patriot24]

Not surprising. New technology is more expensive to produce. Add premium materials like sapphire, ceramic, and gold into the mix, and you've got yourself some manufacturing costs.