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My Letter To Apple:

Shrek

Shrek

macrumors 65816
Original poster
Jul 23, 2002
1,118
0
Nashville, Tennessee USA
Dear Apple:

I heard something in the news somewhere that Apple is pressuring it's manufacturers to cut production costs which could lead to price cuts across it's Macintosh line of computers. This would be great for Apple, but I don't think that it's enough. Apple, you all have something like a 30% profit margin right now, but that's kind or ridiculous, wouldn't you think? I think that it needs to come down to about a 10% profit margin. Besides, if you are really going to lure in those PC users, you're going to have make prices more attractive.

I'm proposing that if those manufacturers can cut production costs by at least 20%, and that Apple cuts their profit margin down to 10%, then that would mean a 40% decrease in prices across the line. That would be a very smart move for Apple! :D

Also, the PowerMac line should be marketed as workstations since that clearly fits the definition of what they are and prevents confusion for consumers. And you all should introduce a high-end iMac line (or a totally new high-end desktop machine), too, as right now you have nothing between consumer desktops and low-end workstations.

Don't think that the PC vs. Mac war has been lost, Apple. I think with the right marketing strategy and even better products and services, it can be won back! ;)

GO APPLE!!! :D

Sincerely,



Jason Hughes
Potential Apple Customer
Click to expand...

Sound reasonable?
 
10%?!!
Not until they get a helluvalot more market share. It's like a chicken and egg thing. Apple can't get more market share unless they cut prices on their machines and they can't cut the prices on their machines without more marketshare. I say somewhere around 20% would be more reasonable. They need to market the hell out of these machines and do it right so they can deal with a reduced profit margin. :)
 
Re: My Letter To Apple:

Originally posted by Shrek


I heard something in the news somewhere that Apple is pressuring it's manufacturers to cut production costs which could lead to price cuts across it's Macintosh line of computers.
Click to expand...

Link/Reference?


This would be great for Apple, but I don't think that it's enough. Apple, you all have something like a 30% profit margin right now, but that's kind or ridiculous, wouldn't you think?
Click to expand...

How do you know what their profit margins are? I think they are closer to 20%, but if you want to write an email like this, you should know.


I'm proposing that if those manufacturers can cut production costs by at least 20%, and that Apple cuts their profit margin by 20%, then that would mean a 40% decrease in prices across the line. That would be a very smart move for Apple!
Click to expand...

Um... math doesn't work like this... this is going to get your email into the trash immediately (well, after they're done laughing)

Think about this for a little while... once you figure it out, rewrite the email.

arn
 
Originally posted by edvniow
10%?!!
Not until they get a helluvalot more market share. It's like a chicken and egg thing. Apple can't get more market share unless they cut prices on their machines and they can't cut the prices on their machines without more marketshare. I say somewhere around 20% would be more reasonable. They need to market the hell out of these machines and do it right so they can deal with a reduced profit margin. :)
Click to expand...

No, Apple needs to focus more on getting more market share right now more than ever! Market share comes first, profits come next. As market share rises, their will be more and more profits. Plain and simple. I know how it sounds, but "you've got to take risks in order to get ahead." ;)
 
Re: My Letter To Apple:

Originally posted by Shrek


Sound reasonable?
Click to expand...

apple has actually already lowered its profit margin a few points, but that letters is asking for apple to dump 66% of its profits. are you nuts. Apple remains in existence because of its high profit margins, with out them, they went out of business5 years ago. They simply don't have enough market share to compete on price. When an apple rep recently said that they were willing to give up a few points of profit margin to gain market share, he went on to say they would never give up a large part of their margin just for market share. A point or two at most.

People are crazy. time to take a basic high school economics class.
 
Re: Re: My Letter To Apple:

Originally posted by arn


Link/Reference?
Click to expand...

Don't have one. Can't remember where I saw it, sorry.


How do you know what their profit margins are? I think they are closer to 20%, but if you want to write an email like this, you should know.
Click to expand...

I've heard it from several people here on MacRumors.

Um... math doesn't work like this... this is going to get your email into the trash immediately.

Think about this for a little while... once you figure it out, rewrite the email

arn
Click to expand...

Sorry about that typo. I fixed it and I am resubmitting.
 
margins

Actually, Apple's margins last time I listened to their quarterly report was somewhere around 28%. Now 28% does seem a little high doesn't it? Other big manufacturers (HP, Dell, Gateway) are making next to nothing on their hardware, so why doesn't Apple drop their margins and sell more computers? I mean what could they possibly be using all that money for? It's not like they have Huge R&D costs that none of the other big manufacturers don't have, and they don't have development costs for some great digital lifestyle apps that come free with every computer they sell do they?

I mean come on!

[/sarcasm]

--PB
 
Re: Re: Re: My Letter To Apple:

Originally posted by Shrek


Sorry about that typo. I fixed it and I am resubmitting.
Click to expand...

It wasn't a typo... it was incorrect math logic.

Here's your corrected statement:

I'm proposing that if those manufacturers can cut production costs by at least 20%, and that Apple cuts their profit margin down to 10%, then that would mean a 40% decrease in prices across the line. That would be a very smart move for Apple!
Click to expand...

You're ignoring a lot of things... a simplified look:

fixed costs + parts + profit margin + dealer margin = Cost of an iMac

arn
 
Re: Re: Re: My Letter To Apple:

Originally posted by Shrek


66%!!! :eek:

How do you figure?!
Click to expand...

Shrek, not to be mean - but I don't think you totally understand percentages.

Let's say their profit margin is 30%.

So, on a $1000 Wholesale machine, they make $300 profit. (30% margin)
10% margin on a $1000 machine is $100. (10% margin)

$100 vs $300

$100 is 33% of $300.

arn
 
Originally posted by Shrek


illogical math. look at your numbers. $100 is 33% of $300. $200 is 66% of $300. :p
Click to expand...

you caught me before the edit. :)

right - so 66% of profits gone

Here's an exercise:

A + B = C

Let's say I take 20% off A and 20% off B.

How much % off C in the end?

arn
 
They'd still make money. Like someone already said, HP, Dell, and Gateway have profit margins next to nothing. Now if only I could find a source for this. :rolleyes:

edit: I get the idea, arn.
 
My only philosophy is this: countless numbers of PC users complain that Macs have prices that are too high, and that's why they don't buy them. So something has to be done. ;) :p
 
Originally posted by Shrek
They'd still make money. Like someone already said, HP, Dell, and Gateway have profit margins next to nothing. Now if only I could find a source for this. :rolleyes:
Click to expand...


How much did Dell and Gateway spend on developing an Operating System last quarter? Industrial Design?

arn
 
Originally posted by arn


How much did Dell and Gateway spend on developing an Operating System last quarter? Industrial Design?

arn
Click to expand...

Dell and Gateway sell so many more computers than Apple, so they make a lot of money anyway despite their low profit margins.
 
If Dr. Seuss wrote to Apple

i love Apple, yes i do,
even though they're
slower and more expensive too
if Apple were to rot,
i'm sure i'd be blue,

Consider this, i'm sure that it's true,
The profit they make should make something new.
For instance DDR RAM, by the end of 2002.
Or the iFlop, a computer housed in a shoe.

if it weren't for our small, tight knit crew,
who understand what it is that an OS can do,
Apple would be hurled straight into
a conservative economy's large pile of poo.

Boo hoo.

Thank god for Bondi blue!
It saved Apple, who knew
industrial design enhances the view,
so out the door the imacs flew.

But now the threat's brand new,
and PCs can do the work only Macs used to do—
faster and at a lower cost too!
So take stock Steve Jobs it's time to review:

Microsoft sucks, but they saved the day
And behemoth Intel stands in the way,
And now you're being laughed at by a Gateway?
It's time to act, and act right away.

"Something better is coming, it's soon on it's way
a new plastic Gizmo to brighten your day!"
the next generation is here! we all say,
and rush for our Visas, ready to pay!

So he stands there on stage, sober and sage,
with a look on his face sure to engage...
the geeky, bespeckled, crazy creatives turn to the page...
what is this greatest new something ever kept in a cage?

The curtain is raised, and they gasp, "Oh my God!"
and the popcorn of echoes as they start to applaud,
that smile then from Steve, a wink and a nod...
the newest new greatness is a 20gig iPod.

All of the baiting and the dreaming and waiting,
fails to live up to the needs we're debating.
Our expectations left lying in this pile of feces—
at least the new iPod is compatible with PCs.

We find it hard to believe, despite hustle and jive,
each year carries on, and our hope's still alive...
If you're going to charge more, if you want Apple to thrive,
i think it's quite clear we need a G5.
 
Originally posted by Shrek


Dell and Gateway sell so many more computers than Apple, so they make a lot of money anyway despite their low profit margins.
Click to expand...

Acutally, gateway sold about 2x as many comptuers as Apple in 2001.

So, if Apple could reach gateway's unit sales, and dropped their profit margins from 30% to 10%, they would make less money then they do now.

arn
 
Re: Re: margins

Originally posted by krossfyter

source please?:D
Click to expand...

http://www.apple.com/pr/library/2002/apr/17earnings.html

excerpt from above link:
CUPERTINO, California—April 17, 2002—Apple® today announced financial results for its fiscal 2002 second quarter ended March 30, 2002. For the quarter, the Company posted a net profit of $40 million, or $.11 per diluted share. These results compare to a net profit of $43 million, or $.12 per diluted share, in the year ago quarter. Revenues for the quarter were $1.5 billion, up 4 percent from the year ago quarter, and gross margins were 27.4 percent, compared to 26.9 percent in the year ago quarter. International sales accounted for 45 percent of the quarter’s revenues.
Click to expand...

Keep in mind this is also their overall margin, not the margin on individual machines. This includes software sales (FCP, DVD SP, etc) and Hardware sales.

As a comparison, you can look at teh Q2 results from HP at this address: http://www.hp.com/hpinfo/investor/financials/quarters/2002/q2.htm

excerpt from hp link
Sequentially, pro forma revenue declined 7%, while gross margin increased from 26.9% to 28.7%.
Click to expand...

Apple's margins aren't really that high, it's just that companies like HP make it in the Enterprise and Business Markets where prices are way way too high, while Apple makes it on Pro Machines and software. HPs margins on their desktops and laptops is ridiculously low, Apple's is higher but like I was trying to point out before, that is because they have huge R&D costs that companies like HP do not have (what, you think they just pulled Rendezvous and Quartz Extreme out of their butts?) as well as development costs for all of the software they include with their machines (iMovie, iTunes, iDVD, iPhoto to name a few).

You want a cheaper machine, I know so do I. I think that they could probably release one too but it would have to come sans digital lifestyle, and they it would be like a Mac without a soul or purpose.

--PB

[EDIT: P.S., these numbers are all from Q2 this year. I think that Q3 results should be out shortly, if they aren't allready.]
 
Even if Apple didn't make that much money with their low market share, I think they could still make some great new hardware and software products. Dell had to start out small, and in it's earlier days it had a machine that was $1,000 less than a similar machine made by it's number one competitor, IBM. Sure it had a smaller market share and a smaller profit margin, yet it still managed to grow and make it BIG in the industry. ;)
 
no offense, but it doesn't seem like you've thought through any of these complaint emails. we all would like to see the prices come down so that we can afford bigger and better.

but then the car analogy comes up. bmw's cost more than vw's. it's better. they make more of a margin, they sell fewer cars.

same thing here...
 
Re: Re: Re: margins

Originally posted by posterboy81
Apple's margins aren't really that high, it's just that companies like HP make it in the Enterprise and Business Markets where prices are way way too high, while Apple makes it on Pro Machines and software. HPs margins on their desktops and laptops is ridiculously low, Apple's is higher but like I was trying to point out before, that is because they have huge R&D costs that companies like HP do not have (what, you think they just pulled Rendezvous and Quartz Extreme out of their butts?) as well as development costs for all of the software they include with their machines (iMovie, iTunes, iDVD, iPhoto to name a few).
Click to expand...

Posterboy, can you provide some links that tell us what Dell and Gateway's profit margins are, please.
 
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