Apple’s Promised Product Transitions

Ars Technica wrote an article about Macs and Blu-ray drives. That’s fine, but they did so under a misguided premise: 

In the third quarter earnings call in July, Apple warned investors about an upcoming product transition that would eat away at the company’s cushy margins. However, in the intermediate, no new or updated products have surfaced that look like they could be responsible for significantly reduced margins.

The article then dismisses the new “unibodies” for the MacBook and MacBook Pros, instead suggesting a “mystery margin-reducing product or feature” must have been intended. It goes on to postulate that Blu-ray was supposed to be that mystery feature, but that Apple decided against it. 

No way.

Forget Blu-ray, the new MacBook lines are the “product transition” in question. Here’s why I believe the Ars article was too quick to dismiss them. 

  • When Apple made the statement in their earnings call it was presented as fact. They didn’t say a product transition might impact margins, they said it will. This means the product(s) referred to were a done deal.
  • They wouldn’t make such a claim in an earnings call for something that wasn’t final; Apple is extremely secretive about new products. Even if they weren’t so secretive, an earnings call is hardly the venue they’d choose to have loose lips. 
  • While the unibody construction will likely reap great benefits (and savings) to Apple over time, right now there’s little question it’s more expensive to produce than the old method. How many factories were sitting around just waiting to cheaply blast a laptop unibody out of a block of aluminum? 
  • There’s the expense of the NVIDIA subsystem (Apple said they worked with NVIDIA on this), case design, new manufacturing process, glass trackpad, etc., which are far greater enhancements than a normal product refresh. These represent R&D investments yet to be recovered. 
  • Looking at the MacBook Pros, their prices are the same as before yet their production costs are undoubtedly higher as well. 
  • I think it’s revealing that the high-end MacBook is $100 more than before. Apple likes to keep price points the same while providing more value, and yet this model got a price hike. I believe it indicates the margin hit was extensive enough to justify it. 
  • Product refreshes usually tend to hit margins slightly (though not always), but this is far more than just a product refresh. It’s the first “next-generation” of the MacBook and MacBook Pros in years, and a major change. In fact, it’s a ground-up rebuild. 
  • Both lines being introduced together means the margin hit on one can’t be mitigated by “normal” margins on the other. They’re both taking their hit at the same time, in the same quarter.

I don’t know why some people are looking around for “mystery” transition products, you can easily find them on Apple’s front page right now.

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