Apple announced earnings this week, and hopefully iPhones sales were not the part of the report that shocked investors. We knew that part was coming. And iPads were great -- anyone who says otherwise is crazy, even though they were below expectations.
Tech analyst Eric Bleeker thinks the key shocker was ASPs. We've known for a while that iPad ASPs would decline. While we saw an 84% increase in units, revenues in the segment are up "just" 52%, and iPad ASPs now sit at $538, well below the previous quarter. In the end, gross margins slipped from 47.4% to just 42.8%. That's a trend that will likely continue, especially if Apple introduces an iPad Mini. And let's face it, that iPhone-fueled 45%-47% margin range Apple saw the past two quarters isn't sustainable for the long term, even though it'll come back next holiday quarter. Next quarter, Apple has guided to 38.5, which is nearly a thousand basis points below where it was just a couple of quarters ago.
If you're an Apple investor, this isn't a huge "threat," in a traditional sense -- it's just the reality that non-iPhone products don't have the same margins. However, investors should be aware that eye-popping iPad unit numbers in the future will lead to less absolute dollars in sales than they're used to.
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Austin Smith and Eric Bleeker have no positions in the stocks mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.