Apple: Lower margins on iPad Mini, iPhone 5 to dampen profits

Apple's wholesale introduction of new products leads the company to project lower earnings per share for the holiday quarter.

Apple said it priced the iPad Mini at lower profit margins than it typically expects. James Martin/CNET

Apple's decision to introduce new lineups for its phones, tablets and computers will result in lower earnings per share in the holiday quarter, CEO Tim Cook told analysts today.

Last year the company earned $13.87 per share in its first fiscal quarter. This year the company set its price target at $11.75.

The reason, executives said, is the high costs associated with producing a wide range of products at Apple's large scale.

"With each new product we see learning curves with ramping products," Cook said during a conference call with analysts. "The difference is the number of products we have moving at once. This is the most prolific period in our history in product introduction and innovation ....We do see all of these costs associated with each of these, but I don't see those costs accelerating as we go through the quarter."

In recent months, Apple introduced new versions of the iPhone, iPad and various iPod devices. It also unveiled the iPad Mini, which goes on sale next month, and new iMacs that will ship in this quarter.

Apple said it had priced the iPad mini aggressively, at a lower profit margin than Apple typically accepts for its hardware. Cook said that the costs of manufacturing the devices would decline over time.

"The iPad mini's gross margin is significantly below the corporate average," said Peter Oppenheimer, Apple's chief financial officer. "We are beginning at the top of the cost curve, but we are going to work to get down the cost curves and be more efficient in manufacturing."

 

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