Yesterday Apple announced its Q3 FY-2013 earnings. The product line unit numbers and revenues reveal something rest of the earnings statement do not.
Here are those numbers,
ASP is the Average Selling Price. You can compute that by dividing revenue by units sold. While average usually hides details a change in average is interesting. Because change in ASP points to change in product mix they are selling or change in prices. When a business has products that cover the entire price spectrum, ASP shifts are something to pay attention to.
For example a larger drop in ASP with only minor drop in unit numbers will point to people not seeing value in their premium products and are happy with the low-end products. Good enough beats better. Since premium products bring more gross profit – you don’t think it costs Apple $200 or even $100 (at 50% gross margin) to go from 128GB MBA to 256MBA do you?
With that background let us look at iPhone, Mac and iPad ASPs.
First iPhone ASP.
iPhone ASP held stead till last quarter (Q2-FY12). But since then it took a drop. The reason it held stead in the past quarter was iPhone 5. But after all those seeking new and great buy their iPhone 5, the market is left with only the price conscious customers and they are buying iPhone 4 or iPhone 4S leading to this drop in Q3. Another factor for slowing iPhone 5 sales is some of those who want new and great are waiting for imminent iPhone 5S.
Next the Mac ASP. Previously Apple used to break down desktop and portables. Unfortunately we do not have that data anymore. So the ASP comparisons do not tell full story.
Last year I wrote in GigaOm how the new Retina display would help Apple increase ASP. That is happening. More people prefer the SSD and Retina components in their MacBook Pros. It is also likely more 15″ models than 13″ are selling as the former offers more value than the 13″ models.
But the slight drop in last quarter could be explained by the MacBook Air refresh and those waiting for MacBook Pro refresh. The new MacBook Air pack lot more value for the price and the absence of Retina display is not a concern as you can see in that linked article.
Finally iPad ASP. Apple said customers use other tablets as expensive paperweights. But its tablet ASPs are dropping like paperweight.
I wrote (in GigaOm) before how keeping the iPad2 and introducing iPad mini will affect ASP and profits. You can see those models are not that far off from what we are seeing now. iPad minis are definitely more popular. But I believe there is another factor at play here – fewer customers are willing to pay high price premium for 32GB and 64GB versions of iPad. Most realize they do not need that much storage or rely on Cloud storage that obviates need for $100 SSD upgrade on their iPads.
There are rumors about Apple testing bigger tablets. As they realize they cannot price discriminate just based on commodity SSD capacity they are opting for other product dimensions as a way to up the ASP.
Bottom line, iPhone is relatively safe. With iPhone 5S the ASP will stay steady or improve. MacBook series ASPs are a worry, as people have more options to add external flash drives Apple will find hard to justify the price premium on those. iPads are a definite concern, watch for significant product changes in this area.