Revenue per Unit - Cost per Unit = Margin
First of all, iPad sales have already dropped. There is now significant competition for parts and supplies now that Apple has to compete with about 440 other companies that are trying to sell similar devices. Next up, let's review the revenue per device, which as you can see has been trending down sharply over the last three quarters, including the quarter that launched the iPad 2.
At the same time that aggregate sales and revenue per unit have decreased, the cost per unit has increased over the same 3 quarters...
The natural consequence of the movement of the variables above - Revenue per Unit - Cost per Unit =
These numbers and charts are happening BEFORE the Android Honeycomb/Ice cream sandwich competition has set in. The first true Android tablet has just shipped 3 months ago, and the real competitors that offer demonstrably better features and value are just launching now (ex. Asus Transformer and Samsung Galaxy Tab 10.1/8.9) and selling out everywhere within hours). Even with the launch of these formidable products, we are only 1% or so (5 out of 440 manufacturers) into the introduction of what is essentially just the first iteration of Android tablets (next revision will be out before the end of the year with Android 3.2) and then their is Microsoft Windows 8 which will put a full computing system on a ARM powered tablet. What do you think will happen to the revenue, cost and margin numbers when competition truly heats up?
As the myriad and quite capable form factors, software GUIs and outright leaps in performance and capabilities manifest themselves in the form of Android over the next 12 months, Apple would be downright suicidal not to alter its path. In order for Apple to win this race, it has to be in it, and the entrance fee for running is margin compression. This was obvious over a year ago: “How Google is Looking to Cut Apple’s Margin and How the Sell Side of Wall Street Will Enable This Without Sheeple Investor’s Having a Clue”