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iPhone 5 and new iPads production reduce Apple profit, analyst says

by Nicole
November 27, 2012 at 4:07 pm

Apple is reportedly having problems producing enough products to meet market demand.

Credit: Apple

Even the company does produce and sell its devices, it earns less money than in the past.

Starting with the iPhone 5, the Apple’s profit started to decline because the components have become increasingly expensive.

In the case of the iPad tablets, Pacific Crest analyst Andy Hargreaves estimates that in the future Apple’s profit from the sale of a single unit won’t reach last year’s results.

“Apple’s gross profit per unit has likely peaked,” Hargreaves said in a research note to clients. “Declining gross profit dollars per iPhone and volume sales of iPad are driving lower gross profit per unit of Apple product sold.”

“Apple will have to sell more devices in order to maintain earnings,” the analyst told AllThingsD. “What happens now: I believe Apple should continue to try to gain share in the near-term, but ultimately should accept the limits of its market or come up with a new $100 billion product or service to drive growth.”

However, Hargreaves is optimistic about Apple and notes that demand for the their products remains strong.

“Checks suggest iPhone 5 is outselling its closest competition (which is iPhone 4S in some cases) by more than 4X,” he wrote. “Meanwhile, the iPad continues to sell very well in a bad consumer demand environment, and we expect iPad Mini to expand the addressable market.”

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