> The iPad’s aggressive pricing has made it hard for rival tablet makers to compete, giving Apple a significant early lead in the market.
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> “Our potential competitors [in tablets] are having a tough time coming close to iPad’s pricing,” Apple CEO Steve Jobs said. “iPad incorporates everything we’ve learned about building high value products. We create our own A4 chip, software, battery chemistry, enclosure, everything. This results in an incredible product at a great price. The proof will be in the pricing of our competitors’ products, which will offer less for more.”
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> For their part, analysts were optimistic about Apple’s gross margins leading up to the September quarter, citing growing sales of the iPhone as an upside to the iPad’s lower margins. In August, Gleacher & Co. analyst Brian Marshall [stated his belief](http://www.appleinsider.com/articles/10/08/23/apples_gross_margins_expected_to_improve_as_iphone_4_antennagate_ends.html) that Apple’s gross margin profile is in the process of bottoming. *AppleInsider* contributor Andy Zaky had [predicted](http://www.appleinsider.com/articles/10/10/18/apple_q4_2010_earnings_preview.html) a Q4 2010 gross margin of 38 percent.
via [appleinsider.com](http://www.appleinsider.com/articles/10/10/27/apple_again_warns_margins_will_decline_due_to_new_products.html)
The strategy is clear: Apple is trying to be as cost-competitive as possible, and thus isn’t making as much profit on each sale as it traditionally does. This is the key strategy to keeping the lead in the Tablet market. The low cost of the iPad is making it next to impossible for anyone else to get a foothold. Competitors are being forced to offer smaller, less capable devices for more money, or subsidized with a contract.
Meanwhile, Apple still makes money on every iPad sold, just not as much as they do on a Mac, say.
Still, this is a new thing for Apple, taking less money and selling in higher volume, so Apple is warning Wall Street about this change in general strategy up front. But that won’t stop Wall Street from losing its mind next time the quarterly earnings announcement comes along.
The sky is falling! Apple made more money than ever, but the profit margin is down. Run for your lives!
Contrast this to Microsoft, which makes several products that LOSE money, or Google, who must have lost tons of money on their many failed projects lately, and no one bats an eye.
I’m never going to understand Wall Street.
