iPad sales are least compared to other Apple Products

Apple beat expectations on earnings, revenue, iPhone sales and Mac sales in its fiscal Q4 earnings report on Monday. But the tablet unit remains a thorn on its side, missing modest expectations of 14.5 million units by a hair and coming in at 14.1 million units. This is only a minor blemish on an otherwise stellar quarter. But the sluggish tablet sales did weigh on the share price a bit in after-hours trading, where Apple’s stock immediately dropped by 2%.

It is quite likely that fear of weaker tablet margins is the main reason why Apple is so cautious in its guidance for the upcoming Christmas quarter. Apple is expecting its gross margin will fall to 36.5% to 37.5% for the ongoing quarter and Wall Street would have liked to see that bracket just a tad higher.

This gross margin guidance leaves room for a slight margin dip during the Christmas quarter despite the success of the new iPhone line. But of course, Apple may well be just setting up a soft target to beat.

Nevertheless, the iPad unit is still boxed into a corner strategically — volume growth is tough to revive with a product range priced entirely above $400, but cutting prices would create the risk of bringing overall gross margins to 35% or below.

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