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Apple Continues Strengthening Unit Pricing

A trade-off that Apple (AAPL) has faced over the years is the one between volume and unit margin. The company has had the reputation for largely holding the line on pricing to maintain its standards, market positioning, or profits, depending on whom you asked. With the advance of unit sales that Macs saw last quarter, I thought it might be time to look at average unit pricing over time for both the computers and iPods. Here is a graph looking at Mac pricing (the black line is a two-month moving average trend):

Over the last two quarters, Apple has been pulling the average per unit net revenue per Mac back up. Over the long term, unit revenue has clearly been coming down. However, if you look at the Mac unit volume, it goes up sharply over the same time, and so does the total Mac revenue. I think it's evidence that Apple has been undertaking a long-term experiment in pricing, balancing price elasticity against total segment margin dollars and looking to maximize the financial benefit. It may be that management has calculated an effective minimum and is now slowly boosting average unit price up again to see how much money it may have been leaving on the table.

On the other hand, there is the trend for iPod average unit net revenue:

In general, and outside a couple of bumps, there seems to be a rising trend. Because iPhones will cannibalize some amount of the iPod market, my guess is that Apple has found that either increasing iPod prices on average improves total margin, or that it's hoping to continue tweaking the price until it shakes out as many consumers as possible who might decide that the difference between an iPod and the subsidized price of an iPhone isn't so large and, therefore, opt for the latter. As I note in another post, iPhone per unit revenue is massive with carrier payments and accessories. Even though the consumers are only spending a bit more, the carriers kick in a lot, and that means a fatter bottom line.

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