Apple stunned the market yesterday by blowing past Wall Street estimates, something the company has gotten used to doing, but it also surprised the Street with its guidance for next quarter, its final fiscal quarter of 2007.

W.R. Hambrecht analyst Matthew Kather may not believe Steve Jobs when he says gross profit margins are set to decline next quarter (ending September 30) but what if Jobs is actually telling the truth? In yesterday's conference call one analyst asked Peter Oppenheimer & Co. point black to elaborate on why the modest gross margins call. The short cagey answer suggested "product transition" pains. This quarter Apple saw unusual profit margins with 36.9 cents for every dollar of sales. Next quarter is headed back down to earth and then some, at just 29.5%.

Apple used to spin through quarters with such percentages, but these days things have been looking up. So why such a downturn in margins?

Product Transitions

I'm going to go out on a limb here and suggest that Apple's upcoming iMac, the one that is suppose to have a remarkable enclosure, thin, elegant and beautiful -- and possibly aluminum -- is going to be a killer desktop machine. And that Apple is going to price it very aggressively in the aim of capturing aggressive market share gains -- possibly in corporate America.

With the MacBook and MacBook Pro proceeding along with great success and with a new refresh recently there is no reason to look at these two areas nor the Mac Pro as places that would explain Apple's rapid rise in the cost of goods sold (COGS) -- especially in such a little three month stretch that could account for over $600 million increase next quarter.

So what could explain this rapid drop in gross margin if not a planned success of a "high volume" product with a very thin margin?

It could be a planned assault with a new AppleTV unit with a possible HDTV from Apple. But this seems unlikely for this quarter. If Apple ever hits it out of the park with an AppleTV-HDTV combo they would want to plan that for the holiday quarter.

Pre-Cursors to Success, the iPhone and Corporate America

A pre-cursor to Apple's Mac success in corporate America would be a wholesale adoption of the iPhone in large corporate enterprises. Apple appears poised to push many levers to accelerate this process. Its biggest lever seems to be Web 2.0 and the drive to push SaaS (software as a service), and in this it has a remarkable ally in Google that wishes to do the very same thing. If Apple can persuade large corporations to adapt their web applications to Web 2.0 and the iPhone (a ala SalesForce.com) then Apple can establish a large beachhead wrapped around Safari.

This then opens the door to Macs and their Safari browsers.

Yet Apple has another lever to push in this equation and it is software. Rarely does Apple ask its own developers to adopt new models for programming (such as the adoption of Cocoa and Objective-C) without itself doing so. And Apple doesn't just eat its own dog food, it becomes its own poster boy. One only needs to look at Apple's success with its own professional creative software -- based on the most advanced programming techniques available to Mac developers.

So while Apple's preaching Web 2.0 and AJAX it is very likely that in some secret space at 1 Infinite Loop they are actually pushing both to their very limits, and for the benefit and deliberate use on the iPhone.

A Closer

Apple has the corporate world both watching and interested with its remarkable iPhone -- really a tiny computer that happens to be a cell phone. It has the fastest and most powerful set of microprocessors ever delivered in a mobile cell phone. It utilizes graphics advances (likely OpenGL ES, perhaps?) serving interface goodies (like Cover Flow) that even Microsoft's brand new Vista can't match.

Apple has the world's attention.

Even multi-billion dollar vertical industries like CAD/CAM and PLM (product lifecycle management) -- once and still very much the most ardent supporters of unification and stubborn Microsoft-ism -- are now rapidly building native Leopard versions of their software for its customers and Apple's.

The world is changing. Apple is worth more money than HP! It may soon overtake even IBM in this measure.

So now Apple just needs a closer. It needs a killer desktop, one that compliments the iPhone in corporate America.

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