AAPL
#With the iPhone 7 Plus, we've put an incredible amount of innovation into the camera and the overall photo experience, and customers are obviously using that and have discovered that they love it.
So, we're getting an incredible amount of feedback there.
We also get incredible feedback on the iPhone 7.
But, the mix that we projected on an iPhone 7 Plus is short of what the reality is.
So, we are chasing supply there.
In terms of the ASP, the way we think about it is we want to charge a fair price.
And so, we don't want to charge more than that, and we think it's worth being fair.
And so, that's how we look at it.
If I can add, <UNK>, keep in mind that in a lot of countries around the world the reality is that our customers have seen some significant price increases because of the FX situation, right.
And, that's something that we need to keep in mind as well.
We clearly saw that this year.
There's a lot of competition for customers in the US which I think is the market that you're talking about.
Whether that will happen every two years, I don't know.
But, I suspect that any time there are large numbers of customers that have a phone that's in that two-year kind of range that it tends to be a sweet spot, and I think you probably will see a lot of people trying to recruit those customers.
Thanks for the question.
I'll let <UNK> talk about the OpEx piece of it.
On India, I think it's important to look not only at per-capita income, which may be what you're looking at, but sort of look at the number of people that are or will move into the middle class over the next decade.
And, the age of the population, if you look at India, almost 50% of the population is under 25.
So, you have a very, very young population.
The smartphone has not done as well in India in general.
However, one of the key reasons for that is the infrastructure hasn't been there.
But, this year, or this year and next year, there are enormous investments going in on 4G, and we couldn't be more excited about that because it really takes a great network working with iPhones to produce that great experience for people.
And so, I see a lot of the factors moving in the right direction there.
I also think the government is much more focused on the infrastructure and on creating jobs, which is fantastic, because you really need the infrastructure and the technology to do that.
Will it be as big as China.
I think it's clear that the population of India will exceed China sometime in the ---+ probably the next decade or so, maybe less than that.
I think it will take longer for the GDP to rival it.
But, that's not critical for us to have a great success there.
The truth is, there's going to be a lot of people there and a lot of people in the middle class that will really want a smartphone.
And, I think we can compete well for some percentage of those.
And, given our starting point, even though we've been growing a lot, there's a lot of headroom there in our mind.
And so, we're working very hard to realize that opportunity.
And, <UNK>, on OpEx, our approach to OpEx is quite clear and quite simple.
We want to continue to invest in the business in all the areas where we think it's critical for us to invest.
So, you see that we make significant investments in R&D.
You've seen the growth rates over the last couple of years.
We are making important investments in data centers because we want to support our services business.
We continue to open retail stores around the world.
We continue to invest in marketing and advertising.
At the same time, we want to continue to be efficient and lean.
It's something that we've done very well over the years.
We want to continue to do that.
So, what you've seen, for example, in FY16, you've seen investments in R&D growing at 25% and then our SG&A expenses to be about flat.
This is kind of the approach that we want to take and continue to take going forward.
If you step back for a second and you look at our implied guidance for the December quarter, we've got an expense-to-revenue ratio of 9%.
This is extremely competitive in our industry, and I would I say in general.
So, we want to continue to have this balance.
Make the right investments and remain efficient.
<UNK>, let me give you some details both on a sequential basis, and I'll give you also something on a year-over-year basis because maybe that's where the disconnect comes from looking at last year's gross margins in the December quarter.
On a sequential basis, we're essentially guiding to some improvement in gross margins.
We had 38% both in the June quarter and in the September quarter.
We're guiding slightly higher for the December quarter because on the positive we're going to have, of course, better leverage and the mix in the December quarter tends to be better.
But, we need to keep into account the fact that these positives are going to be partially offset by the cost structures of the new products that we are launching now, and we launched already a few during the September quarter and that will have an impact on our December-quarter results.
On a year-over-year basis, keep in mind that last year we did in Q1 we did 40%, around 40%, 41%.
But, there's a couple of things that I think need to be considered before doing a year-over-year compare.
And, it's a fact that last year we had this award for a patent infringement of $548 million that is at the gross margin level is 40 Bps.
And then, we've got the FX situation which I mentioned before which is worth another 60, 70 Bps.
And so, you're left with less than 100 basis points deterioration on a year-over-year basis where, again, we have the reality of new cost structures into our products.
It is very, very important, I think, for investors to understand that what's happened during the last two years.
During the last two years the US dollar has appreciated by 15% over the basket of currencies where we do business.
And, we are a Company that generates two-thirds of our revenues outside the United States.
15% appreciation of the US dollar.
So, on a year-over-year basis, just 2016 over 2015, was 340 Bps impact from foreign exchange.
This is something that we have offset almost entirely through a number of initiatives going from pricing actions to cost initiatives to our hedging program.
But, at some point, the strong dollar becomes the new normal, and we need to work with that.
And, I think over the years, we have made very good tradeoffs, and our gross margins have been quite stable over time.
We review the capital return annually, and we've established a cadence now to announce our thinking on that every April.
So, we have a robust discussion around the dividend and the buyback.
We very much believe that Apple is very undervalued, and so we're investing with confidence in the Company that we know really well.
And so, that thinking has I think proven out over time, and I think been very good for our shareholders.
And, in addition to that, we know that some shareholders really like a dividend and some ongoing income, and so we provided an amount that we think is a good amount and have a good track record of raising it annually.
And so, we'll be able to say more on that I'm sure in April of next year.
