Apple Inc.'s profit margins are falling back to levels not seensince sales took off after the 2007 debut of the iPhone, ascompetition and lack of breakthrough products pressure the companyto lower prices.

Concern over falling margins helped prompt a 33 percent declinein Apple shares from a record high of $705.07 on Sept. 21, makingit the worst-performing stock in the Standard & Poor's 500Index in the same period. Last week, Apple said the board andmanagement are discussing the return of more money to shareholders,after a proposal by Greenlight Capital Inc.'s David Einhorn to payout more of its $137.1 billion in cash and securities, possiblywith higher-yielding preferred stock.

The latest quarter's drop in gross margin to 39 percent from 45percent a year earlier was caused by the introduction of the iPadmini, other products with higher costs and price cuts for existingproducts, Apple said. Unless Chief Executive Officer Tim Cookunveils a revolutionary new gadget with premium pricing, Appleshares will remain under pressure.

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