Price cuts on Apple iPhone likely

[copernicus]

CNet article

 

[bruckwine]

well NOw that'd makemass-consumer sense! Might work out for them by slashing those steep price tags if that's their true market....

 

[Pearl_Diva]

I agree!!

 

[Felipe#WP]

Since they arent making any money on their Macs, apple is looking for a cash cow.

if they can sell these for 50% margin, they will continue to do so.

the price will drop if it doesnt sell and when/if they come out with a newer model (But how do you improve on perfection?)

 

[kmrivers]

Since they arent making any money on their Macs, apple is looking for a cash cow.

if they can sell these for 50% margin, they will continue to do so.

the price will drop if it doesnt sell and when/if they come out with a newer model (But how do you improve on perfection?)

More uninformed comments.

http://www.macrumors.com/pages/2007/01/20070118132008.shtml
http://www.macrumors.com/pages/2007/01/20070117163713.shtml

They are making money on the Mac. 28% growth in fact.

 

[bruckwine]

Since they arent making any money on their Macs, apple is looking for a cash cow.

if they can sell these for 50% margin, they will continue to do so.

the price will drop if it doesnt sell and when/if they come out with a newer model (But how do you improve on perfection?)

Let's not jump the gun here! Let's try and REACH perfection b4 we improve it!

 

[bcaslis#IM]

Yup, 1.6 Millions Mac in a quarter is no money. Yup record $7.1 billion in a quarter, must be those stupid macs. Yup, something like 28% profit margin on those stupid Macs, no money there.

Really, what a ridiculous comment. If you really hate Apple so much why spend time in an iPhone forum?

Since they arent making any money on their Macs, apple is looking for a cash cow.

if they can sell these for 50% margin, they will continue to do so.

the price will drop if it doesnt sell and when/if they come out with a newer model (But how do you improve on perfection?)

 

[samkim]

More uninformed comments.

http://www.macrumors.com/pages/2007/01/20070118132008.shtml
http://www.macrumors.com/pages/2007/01/20070117163713.shtml

They are making money on the Mac. 28% growth in fact.

Not that I'm taking a position one way or the other on this, but I didn't see anything in those articles to indicate that they're making money on Macs, aside from an assertion from an analyst asking a question. Apple doesn't provide margin figures at the product level.

 

[oalvarez]

Apple is making money. period.

does that bother you?

hec, i'm a pc guy, but at least i can admit and accept that the other camp might be doing their thing too.

the only thing i can't accept is stupid Palm

 

[kmrivers]

Not that I'm taking a position one way or the other on this, but I didn't see anything in those articles to indicate that they're making money on Macs, aside from an assertion from an analyst asking a question. Apple doesn't provide margin figures at the product level.

Considering the profit margins on the Macs, some say the iMac is close to 50% I would say it is safe to assert they are making money on the Macs.

The Mac has seen tremendous growth in the last year. 28% last quarter.

Even so, they posted a billion dollar profit. I would hardly say they "need" a cash cow. Which was my main point.

 

[samkim]

Apple is making money. period.

does that bother you?

hec, i'm a pc guy, but at least i can admit and accept that the other camp might be doing their thing too.

the only thing i can't accept is stupid Palm

Why would it bother me? And why can't the rest of us have a discussion about Apple without your repeatedly taking offense?

 

[samkim]

Considering the profit margins on the Macs, some say the iMac is close to 50% I would say it is safe to assert they are making money on the Macs.

The level of the profit margin is the question. In the Q&A, they said that the iPod was the key driver of their high margins. That would mean that the iPod's margins are higher than the average margin and the Mac's margins are lower. If you have a source on that 50% figure, I'd appreciate a link. Thanks.

 

[bruckwine]

Apple is making money. period.

does that bother you?

hec, i'm a pc guy, but at least i can admit and accept that the other camp might be doing their thing too.

the only thing i can't accept is stupid Palm

Are you surur's twin brother?! The two of you are as one-sided as you accuse each other of being whether about WM, POS or the still largely unknown iPhone! why all the bile?

 

[surur]

Are you surur's twin brother?! The two of you are as one-sided as you accuse each other of being whether about WM, POS or the still largely unknown iPhone! why all the bile?

Ha!



Surur

 

[oalvarez]

Why would it bother me? And why can't the rest of us have a discussion about Apple without your repeatedly taking offense?

you are now questioning their profit margins and down to the specific device. i'm not taking offense, just simply laughing at some of the questions that are raised. why not pull down a 10k or write/call Apple's treasurer to find out for yourself.

bile? holy moly that's funny. one sided? ha. i own a wm Treo, i have owned palm os treos. i think they both suck, but i simply prefer wm5 over the other.

please.

 

[samkim]

you are now questioning their profit margins and down to the specific device. i'm not taking offense, just simply laughing at some of the questions that are raised. why not pull down a 10k or write/call Apple's treasurer to find out for yourself.

Nope. Several people in this thread made claims about the profit margins of Macs. One claimed the margins were small. Two others went on the attack, claiming that the profit margins are large. One of them provided links that did not support the claim; the other claimed a 28% profit margin, which seemed to be confused with the growth rate. I pointed out that there's no hard data provided by Apple either way. I am genuinely curious what the correct answer is, and I asked for a link. It's certainly possible that some analyst has put forth an opinion on the matter.

Apple does not release profit margins at the product level, so checking their SEC filings or calling the Treasurer's office will likely yield nothing.

If you're not interested in this matter, you don't have to participate. But the profit margins on Apple's existing products are quite relevant to the thread and in determining the likelihood that Apple will reduce prices on the iPhone. The article's reasoning is based solely on the analysis that says the manufacturing costs are about half the retail price. It ignores R&D, marketing, distribution, and sales, which the company can't ignore.

 

[whmurray]

CNet article

The component budget analysis does not support the conclusion. Apple prices "value," not cost. (IBM's pricing model was to be the low-cost producer and the price follower.) Unit cost of the iPod has clearly dropped as sales have skyrocketed. That has resulted in improved margins, not lower prices.

Keep in mind that the cost of the iPhone is not simply the hardware component cost. It must include the assembly cost. Each copy must also bear its pro-rata share of the software cost, where, incidentally, both the cost and value are. As Josh said on West Wing, "The second pill cost four cents but the first one $400M."

I will be surprised if the last iPhone mod 1.0 does not sell at the same MSRP as the first. What one can expect is that the function will go up, mostly software, and new cheaper models will follow. Look at the price history of the iPod.

 

[bcaslis#IM]

I have no confusion with the growth rate (which was more than 28%). Apple has several times given profit margins on Macs during their investor conference calls. Macs have in recent years always had profit margins in the 28% range.

Nope. Several people in this thread made claims about the profit margins of Macs. One claimed the margins were small. Two others went on the attack, claiming that the profit margins are large. One of them provided links that did not support the claim; the other claimed a 28% profit margin, which seemed to be confused with the growth rate. I pointed out that there's no hard data provided by Apple either way. I am genuinely curious what the correct answer is, and I asked for a link. It's certainly possible that some analyst has put forth an opinion on the matter.

Apple does not release profit margins at the product level, so checking their SEC filings or calling the Treasurer's office will likely yield nothing.

If you're not interested in this matter, you don't have to participate. But the profit margins on Apple's existing products are quite relevant to the thread and in determining the likelihood that Apple will reduce prices on the iPhone. The article's reasoning is based solely on the analysis that says the manufacturing costs are about half the retail price. It ignores R&D, marketing, distribution, and sales, which the company can't ignore.

 

[samkim]

I have no confusion with the growth rate (which was more than 28%). Apple has several times given profit margins on Macs during their investor conference calls. Macs have in recent years always had profit margins in the 28% range.

According to this, the growth rate on Mac shipments was 28%, the average gross margin for the company was 31%, the Mac gross margin was less than that, and they don't release product line margin figures. If you say that Mac gross margins were 28% in the past, I'll take your word for it.

 

[kmrivers]

The level of the profit margin is the question. In the Q&A, they said that the iPod was the key driver of their high margins. That would mean that the iPod's margins are higher than the average margin and the Mac's margins are lower. If you have a source on that 50% figure, I'd appreciate a link. Thanks.

Sorry for the delay.

Here is a source. I am guessing you can also find this on iSuppli as well. I didn't look around for it yet.

http://www.betanews.com/article/Intel_iMac_Costs_Apple_899_to_Build/1137710867

I was off a little by saying 50%. It is estimated at 44%. Which only increases since Apple doesn't have dynamic pricing like Dell and the other guys do. So their margin only increases over time if they use the same components.

iPod is the key naturally. They sell more of them. The Mac doesn't sell as many iPods.

Apple shipped 1,606,000 Macintosh computers and 21,066,000 iPods during the quarter, representing 28 percent growth in Macs and 50 percent growth in iPods over the year-ago quarter.

Case in point there. The iPod is their money maker right now. But they are still making on the Macs.

Lets look at it this way. 26mil iPods at $200 (average cost) = 4.2 billion dollars.

1.6mil Macs at $1500 = 2.4 bil.

I'll let you take whatever percentages off of those, the iPod still rakes in 2x as much as the Mac. But they are clearly still making money on those Macs, with margins at close to 50%, and raising, again, because Apple does not shift prices often during a product cycle.