Apple makes 55% profit on iPhone

http://investing.reuters.co.uk/news...7328_RTRIDST_0_BUSINESS-IPHONE-MARGINS-DC.XML

This is fairly astonishing and pretty unpresidented in the electronic industry. The estimate doesn't take into account the software development, royalties and distribution costs, but it's probably fair to say that Apple is going to make an absolute killing in iPhone.

In contrast, for example, companies like Sony and Nintendo make peanuts on devices like PSP and DS - although money is made on software.

Basically, Apple could sell this device for half the money and still turn a profit...

yep, shows the greedy side of Apple methinks!

Apple isn't in this for fun. They're here to make money for their shareholders. Me, I'm thrilled they make that much. Go Apple!

If people will pay what Apple asks, there's no harm in that. It isn't like they have a monopoly on cell phones. They've moved an estimated 700,000 iPhones so far so there are many people that are fine with it.

You can't argue with the market. If people are willing to pay, Apple can sell it for that much. Simple as that.

THe that get me mad at Apple is the fact that, beyond those great profits on the phone, they made AT&T just up a portion of the consumers' monthly contract profit, which is probably why there's no contract discount on it. I think that's where Apple overstepped.

Willem said:

Apple isn't in this for fun. They're here to make money for their shareholders. Me, I'm thrilled they make that much. Go Apple!

If people will pay what Apple asks, there's no harm in that. It isn't like they have a monopoly on cell phones. They've moved an estimated 700,000 iPhones so far so there are many people that are fine with it.

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Good for you.

Apple's traditional customer base has not been cold blooded capitalist types that value profit and shareholder stakes above everything else - in fact the quite the opposite is probably true, as a generalisation.

There could be a backlash and frankly it remains to be seen whether or not the sales volumes can be sustained over the longer term. In any major hardware launch, there are always around a million or so sales attributed to

a) Early adopters
b) People who genuinely think object ownership somehow makes them cool
c) People with more money than sense

Not to mention Apple's loyal following who would buy anything with an Apple logo on it.

Anyway - my point was actually that Apple could really queeze the market if they chose to do so. My opinion is that the price is artificially high to cement its place as an 'object of desire'

Apple is a great company to own shares in - I am a shareholder.

Anyway - my point was actually that Apple could really queeze the market if they chose to do so. My opinion is that the price is artificially high to cement its place as an 'object of desire'

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As Seth Godin says, Apple sells fashion. They don't sell the cheapest devices they sell the ones that people lust after.

Apple is a great company to own shares in - I am a shareholder.

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Me too. It's been a great ride!

Is anyone surprised? Black MacBooks cost more simply because they're black, but people were willing to pay anyway.

It's no different from high-end or perceived high-end anything. A car manufacturer makes a killing on the top-end models, less of a profit on the others, with volume helping to make up the difference.

A top-end Mercedez doesn't cost $50,000 more to build than an entry level, but I'd bet the profit on it is 200 per cent or more.

diesel828 said:

Is anyone surprised? Black MacBooks cost more simply because they're black, but people were willing to pay anyway.

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No, they cost more because they were faster and/or had more HDD space - although the cost differential was much higher than it should have been, based on the parts alone.

Zoolook said:

Basically, Apple could sell this device for half the money and still turn a profit...

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...and in 6 months they will

I don't see this as an issue to be honest.

A low end iPhone is what $499? A Treo 700P/W from Verizon retails at $499 as well. Are you telling me that a 700P costs more, or even as much, to make than an iPhone? Somehow I doubt it. It has even less features than the iPhone does, and cards only come in up to 2Gb sizes. To be honest, I still think the iphone is the better deal at the same price.

Granted, Verizon offers a $100 discount with a 2 year plan, but that only applies to new customer, not existing ones.

no big deal to me.. most retail stores have a 40-60% profiit on most things they sell.

Zoolook said:

The estimate doesn't take into account the software development, royalties and distribution costs....

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Or assembly, packaging, customer service expenses, or return/warranty overhead.

I expect Apple's actual profit margin on the iPhone is a healthy 25-30% or so. Same as it's other products.

KoDorSean said:

no big deal to me.. most retail stores have a 40-60% profiit on most things they sell.

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At least. More things have closer to a 90% to 100% profit margin.
People would be appalled if they knew how much companies really made on the things they sell.

This is really good news because it gives them a lot of room for a price drop once the market is flooded.

The markup on the iPhone is indeed around 55%, but that is a looooooong way from saying that they make 55% profit off of every sale.

How much percentage wise does Nike (or any shoe/clothing apparel companies) profit from their products? How much percentage wise does luxury car manufactures/dealerships profit from their products? And people are surprised/complaining that Apple is making money form the iPhone?

[sarcasm]News flash: American Companies are FOR PROFIT! *gasp*[/sarcasm]

I'm glad that Apple is making money from the iPhone. That means they can spend the money for next gen products and maybe *gasp* release Leopard on time!