The Profit Margin on the iPod nano

Ant writes "BusinessWeek Online reports that researcher iSuppli took a look inside the iPod Nano to find out how much Apple is making off it, and who supplies its parts. From the article: 'Apple has sold some 16 million iPods in the first nine months of fiscal 2005, and 21 million since its inception. Thus far in fiscal 2005, the iPod has brought in $2.6 billion in revenue, accounting for about 25% of Apple's total.'"

Comments

The part of the article that applies

[op12]

Here's the part of the article that actually pertains to the headline:

Market research firm iSuppli set out to satisfy the curiosity by buying the $199 2-gigabyte version of the Nano and tearing it apart. The verdict? It costs Apple $90.18 in materials to build the unit and $8 to assemble it, leaving a profit margin before marketing and distribution costs of about 50%. That's consistent with the margins on earlier iPod versions and serves as a reminder of what a profit machine the iPod family of products has become for Apple since it was introduced in 2001.

Re:The part of the article that applies

[saider]

Wholesale is in the $140 range. Apple resellers don't make much on the hardware, but rather the accessories. That's why the salesmen will insit that you get the accompanying carry case or widget to go with it.

Re:The Question Answered

[RobinH]

Remember that this is per-unit profit, but doesn't include R&D costs.

Re:Too bad that's so simplified

[Zangief]

R&D does cost, but the cost of it cannot influence the price you set for your product, because R&D is a sunken cost. They already spent the money, they want to recover it, but what they have to do now is to optimize the production line, and that means they have to optimize how much it costs to produce ONE iPod.

The article also mentions US$8 as the assembly cost.

Re:Tooling? Investment?

[untaken_name]

Let's not forget the cost of making those 'hip' 'trendy' 'moronic' commercials and the cost of the airtime to show them. I seem to see an iPod ad about once every commercial break mo matter what channel I happen to be watching, so I'm sure it's a significant cost.

Revenue = Profit? I wish

[the eric conspiracy]

Here is a primer on business terminology.

Revenue = total amount of money the business brings in through sales.
Cost (of manufacture) = cost to actually manufacture or acquire item. Includes labor, factory and raw materials.
Margin = Revenue - Cost. (for most corps around 40-50% of revenue - less and you go out of business)
M&A = management and sales costs.
R&D = R&D Costs.

Profit = Revenue - Cost - M&A - R&D - Borrowing Costs - Other Transactions.
Profit for most corps runs 5-15% of Revenues. Less and you are in big trouble.

Note Profit does not equal Revenue, Revenue - Cost or Margin. All of these are MUCH greater than Profit. Profit is the revenue the company left after paying off everybody.

Re:Get a look at Apple's misdeeds & mischief

[falcon5768]

A class-action suit was filed against Apple over the illegal bundling of iTunes with iPod. This practice is anti-competitive.

nothing says you HAVE to use the program. I know of plenty of third party apps that you can use to get tunes on and off your ipod. This is like saying Epson and Adobe should be sued for bundling a light version of photoshop with scanners.

A class action suit is gathering steam concerning defective main circuit boards in iBooks manufactured from 2001 to 2003.

Ok here I could see, but Apple allowed everyone with the problem free replacements of their iBook motherboard (and in some cases like mine, a whole new iBook) once the problem was known.

Apple faces a class action lawsuit by people saying they misrepresented iPod battery life. Info here and here.

Totally without merit even though Apple offered replacements. It was well documented when you bought a iPod that the battery life was 8 hours (which it was with my first gen and I can vouch for it along with thousands of others) and that after so many hours the batterys charge went down. This is like saying your going to sue Nintendo cause you play your DS too much. Just another group of lawyers latching to a story and getting rich while the few who legitimatly had a problem are going to get nil. Infact this one was settled if I remember for 50 buck voucher... the cost of a battery replacement.

Apple previously faced a class action lawsuit by Powerbook 15-inch owners concerned about white blotches that appeared on their screens. Info here. Apple resolved that one.

Was a very obscure manufacturing problem and I have yet to meet someone who actually even HAD the problem. Likewise it wasnt as if Apple wasnt fixing it (they where) people just didnt feel they where fixing it fast enough for them, this btw had nothing to do with drop pixle problems, those are just the nature of LCDs.

And im not even going to get into the other shit listed since some isnt even proven but just baseless accusation, and nothing says the reason Jobs gave (HIS OWN MONEY) to Kennedy has to be because of buisness (its well know Jobs is a very liberal guy and a huge Democratic Party contributer)

I mean damn if your going to troll, i could as a Apple user come up with a LOT better shit to troll with than you just did. Sure Apple is no saint. But its no Microsoft either.

Re:Too bad that's so simplified

[vertinox]

Of course, R&D costs nothing, fabrication is free, paying employees for design and support is volunteer based, and filing the patents and copyrights by lawyers are all pro bono.

Copyrights are cheap around $30 per application and patents are roughly $650 per patent application (plust a $100-$150 filling fee) with an average $1,000 every 7 years to maintain... That might be exspensive to a small business but $5,000 or so for every patent for 17 years is a steal for a multi-million dollar company.

However, the Patent experts and full time lawyers they hire on cost an arm and a leg and have to be factored in.

Sources:

http://www.copyright.gov/register/sound.html

http://www.uspto.gov/web/offices/com/iip/patents.h tm#PatentCost

Re:$25 a gigabyte?

[WillAffleckUW]

The article says Apple is getting a gigabyte of flash for $25 (wholesale). The best RAM prices I've seen this year has been $118 (retail). As recently as last year flash was more expensive.

Not this year. You can buy a post-manufacturer 1GB Flash card with MP3 player, FM radio, and voice recorder for under $50 right now if you know where to look.

Nano has a plastic screen cover

[snowwrestler]

The Nano LCD's glass surface is hidden under a clear plastic cover (in fact it covers the entire top of the Nano), whereas on the Mini the glass screen of the LCD is exposed. Glass is more difficult to scratch than plastic, therefore it is harder to scratch the Mini's screen than the Nano.

If you care about scratches, get a Mini on sale. The glass screen and metal body are very scratch resistant.