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

Too bad that's so simplified

[EggyToast]

Sure, parts cost that much. Does anyone honestly believe that the rest of that is pure profit?

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.

How is this useful? So now we know how much the pure hardware costs for the Nano? Big deal. It's probably on par with pretty much any MP3 player, especially flash based ones. Is this supposed to convince people that "Oh noes, look, Apple really DOES make money on its hardware!"

Duh. We know Apple makes money on its hardware. So does every other company that makes hardware. But this says nothing for the actual cost to Apple of the device, without consideration for, you know, actually designing and creating the thing.

Re:Too bad that's so simplified

[TeamSPAM]

I would agree with the parent. The only hardware that seems to be sold at a loss are gaming consoles and cell phones. The console makers do it because they assume they will make up the loss on game sales. The cell phone makers aren't selling at a loss, it is the providers that base the loss on the length of the contract. And the providers only seem to be giving the crappy phones away. The good cell phones will still cost around $200. Profit on the hardware is why Apple won't offically release a version of OS X for generic x86 hardware. There's not enough money in it for them if the hardware sales are missing from the equation.

Apple paving the way to thin consumer devices

[xtal]

I hope the extreme reception the Nano got (mine is on the way) is a wake up call to Palm et. al they better get back to their roots and make some THIN and LIGHT devices you can actually easily take with you.

No input on the Nano is crummy, but it's form factor makes it much more likely I will take it someplace.

Re:Apple paving the way to thin consumer devices

[AGMW]

No input on the Nano is crummy, but it's form factor makes it much more likely I will take it someplace.

My wife just got a 6GB iPod Mini and it's terrific. Also picked up one of them iTrip doohickies too, and it's excellent for using in the car. Shame it's illegal in the UK really!

Now what with more and more (top end) car manufacturers building Bluetooth into their cars for Hands-Free Mobile use, using the Stereo, why not have a "bTrip" (er - "iTooth"?) that connects automatically to the car Stereo as well. That'd sure be neat!

Build the BlueTooth into the iPod/iNano/iVimto and you presumably don't need the USB connector anymore either! Maybe permit swapping songs with other iPeople on the train etc, or even listen in to whatever other people are playing?

Apple Brand

[mysqlrocks]

Even if Apple didn't turn a profit on the iPod the benefit to the Apple brand from the iPod has been huge. People will be more likely to by other Apple products because Apple is "cool" again.

Sad.

[hungrygrue]

Apple is currently the most innovative computer company around, with an operating system that makes the current market leader look like a dinosaur. The fact that a quarter of their profit comes from a damn mp3 player is just sad.

Engineering costs?

[Anonymous Coward]

What about the engineering costs? That hardware doesn't design itself. The software updates don't write themselves.

I'm not saying marketing and distribution are legitimate costs, just that they seem to have overlooked a major one.

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.