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Apple Makes $831 On Each AT&T iPhone
Ponca City, We Love You writes "The NYTimes reports that Gene Munster, an analyst at Piper Jaffray, has studied Apple's financial statements and come to the conclusion that AT&T is paying Apple $18 a month, on average, for each iPhone sold by Apple and activated on AT&T's network — up to $432 over a two-year contract. This shows how much incentive Apple has to maintain its exclusive deal with AT&T rather than to sell unlocked phones or cut deals with multiple carriers. Last week Apple disclosed that 250,000 iPhones had been purchased but not registered with ATT that Apple thinks are being unlocked so Apple has now taken action to curb unauthorized resellers by limiting sales of the iPhone to two per customer and requiring that purchases must now be made with a credit or debit card — cash will not be accepted." The latter article links to a US Treasury page explaining the incorrectness of the widely-held belief that cash cannot be refused for any transaction.
They make money, good for them. As long as they give what the customer wants, they'll get sales (I don't have one. At most, I'll get an iPod Touch one day. Mostly because of the limitations of AT&T service rather than the cost).
I just find it amusing that some people get upset that a hardware manufacturer makes money or a lot of it. Maybe they are so accustomed to the subsidized Xbox model where MS supposedly loses money on each sale only to try to salvage it later (MS couldn't afford it if Xbox was their business like Windows/Office is anyway). It is no way to say that Apple has to be doing things that way and there is a lot of competition out there for these devices if you don't like their way of business.
I still think Apple is being rather silly about the cash issue. Many people I know don't have credit cards because that's how they control their spending. This isn't to say that they don't have money though.... their probably more affluent than average and can afford these gadgets.
A business doesn't have to cater to what's BEST for the customer. A business needs, and ONLY needs, to provide the following two points:
- A better product value (this includes technical specs, service quality, license agreement, and of course price) than any other competitor can offer;
- A NET gain for the customer for purchasing the product (in other words, no matter how objectively "crappy" the product is, the customer will be more satisfied buying the product than not buying it.
Out of the whole range of options which satisfies the above two points, a business will always choose one that is best for the BUSINESS, not the customer.
E.g. If more people cared about carrier lock-in and less about the flashy buttonless display, then they wouldn't buy iPhone in particular, would they? Can't say I'm terribly thrilled by Apple's tactics, but I find it perfectly fair that in a free market society where competition to Apple DOES exist, Apple has the full right to say "either take our products how they are and with all strings attached, or take a hike".
If you don't like this business model, then you do not support free market in principle (not preaching whether that is good or bad, just stating the fact).
This is the legislation in France, where the iPhone will be sold by Orange before the end of the year.
The legislation says that "linked sale" (vente lie'e) is forbidden: if you offer some good for sale, you are not allowed to force the buyer to buy a service together with this good.
There has been a debate in the press about whether Apple would renounce selling iPhones in France or find a workaround.
The trick Orange will use is to propose the iPhone at a prohibitive price (1000 euros?) and offer a massive discount for any plan purchased with it. But consumer watch organizations are quite powerful here, and they could sue if they show the price is too high and the scheme is actually a disguised "vente lie'e". The consumer watch organization are allowed to use surveys and statistical analyses to show this, so Orange and Apple will have to play tight at this game.
BTW. I'm surprised so many of you in the US have plans around $60/month. I pay 14 euros/month for basic service, but it's plenty enough airtime.
It's the nature of engineering and cost estimates. Of course they are going to be inaccurate to some degree. If you can point to more accurate estimates that are publicly available then great. If there are better firms than iSuppli at cost estimating, then wonderful.
Getting to within 10% of the cost of goods sounds fantastic to me. Within 20-25% still sounds not bad. It's a lot better than a total guess, which seems to be what you're suggesting. (gross margins of between 20 and 50 %).
Incidentally, on the whole matter of Apple making money:
I'm not a big fan of the iPhone -- it's simply not the product for me. Part of that's price, much of that's the lockin -- on apps and to a carrier if you want stable seamless firmware upgrades.
But I'm delighted to see it succeed and delighted to see Apple making lots of money off it. I doubt Apple's going to take 70-90% of the smartphone market, and if they do, it'll be because they deserve to. People like RIM and Nokia will have manifestly failed to execute.
Apple making lots of money off of smartphones means, ultimately, cheaper and better smartphones for everyone.
I have a fantastic Samsung media player. It plays Ogg Vorbis. Terrific features. Inexpensive, too. And an absolutely horrible interface. The iPod's wiping out players with horrible interfaces. Great. That's good for us all. The latest Samsungs are immeasurably better.
Smartphones will get better and cheaper because of the iPhone. That's good for everyone.
They make it sound like they have the right to go after people just because they haven't activated the phone. Apple may not be required to sell them unlocked yet, but consumers have the right to unlock them, plain and simple. This is borderline control freak territory on Apples part, and it looks even worse because they are taking massive kickbacks on an already expensive piece of hardware that was sold far above cost.
Most phone makers get a kickback from the carrier because the consumer never paid the manufacturer directly, but this is not the case with Apple.
LOL. Yes, and they also don't take out zero-down mortgages, make car-buying decisions based on the monthly payment rather than the total cost, or rent extra-fancy furniture/tvs/etc when they could buy cheaper versions.
Average number of credit cards per U.S. household: 12.7
Just because you and your few closest buddies have some clue about financial planning, doesn't mean 99.9% of people do.
Warning: Apple/Nintendo fangirl. Likes her electronics cute & cuddly. May be rabid.
My husband and I were given a couple of MasterCard debit cards for Christmas last year. We had a HELL of a time spending them. They wouldn't work at Ikea, Target, or a nice restaurant we went to. They did work at K-Mart and Borders Books. No rhyme or reason, tried running them through every which way and backwards, with various amounts often far below the amount left on the card. So we bought more stuff at K-Mart than we normally do this year, and I won't be using those again. Oh, and you can only check your balance via phone twice without getting charged for it - but the website to check balances doesn't work on anything but IE on Windows. And that same website is necessary for activating it if you want to make online purchases. All in all, I don't know if it was just this particular type of card or what, but I was thoroughly unimpressed.
Warning: Apple/Nintendo fangirl. Likes her electronics cute & cuddly. May be rabid.