[Sigia-l] Apple's Profit Margins (was: Mac-like design)

[Will Parker]

On Sep 14, 2007, at 2:51 AM, Manu Sharma wrote:

> Ziya wrote:
>
>> Remember Apple's goal is a mere 1% of worldwide phone market,
>> which is not much more than a rounding error on Nokia's or Moto's
>> biz model.

Don't make me trot out the '80 billion cockroaches can't be wrong'  
argument.

> True, the Nokias and the Motos are probably selling 10 or 20 times
> as many phones but it's a safe bet that Apple's making at least 50
> times on each iPhone. If not more.

Nokia and Motorola. Doing less with more.

This whole market-share argument is silly when the market includes  
both low-margin and high-margin products. They're not directly  
comparable.

> For example, Nokia's bestselling phone - the 1100 - which has sold
> over 200 million units is available for a mere $26.99 on Amazon
> today. Apple probably makes that much from its share of just a
> couple of months' AT&T subscription.

Am I correct in believing that Apple is the only phone vendor who  
gets a kickback on the cell service provider's subscription revenue?  
I know that Danger works very closely with T-Mobile on Sidekick  
design, but I don't believe they get any portion of T-Mobile's revenues.

> The same is true about Motorola, Samsung and all other phone
> makers - their bestselling phones are either ultra cheap or heavily
> subsidised. In other words, they have puny margins.

Well, be careful there. A subsidized device could provide a large 
(ish) profit margin for the manufacturer. In that case, it would be  
the service provider who has to deal with the lower margin.

> Can't wait for Apple's fourth quarter results to shock the world. It
> will be a slap on the face of everyone who ever ridiculed Apple's
> market share.

I can tell you from bitter experience that EVERY time Apple does  
something amazing, technically or financially or both, the stock  
price will drop by 8% the next day, and won't fully recover for the  
next month.

As far as I can tell, Apple could include a lifesize working copy of  
the starship Enterprise (plus Kirk, Spock and McCoy) with every  
purchase, and investors would rush to sell off the stock because the  
bundle didn't include an FM radio.

-Will

Will Parker
wparker at channelingdesign.com