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The Profit Margin on the iPod nano

Zonk posted more than 8 years ago | from the white-gold dept.

The Almighty Buck 246

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.'"

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246 comments

DIGG! (-1, Offtopic)

Anonymous Coward | more than 8 years ago | (#13628751)

Once again, digg.com had this yesterday...

Re:DIGG! (-1, Offtopic)

Anonymous Coward | more than 8 years ago | (#13628847)

Does it make any difference if /. and digg both had this yesterday ?

The part of the article that applies (4, Informative)

op12 (830015) | more than 8 years ago | (#13628753)

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.

Engineering costs? (5, Insightful)

Anonymous Coward | more than 8 years ago | (#13628863)

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.

Re:Engineering costs? (4, Insightful)

Total_Wimp (564548) | more than 8 years ago | (#13628997)

Engineering and development costs per unit get smaller and smaller as more units are sold so they can't be predicted on a per unit basis until we know more about sales numbers. The article says Apple has sold 16 million iPods in the first nine months of this year and based on the rave reviews of the nano and the huge yearly growth of the iPod market, we might expect to see numbers like that for the nano alone next year. If that's the case, engineering costs per unit will likely dwindle to an insignificant figure. That is unless you expect that those costs have greatly exceeded, say, 16 million dollars.

TW

Re:Engineering costs? (1)

at_slashdot (674436) | more than 8 years ago | (#13629007)

Those are fixed costs not variable that doesn't matter too much when you sell million of units.

Re:Engineering costs? (3, Insightful)

BasilBrush (643681) | more than 8 years ago | (#13629015)

They're not part of the gross profit margin. They are fixed costs. The same whether they sell 100 or 100 million nanos.

Re:Engineering costs? (4, Interesting)

sammy baby (14909) | more than 8 years ago | (#13629288)

True, but if your fixed costs are high enough, your gross profit margin won't be able to cover it, so they still factor in.

(I mean, let's not kid around, there's no way in hell Apple is gonna fail to make its fixed costs back on this one. They'll probably do it in the first week.)

Re:Engineering costs? (0)

Anonymous Coward | more than 8 years ago | (#13629029)

Those aren't per-unit costs.

Re:Engineering costs? (0)

shotfeel (235240) | more than 8 years ago | (#13629121)

Same applied to the $40/processor it costs Intel in production. Nobody seems to remember that may only be a small part of the total cost. In some cases more is spent on marketing than production.

Re:Engineering costs? (4, Insightful)

soft_guy (534437) | more than 8 years ago | (#13629327)

Yes, that's why they need to double the materials price. They *do* generally have to pay for things like:
- The contract manufacturer's profit
- Shipping (although sometimes the contract manufacturer pays for this)
- Marketing, advertising, sales promotions
- Warranty repairs/replacements
- Returned units
- Keeping the retail stores open and paying the people there
- Engineering costs
- Other fixed costs of running Apple (keeping the lights on at 1 Infinite Loop)
- Steve's turtlenecks don't pay for themselves :-)

Re:The part of the article that applies (4, Interesting)

Alex P Keaton in da (882660) | more than 8 years ago | (#13628941)

It doesn't say what the wholesale price is... Who is making the profit, the reseller/retailer of Apple. If Apple is wholesaling them for $110, their profit is different than if they are wholesaling them for $150...

Re:The part of the article that applies (3, Insightful)

Junior J. Junior III (192702) | more than 8 years ago | (#13628943)

Hold on, what about R&D costs? What about advertising? What about support, warranty, and RMA costs? I bet that 50% over manufacturing costs doesn't actually go all that far...

The Question Answered (-1, Redundant)

Crusader7 (916280) | more than 8 years ago | (#13628757)

The important question answered:

It costs Apple $90.18 in materials to build the [$199] unit and $8 to assemble it, leaving a profit margin before marketing and distribution costs of about 50%.

I'm not sure what the implications are here. That seems like it's about right for a typical "hot" technology item.

Re:The Question Answered (3, Informative)

RobinH (124750) | more than 8 years ago | (#13628842)

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

Re:The Question Answered (1)

lukewarmfusion (726141) | more than 8 years ago | (#13628895)

I believe that R&D costs are considered "sunk" costs and are not a part of the actual cost. It's a consideration in pricing, of course, but the point I kept getting when researching product pricing was that sunk costs are gone whether or not you sell any or how much you sell them for.

Overhead for plants, staff, etc. probably aren't factored into their estimate, though. How could they know the cost of running the factories, the costs of paying all the employees (including plant managers and non-assembly staff), etc.? I'm not positive, but I'd assume that marketing costs are part of the Cost of Acquiring a Customer - which should be factored in as well.

Re:The Question Answered (1)

BasilBrush (643681) | more than 8 years ago | (#13629038)

Overhead for plants, staff, etc.

I would think that's exactly what the $8 assembly cost is estimating.

Tooling? Investment? (4, Insightful)

troon (724114) | more than 8 years ago | (#13628758)

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%.

The article is light on details. I hope they took account of amortization of any tooling or plant investment. It's this sort fo thing that stops the small players, hobbyists and enthusiasts producing anything similar for reasonable money.

Re:Tooling? Investment? (0, Redundant)

hcdejong (561314) | more than 8 years ago | (#13628785)

And don't forget the R&D, a factor that doesn't seem to be included in the figure at all.

Re:Tooling? Investment? (4, Insightful)

ChrisF79 (829953) | more than 8 years ago | (#13628834)

The article is light on details. I hope they took account of amortization of any tooling or plant investment. It's this sort fo thing that stops the small players, hobbyists and enthusiasts producing anything similar for reasonable money.

Those costs would be included in Overhead, which is below the gross margin line on the P&L so they are likely not included. There's a lot in between gross margin and net margin.

Re:Tooling? Investment? (1, Informative)

untaken_name (660789) | more than 8 years ago | (#13628961)

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.

Re:Tooling? Investment? (2, Insightful)

darkmeridian (119044) | more than 8 years ago | (#13628856)

I would be surprised if Apple owned the fab plants that built the frames. Apple probably buys all the parts to spec and then assembles them. Assembly plants probably are not that complicated and perhaps can be shared with earlier iPod plants.

Re:Tooling? Investment? (1)

tyler083 (775626) | more than 8 years ago | (#13628877)

Can't forget software, which is pretty useful in making the iPod work the way it does.

Profit Margins (1)

Abit667 (745465) | more than 8 years ago | (#13628759)

Impossibly Small

Re:Profit Margins (-1, Offtopic)

ccarson (562931) | more than 8 years ago | (#13628776)

test

Re:Profit Margins (-1, Offtopic)

Anonymous Coward | more than 8 years ago | (#13628805)

holy crap!! it's the fabled test post!!

Re:Profit Margins (0, Offtopic)

hostyle (773991) | more than 8 years ago | (#13628806)

Mom? Is that you?

I'm leaving now and will be home soon. Sorry about all that stuff I posted earlier.

Small Margin? (3, Funny)

Anonymous Coward | more than 8 years ago | (#13628764)

Is it an "impossibly small" margin?

Too bad that's so simplified (5, Insightful)

EggyToast (858951) | more than 8 years ago | (#13628768)

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 (1)

Fett101 (810894) | more than 8 years ago | (#13628784)

Can't forget marketing too.

Re:Too bad that's so simplified (1)

mattyohe (517995) | more than 8 years ago | (#13628942)

posting articles to /. is free.

Re:Too bad that's so simplified (1)

Jackdaw Rookery (696327) | more than 8 years ago | (#13628788)

Bingo, you have it spot on. The article is a gross simplification of the nano's manufacturing.

Re:Too bad that's so simplified (0)

Anonymous Coward | more than 8 years ago | (#13628823)

Calm down fanboy. Consumer electronics normally cost around the 30% of the retail price to physically build. The rest of the costs get eaten up by packaging, distribution, and retail markups etc. Any profit the manufacturer sees will need to cover their running costs.

Re:Too bad that's so simplified (1)

Ingolfke (515826) | more than 8 years ago | (#13628860)

Consumer electronics normally cost around the 30% of the retail price to physically build.

At what point in the product life cycle is this true and what competitive conditions must exist for this to occur?

Re:Too bad that's so simplified (1)

trevordactyl (908770) | more than 8 years ago | (#13628831)

In addition to everything you've said, is anybody really surprised that companies try and maximize their revenue? That's their sole purpose. To make money. If everybody's willing to pay it...what's stopping them? That's my understanding of capitalism. It's not a necessary service so they can make a 999% profit if they'd like. No monopoly = no regulation = don't buy one if you don't want them to profit off you.

Re:Too bad that's so simplified (5, Interesting)

TeamSPAM (166583) | more than 8 years ago | (#13628849)

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.

Re:Too bad that's so simplified (2, Interesting)

tgd (2822) | more than 8 years ago | (#13629032)

To be more accurate, game consoles are sold at a loss. Cell phones are not sold at a loss. Verizon and Cingular may sell them to the customer at a loss, but they're not the ones building the phone. Nokia, SE and Motorola do not sell them at a loss.

If you're talking about physical goods sold at a loss by a third party service provider, there are lots of other examples beyond cell phones of that -- satellite resellers, some of the "free PC" companies, the satellite radio companies, etc.

Re:Too bad that's so simplified (1)

DaPoulpe (795028) | more than 8 years ago | (#13629197)

Well to be even more accurate, most consoles are sold at a loss.
Because I don't think the GameBoy familly is in that case, and IIRC the GameCube is actually quite cheap to produce too.
So I would say that actually Nintendo manages to get some money out of their Hardware.
But they may be the only ones...

Re:Too bad that's so simplified (3, Informative)

Zangief (461457) | more than 8 years ago | (#13628907)

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:Too bad that's so simplified (0)

Anonymous Coward | more than 8 years ago | (#13628919)

Apple's margin for the last nine months has run at just about 9%. When you buy an iPod on Amazon for $300, Apple gets about $150 of that, and makes a profit of about $13.50.

Re:Too bad that's so simplified (1)

EnderWiggnz (39214) | more than 8 years ago | (#13629108)

thats why its "gross profit margin". everything else is counter as OpEx.

Apple paving the way to thin consumer devices (5, Interesting)

xtal (49134) | more than 8 years ago | (#13628773)

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 (5, Interesting)

AGMW (594303) | more than 8 years ago | (#13628931)

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?

Re:Apple paving the way to thin consumer devices (1)

rufus_sd (872392) | more than 8 years ago | (#13629047)

If you buy a Mini (at least in the US) there is an option for a direct iPod link.

Re:Apple paving the way to thin consumer devices (2, Insightful)

notthe9 (800486) | more than 8 years ago | (#13629071)

BT is not NEARLY fast enough for much song transfer, let alone the fact that you cannot charge over it.

And Apple is not apt to let iPeople swap their music on the iTrain, as they are pretty big on the no piracy thing.

Re: No piracy (1)

CmdrPorno (115048) | more than 8 years ago | (#13629257)

Actually, I can hook up my iPod nano to more than one computer without having to format it first. I haven't tried to copy songs from the iPod to the computer yet, but even the functionality I just mentioned is an improvement over my old Shuffle.

Re:Apple paving the way to thin consumer devices (2, Insightful)

flithm (756019) | more than 8 years ago | (#13629169)

First of all, this is a great idea. A bluetooth add on would be a really nice addition to their product line. Especially as an add on, since lots of people would not need (or want) it.

One thing I wanted to mention though, I can't really see bluetooth being a suitable replacement for the USB connector. I'm not a bluetooth expert (so someone please correct me if I'm wrong) but as far as I understand it there's two common bluetooth transfer modes: DH5/DH1 and DH5/DH5.

DH5/DH1 gives a maximum theoretical forward transfer rate of 723.2 Kb/s, with 57.6 Kb/s reverse.

DH5/DH5 gives 433.9 Kb/s both directions.

I believe the DH5/DH5 is the most commonly used mode (for obvious reasons), which gives a maximum theoretical speed of 54.125 KB/s up and down. I use bluetooth to connect my PDA to my computer, and every once in a while (if I'm too lazy to dock) I use it to transfer a couple of MP3s. I also have a handy network bandwidth meter, and I have never seen speeds higher than 45 KB/s, and it usually stays around 40. But since this could be a crappy device I bought, or interference or who knows what, let's stick with the theoretical.

Think of transferring 4 GB at that speed: It would take 21.53 hours!

As you probably know the theoretical max speed of USB 2.0 in High-Speed mode is 480 Mb/s (60 MB/s) or 1135 times faster than Bluetooth.

Using USB High-Speed the same transfer would take: 1.14 minutes.

Of course these are theoretical values. Transfer overhead in the system (both network and computer) increases the time of the USB transfer quite a bit.

Either way I think you can see that Bluetooth is not a good thing to use to replace USB :).

Re:Apple paving the way to thin consumer devices (1)

johnhennessy (94737) | more than 8 years ago | (#13629316)

Another reason to hold on ROKR...

Why not use the bluetooth connection on your appropriately spec'ed cellular phone to download tracks from iTunes to your iPod.

This gives people the CHOICE to use whatever phone they want, with whatever MP3 they want with whatever Online service they want. (Okay, if you want iTunes, then the iPod is not optional).

Its a win-win for Apple - suddenly they do not need reseller deals with every Mobile operator in a country to sell their wares.

My television does not need to be able to wash my clothes and clean my carpet.

Of course there are some issues to be worked out, one of the biggest is that the main carriers want to control your life ... I don't buy books/music/dvd's off my broadband provider, what makes the network operators (i.e. Verizon/Cingular/whoever) think that I should buy these from them. If they got back to doing what we're paying them to do - provide a cheap cost-effective data service - then they might actually be able to succeed in that goal.

Re:Apple paving the way to thin consumer devices (0)

Anonymous Coward | more than 8 years ago | (#13628979)

Is the original Ipod really too big for you to carry around? Does that extra few ounces rip holes in your pocket and make it terrible uncomfortable to go anywhere?

Or is there a big scma by clothin companies and technology companies to make smaller devices by the clothign companies slowly shrinking the size of pockets to make you feel that you need somthing smaller?

just my 2 cents, i have a 2nd gen and it has always been small enough for me, even more so hwen it hold all my music which would be impossible to bring along any other way.

Re:Apple paving the way to thin consumer devices (1)

nine-times (778537) | more than 8 years ago | (#13629081)

Is the original Ipod really too big for you to carry around? Does that extra few ounces rip holes in your pocket and make it terrible uncomfortable to go anywhere?

For me, sorta. I'm not really complaining, though. When I got my first iPod, I thought it was terrifically small for the amount it held, and it was substantially bigger than current iPods. However, yes, the full sized iPods are a little large to be carried around in my pocket. I've typically kept mine in one of those belt holsters or a messenger bag, because, typically, the most I'm willing to carry in my pockets is my wallet and keychain. The situation only gets worse as you factor in a cell phone, camera, and PDA.

You want to say they're great, I'll agree. You want to say they're impressively small, I won't really argue. But are they big enough that they're a little uncomfortable and annoying to carry around? Yes, that too. I'm hoping they'll eventually come out with a viable convergence device, or else the devices will keep getting smaller and someone will design a super-comfortable utility belt.

There might be more to it than the cost of parts (4, Interesting)

jockm (233372) | more than 8 years ago | (#13628781)

It would be nice if they factored in the cost of design, development, and manufacturing into that cost. I have worked on consumer electronics projects in the past, and the rule of thumb was adding $1 to the Bill-Of-Materials adds $4 to the retail price. Still it doesn't surprise me that the profit margin is high.

Re:There might be more to it than the cost of part (1)

AlecC (512609) | more than 8 years ago | (#13629262)

They did factor in the cost of manufacturing - $8. The others, being fixed rather than per-unit, depend upon the volume sold. If they sell hundreds of thousands, that would be high; if they sell tens of millions, that would be low. They are working only BOM*2 rather than the *4 you remember - which is only viable if you expect huge volumes.

Or, to put it another way, if it cost $8 million to develop (design, software etc. - just a guess) and they are making $80 per unit, they need to sell 100,000 units to break even. 200,000 units gives a 100% ROI, whcih is the sort of return Apple needs to make off *every* product if it is to live. A million units is the sort of figure they need to keep their stock looking cheerful. Given the buzz they have, this doesn't look unlikely.

Apple Brand (5, Interesting)

mysqlrocks (783488) | more than 8 years ago | (#13628794)

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.

Re:Apple Brand (1)

ChrisF79 (829953) | more than 8 years ago | (#13628874)

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.

Interesting take really, but I don't think that is entirely valid. Apple is a publicly traded company and shareholders buy on earnings. They must make decisions that will increase shareholder value. Sure, lots of companies sell products at a loss in the short-term for one reason or another, but I really don't think this would be beneficial for Apple in this instance. Millions of units selling at a loss would undermine their overall profits. For each nano sale, they're likely cannibalizing the sale of a different iPod model. So to sell them at a loss to pick up a bit of profit on the sale of some other Apple product really doesn't seem to practical to me.

Re:Apple Brand (1)

mysqlrocks (783488) | more than 8 years ago | (#13628929)

Millions of units selling at a loss would undermine their overall profits.

My point was that Apple has benefited from much more than just the direct profit on the iPods. You are absolutely right that their shareholders would not let them sell something that does not make a profit.

Re:Apple Brand (0)

Anonymous Coward | more than 8 years ago | (#13628944)

Apple's actually for "smarter" people, not "cool" people. Sheep! SHEEEP!!!

Maybe I am in the minority (3, Interesting)

Shivetya (243324) | more than 8 years ago | (#13629230)

but I think I am not, I know of no one who has bought any form of iPod who actually bought an Apple computer. Now I know a few Mac users who have iPods.

What I have seen is that they will most likely buy ANOTHER iPod. The only few who considered buying an Apple computer got immediately turned off by the price.

It is all about price points. The iPods are doing well now because they are at that magical number of being below $299 and most being $199 and under. Look where the largest iPod market is, it is that lower price range.

Meaning, if Apple can come out with other items in that range people might just stop and buy, may I suggest a media center type solution. An Apple PVR with more functionality?

Necessary to be an innovator (4, Interesting)

Karma_fucker_sucker (898393) | more than 8 years ago | (#13628802)

Historically, Steve [Jobs] won't accept anything less than 20% gross margin on any product," says Creative Strategies analyst Tim Bajarin.

To pay for the R&D, marketing, etc ... I'm surpised that Jobs doesn't demand a higher return.

I'm wondering if Apple will go the way of Sony. Innovating firms have a tendency to be eaten up by firms who copy and then sell for a lower price. The only way to stop copiers is to create a closed format - basically kill competition before it happens - or to keep innovating to stay ahead of the copiers - easier said than done.

Re:Necessary to be an innovator (4, Interesting)

Ingolfke (515826) | more than 8 years ago | (#13628879)

Innovating firms have a tendency to be eaten up by firms who copy and then sell for a lower price.

-cough- Dell -cough-

Re:Necessary to be an innovator (1)

stevesliva (648202) | more than 8 years ago | (#13628949)

Innovating firms have a tendency to be eaten up by firms who copy and then sell for a lower price.

Let's hope gas stations stick to this plan in the next few days.

Re:Necessary to be an innovator (2, Insightful)

LinuxOnEveryDesktop (14145) | more than 8 years ago | (#13628930)


I'm wondering if Apple will go the way of Sony. Innovating firms have a tendency to be eaten up by firms who copy and then sell for a lower price. The only way to stop copiers is to create a closed format - basically kill competition before it happens - or to keep innovating to stay ahead of the copiers - easier said than done.


Let's see - the way of Sony. With a gigantic consumer electronics business, which used to make great stuff, but unfortunately is now reigned by a bunch of IDIOTS in the music and film units that have forced Sony to become pretty much irrelevant in the digital media sphere. Why? Persistently trying to push proprietary, crippled crap (ATRACKS, anyone?) - and then being surprised that nobody wants to buy it. Sony should be the one behind the iPod - it's a logical step from the walkman and discman history.


Sony is run by a bunch of idiots. I'm surprised the shareholders have not revolted a long time ago.


I'm guessing Steve Jobs understands this perfectly, and I'm pretty happy that Apple doesn't actually own any content business. Pixar is a totally separate company. As long as that stays the case, I don't see Apple become irrelevant the way Sony did anytime soon.



That doesn't work (1)

Mr. Underbridge (666784) | more than 8 years ago | (#13629233)

I'm wondering if Apple will go the way of Sony. Innovating firms have a tendency to be eaten up by firms who copy and then sell for a lower price. The only way to stop copiers is to create a closed format - basically kill competition before it happens - or to keep innovating to stay ahead of the copiers - easier said than done.

That *is* what Sony tries to do, and that's part of what's killing it. Sony's great if you only own Sony products. Otherwise, they put all their effort into supporting their own proprietary formats and such that are total losers. They've been doing it since the 50's, and they tend to lose.

In my opinion, Sony isn't big enough - or else doesn't capture enough marketshare when they innovate something - to be able to start a proprietary format effectively.

Get a look at Apple's misdeeds & mischief (-1, Troll)

Anonymous Coward | more than 8 years ago | (#13628811)

Re:Get a look at Apple's misdeeds & mischief (3, Insightful)

rebeka thomas (673264) | more than 8 years ago | (#13628832)

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

ROFL! because bundling a driver with the hardware SHOULD BE BANNED.

retards.

Re:Get a look at Apple's misdeeds & mischief (0, Troll)

pintomp3 (882811) | more than 8 years ago | (#13628896)

that's one big ass driver. that's like saying it would be ok for epson scanners to work only with epson imaging software. no photoshop, no paintshop, no gimp, etc. of course, scanners don't have drm and the riaa to deal with either.

Re:Get a look at Apple's misdeeds & mischief (4, Insightful)

mh101 (620659) | more than 8 years ago | (#13628995)

For your illustration to work, you have to assume the iPod only works with iTunes. I won't list them here, but there are several other third party apps that people can use to transfer stuff to their iPod with.

So... it is the same as with scanners. Apple bundles their own software that they developed, but you're free to use whatever other program you find that can speak to the iPod.

Re:Get a look at Apple's misdeeds & mischief (1)

justforaday (560408) | more than 8 years ago | (#13629128)

Although your point has already been refuted, it should also be pointed out that in the examples you give above (well, photoshop and paintshop at least), you're still using the epson imaging software, except as a plugin (via TWAIN).

Unpeeling?! (0)

Anonymous Coward | more than 8 years ago | (#13628813)

Shouldn't we be Peeling the Nano? Or are we "not listening" to our iPods either?

Profit = Evil??? (1, Offtopic)

MrLogic17 (233498) | more than 8 years ago | (#13628817)

Why is it assumed that profit is a bad thing?

If Apple wasn't making money off the iPod, *that* would be a bad thing. For many thousands of employees!

All these articles lately make me think the editors have gone commie/socialist on us....

-MrLogic

Re:Profit = Evil??? (1)

ChrisF79 (829953) | more than 8 years ago | (#13628854)

Why is it assumed that profit is a bad thing?

Interesting. I didn't get that take from the article at all.

Re:Profit = Evil??? (0)

Anonymous Coward | more than 8 years ago | (#13629186)

Interesting. I didn't get that take from the article at all.
 
From the WHAT?

Re:Profit = Evil??? (0)

Anonymous Coward | more than 8 years ago | (#13628913)

Where does it say that profit is evil? Don't try to read into things too much...

Re:Profit = Evil??? (1)

szaz (890101) | more than 8 years ago | (#13628934)

Communism and Socialism are different and related only by the fact they are ideologies. So which is it.... communist or socialist? And why do you assume that socialists think profit is bad?

Because you're on slashdot (2, Insightful)

ChePibe (882378) | more than 8 years ago | (#13628984)

"Why is it assumed that profit is a bad thing?"

Because you're on slashdot. Read through any article about software piracy or "sharing" movies and music. Look for all of the responses that talk about a "dead business model" of paying people thousands or millions of dollars to create software or digital products and, if they're good, expecting to get a profit. Copyrights and patents are evil. Blah, blah, blah. I can agree to a certain degree on some of these matters, much of the Slashdot community's negative feelings about those that actually want to make money from a product is truly amazing.

The iPod Nano was not an open source linux based product with an underground publicity campaign. If it was, everyone would be happy.

Then again, it is an Apple product, which means there will be far less criticism than if, say, it was a Dell product.

Sad. (5, Insightful)

hungrygrue (872970) | more than 8 years ago | (#13628818)

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.

Re:Sad. (3, Funny)

Anonymous Coward | more than 8 years ago | (#13628908)

Apple is currently the most innovative computer company around, with an operating system that makes the current market leader look like a dinosaur.

I agree. BSD is a good OS, despite the lack of Netcraft confirmation. :)

Re:Sad. (3, Insightful)

Budenny (888916) | more than 8 years ago | (#13628972)

Well, they had two choices if they wanted to grow.

Choice (1): move out of the niche market for bundled proprietary hardware+OS, and sell unbundled OS, and try to grow the PC product line. Risky. Bet the company stuff.

Choice (2): stay in the niche, keep hardware+OS bundled, and diversify into different product areas for growth.

They chose the second. This meant their PC market share will probably now never rise above 5%, the PC product line whatever its merits will not be a source of much growth. But the new business areas, as long as they can keep inventing them and exploiting them, and as long as they pick high margin areas, may deliver earnings growth. As the correlation of stock price movement and iPod introduction shows.

Not sad, just a business decision. You can see the attractions in the stock price. They'll end up as a consumer electronics company rather than a computer company, if it works.

Re:Sad. (1)

somersault (912633) | more than 8 years ago | (#13629115)

Yeah, after using Macs since I was 4 (1997), it does seem a shame that they are moving away from computers being their mainstay, but at least they'll be making innovative/cool consumer electronics if that's the direction they're going. Similar to Amiga being sold off and having their tech more likely to be used in washing machines etc >_> Makes me want to cry a little.

Re:Sad. (1)

dodobh (65811) | more than 8 years ago | (#13629156)

Their OS does not run on my hardware, and I see no sense in buying their hardware for the OS.
I don't need a laptop, I need a portable desktop -- read battery life is not really important, but performance and features are. And Apple is nowhere close on price/performance in that market.

Re:Sad. (1)

CmdrPorno (115048) | more than 8 years ago | (#13629308)

This is one of the big reasons they are moving to Intel. The G5 was an awesome machine when it was introduced, but its relative performance is tapering off compared to the latest bunch of x86 chips. The G4 is just outdated, and I say that as someone who has an 8-month-old PowerBook G4. Even when the Intel portables come out, expect to pay a premium compared to a Dell. If you care nothing about the OS, it won't be worth it, but if you like the OS and the design of the machines, it probably will be...

Personally, I think Apple is the only computer company who currently even has a design staff.

In other news, houses are free (4, Insightful)

Kombat (93720) | more than 8 years ago | (#13628820)

In a related story, researches have discovered that new home construction costs practically nothing at all, as the wood was taken from trees that were growing there anyway. Wood costs nothing to fabricate, as mother nature provides it for free (given enough time). The foundation is poured from concrete, which is just rocks, sand, and water, all of which are freely available. Thus, new home construction is 100% profit.

Re:In other news, houses are free (1)

mios (715734) | more than 8 years ago | (#13628909)

That was one of the smartest/funniest things I've read in slashdot in a long while.

Cheers.

Re:In other news, houses are free (1)

Comatose51 (687974) | more than 8 years ago | (#13628952)

I would mod you up even higher if it goes pass 5. Maybe I'll mod you down first and then mod you back up just so I can mod you up. Oh well, too late now.

The Profit Margin on the iPod nano... (0)

Anonymous Coward | more than 8 years ago | (#13628840)

...is razor thin and quite light.

In the meanwhile... (4, Insightful)

Willeh (768540) | more than 8 years ago | (#13628897)

Apple retailers get reamed right in the ass. I've seen lists of the costs of the various products a year ago when i used to work in the field, and they ain't pretty. Think of the Apple lineup from a year ago. An Apple reseller (excluding Apple stores, they don't have any in my country) stood to make a whopping 10 off of every eMac sold, up to about 50-80 off of an iMac (the lampshade version iirc). Margins were pretty much razor thin from a retailer perspective. Then again, Apple have been known to want to eradicate 3rd party dealers and go Apple Store only, but in a country with no Apple Stores? Why limit access to your stuff at all?

I could understand (evil as it may be) Apple wanting to control distribution if they were the top dog in the computer business, but as it stands i think Apple would do well to play friendly with everyone who wants to push Apple products to the masses (iPods excluded, they're all over the place).

Re:In the meanwhile... (0)

Anonymous Coward | more than 8 years ago | (#13629005)

Is that $10 or 10%? Because 5-10% retailer profit margin is very common for PCs.

Re:In the meanwhile... (1)

Willeh (768540) | more than 8 years ago | (#13629043)

That's 10 euros (roughly equivalent to 10 dollars, at least in the computing world), NOT 10 percent.

Re:In the meanwhile... (2, Interesting)

kakos (610660) | more than 8 years ago | (#13629068)

Er, that's pretty common for every computer retailer. I worked at CompUSA and computer systems (made by HP, Sony, Toshiba, et al) all had a margin of between $10-50. It was miniscule. There is a reason they try to push those extended warranties on you so hard. That is where they make their money.

Re:In the meanwhile... (1)

Zemplar (764598) | more than 8 years ago | (#13629211)

Having many retail locations to sell computers is not a good business idea - simply more overhead than can be paid for given current commodity pricing. If you need an example, look no further than Gateway. Also, did you ever wonder why Dell's "retail locations" consist primarily of kiosks in the mall? Kiosks are cheap and have high traffic - just like Dell.

Therefore, I could care less if Apple allows resellers to market their products. Mail order [internet] distribution and Apple stores keep Apple's products more cost competitive and eases acquisition for the majority of their customers.

Mod article -5 Troll (3, Insightful)

Udo Schmitz (738216) | more than 8 years ago | (#13628898)

It doesn't say anything about the profit Apple is making with the iPod nano. It only shows the price of the used components. This could be interesting for any competitors in the MP3-player market. You'd still need developers, marketing and all that other stuff used to get a product to market ...

The Pocket is the New Platform. (3, Interesting)

Anonymous Coward | more than 8 years ago | (#13628947)

The point that things like this [ipodlinux.org] and this [fear.me.uk] demonstrate, is that Pocket is the New Platform.

Apple are pretty savvy to this. iPod nano is a keyboard and mouse interface away from being a Classic.. its not unusual that the same sort of 'monolith screen slab' form factor of the original Mac is still resonant in their current design path.

But now, it fits in your pocket. And it won't be long until the LED projector segment shrinks to the same form-factor, and we'll see, perhaps, even the death of laptops ..

[.. there's nothing quite so cool as having torrent in your pocket ..]

Re:The Pocket is the New Platform. (1)

birge (866103) | more than 8 years ago | (#13629292)

The pocket is the new platform? Sounds like the media lab hype of years gone by. Anyway, until your fingers shrink I think it's premature to predict the death of the laptop. Projection needs a place to project, too. That's not a feasible solution for display. Let me offer a sober suggestion: nothing is the death of anything. Nothing is the next big thing that's going to change our lives completely, blah blah blah. There's a bunch of stuff, some of it better at certain things than others. Why is it that people aren't happy unless they can hype the second coming and predict simplistic sea changes that can be summarized in a buzzword? I'm serious about the question, as it seems to be a modern phenomenon.

Software development (4, Insightful)

Dexter77 (442723) | more than 8 years ago | (#13628980)

With that formula Windows' profit margin is about 99.9%, because CD only costs 10c to make.

As a software professional, I've never been able to calculate real profit margin of any product that contains any kind of a software. Especially in a big company, you got different software modules from different products linked together. For example if software module A costs $500,000 to develop and it's sold with $1000 per license. Then you have a software module B that cost $2,000,000 to develop, and sold $100 per license. Both of those modules are sold separately, but then you decide to use both of their technology to develop a product C. It costs additional $100,000. All of those modules continue to sell separately. What is profit margin of product C? Do you count in only the $100,000 or that part of A and B, which haven't been covered by license sales? What about company's administration costs, marketing costs, etc.

And that was an extremely simple example. Old company has thousands of software modules, all linked to each other in some way. You can never really point out the actual cost of a product in software business.

My point is: The only way to know the real margins of a product, is to see how good salaries are in that company (as long as it is profitable)

PS. I bet iPod family's UI design has cost ten times more to develop than any other competitor's product's. There are countless number of factors that you can't even imagine when considering those margins. (But as a software manager, I consider it an advantage. No matter how bad failure a development project is, you can always trick those business directors to believe that it actually was a success. You'll just sweep those man-months under the carpet (of some other project/product) and say you used a software module that was developed by other project.)

How does this work? (1)

xenocide2 (231786) | more than 8 years ago | (#13629092)

The iPod is increasing its margins, even as it increases the number of units sold, to the point where they're consuming something like 40 percent of Samsung's high capacity NAND chips. And yet somehow, they get a deal on parts that saves Apple like 40 percent of the cost of chips. "Crotty estimates that Apple is paying $54 for 2 gigabytes worth of memory. That would cost any other manufacturer $90." That seems like a large discount to give somebody who desperately needs your product. I do realize that manufacturers often give bulk discounts, it seems a bit silly to offer 40 percent off at the biggest order end.

No wonder Jobs says iTunes is designed to move hardware; without it, somebody would step in and produce the same thing at half the price!

save money, build it yourself (1)

acomj (20611) | more than 8 years ago | (#13629119)

See people, its easy to save money, just buy the parts plus a sodering iron and get to work. At the estimated 4 dollars to assemble, I estimate it will take a novice about an hour.

Seriously though, ipods don't seem significantly more expensive than the competetion and companies are exiting the market (RIO), so I'd expect margins aren't as high as this estimate. Apple usually gets around 20-30% margins based on SEC filings.

 

Let's not forget the warrantee savings (2, Insightful)

yakkowakkodot (916507) | more than 8 years ago | (#13629180)

We've seen how durable these new nanos are. That's going to help their profits tremendously as now a 5 foot drop means a scratch, not a invisible damaged circuit they have to swap out units for under warrantee. Good for them, good for me. Um, sorta. Dropped my mini and 10 days later, new mini. I think only ACME delivery to Wile E. Coyote is faster. Reducing that overhead potential just helps them more.

Re:Let's not forget the warrantee savings (1)

tdsanchez (15549) | more than 8 years ago | (#13629255)

Except for the fact that the Nano seems to scratch when merely looked at... many people are unhappy about this. This is a post from Apple's Nano disucssion area:

I think Apple is going to have a major problem on their hands when enough of these are sold. They chose a poor material for the Nano and will probably have to change it in the manufacturing process soon. The Nano is a beautiful product and should not have to be covered up just to avoid the slightist scratches from fingernails etc. I bet the Apple stores will soon be required to replace their floor models everyday to keep from turning off the customers. I have treated mine like a king and it already has a few scratches etc. They could at least use the best Lucite they used in the previous models. Only time will tell.

To which I replied (and will likely be censored by Steve J.)
Welcome to the world of the new Apple. Apple's dirty little secret for some years (since the first iMacs) has been to make it's products mar and scratch easily to encourage frequent purchases. Gone are the days of robust product casing like those found in the pre TiBook Powerbooks and pre iMac and B/W G3 computers.

My white Nano is my third iPod, and like my first two iPods, it seems to scratch spontanously. The day after I got it, I purchased several sheets of transparent vinyl from the printer supply section at Office Max. This is the same stuff that many manufacturers use to protect displays during shipping and manufacture. I measured and cut strips that are 1.5" X 3.5" and covered both sides, and later evolved the pattern to have protective tabs for the sides and top. It makes the Nano look a little odd on close inspection, but I can actually use the Nano without worrying about it looking it just survived a trip through the sandblaster.

I call Apple to task for not having some kind of protective casing available with the Nano. It seems they'd like people to get their Nano's nice and scratched up before effective protective casings are available.


Hopefully, Apple will wise-up REALLY fast so that the Nano launch will not be marred by a purely cosmetic profit play.

Revenue = Profit? I wish (5, Informative)

the eric conspiracy (20178) | more than 8 years ago | (#13629212)

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.

Does the margin really matter? (1, Flamebait)

Spansule (695381) | more than 8 years ago | (#13629235)

Why is this news? I'm seeing it all over the web. Apple can charge whatever they want. If you don't like it, buy something else.

Can we skip these meaningless "profit" articles? (1)

Rude Turnip (49495) | more than 8 years ago | (#13629321)

TFA doesn't get into figuring out the net profit margin, which, in layman's terms is the real, bottom line profit margin. 50% is a completely meaningless figure since, as everyone else is mentioning, does not include R&D or marketing costs. Sure, go on a self-righteous rant about Apple's marketing, but the cost is what it is. An earlier thread about Intel's "$40 to produce a chip" was in much of a similar vein and equally meaningless. Please, can we avoid these articles that essentially discuss gibberish numbers?
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