Apple makes $208 on each $499 iPad
Profits jump to $446 on top-end $829 model, analyst estimates
Computerworld - The $499 version of the new iPad tablet actually runs Apple about $270 in materials and manufacturing costs, a Wall Street analyst said today.
According to a bill of materials (BOM) analysis by Brian Marshall of BroadPoint AmTech, the cost of goods inside Apple's 16GB Wi-Fi-only iPad totals $270.50. That figure includes a $10 line item dedicated to manufacturing, but doesn't include another $20 set aside for under-warranty service costs. Adding the latter makes Marshall's bottom-line total $290.50.
The most expensive component on his price list was the 9.7-in. LCD touch-sensitive display, which he tagged at $100. The 16GB of memory and the aluminum case cost about $25 each, said Marshall, while the Apple A4 chip was listed at $15.
Because that model will sell for $499, Apple's profit margin is 42.9% after the $20 warranty set-aside is factored in.
As a hardware expert pointed out Wednesday, the iPad that can connect to the Internet via a 3G data network is even more profitable, since Apple adds a $130 surcharge for those tablets but incurs a very small hardware cost to add 3G.
By Marshall's estimate, the $629 16GB iPad with Wi-Fi and 3G costs Apple $306.50, just $16 more than the Wi-Fi-only model, giving the company a profit margin of 52%, a jump of nine percentage points.
In all cases, the Wi-Fi-plus-3G iPad provides a bigger margin that the same configuration in Wi-Fi-only. The $599 Wi-Fi-only iPad, which includes 32GB of flash storage, costs Apple $316, for a margin of 48.1%; the same iPad with 3G has a $729 price tag, but runs Apple only $332, a margin of 55.1%. That's the highest of any iPad according, to Marshall's analysis.
Apple's iPad line as a whole enjoys a margin of approximately 50%, assuming that the lower-priced Wi-Fi-only tablets sell much better than the 3G models. In a research note to investment clients, Marshall called the iPad "another grand slam for Apple," and upped his estimate of iPad sales during 2010 from 2.2 million to 7 million.
High profit margins are standard for Apple, which earlier in the week boasted that its corporate margin for 2009's final quarter was 40.1%. Some products, in fact, have estimated margins even higher than Marshall's iPad numbers: The consensus for the iPhone 3GS is above 60%, for example.
"If [Marshall] is right, this shows that there's room going forward for Apple to reduce the price of the iPad," said Ezra Gottheil, an analyst with Technology Business Research. "I think the $499 price point is very aggressive, but if they dropped [the price] it would really put the iPad in the netbook range. At a lower price, consumers will have to decide what they want for a portable work and play device, a netbook or get an iPad."
- Office for iPad apps ring up 27M downloads
- Apple plays hardball with iPad Mini reveal
- Apple breezes to PC sales' top spot as Windows share decays
- Analyst tallies perks of September launch of new iPhone, iPad
- Analyst predicts stellar iPad sales in next week's Apple earnings
- Nexus 7 holds up better than iPad in drop, water-dunk tests
- With iPad Mini, Apple would remain tablet king through '16, says IDC
- Apple demands ipad3.com domain
- Chrome for iOS snatches top spot on App Store
- iPad in the Enterprise: IT Must Stay Ahead of the Curve
- Cloud Computing Drives IT and Business Agility Hybrid Cloud Accelerates Time to Value What is the main focus for IT in your organization - cost or agility? Many IT discussions today focus on cost controls rather...
- Infographic:10 Reasons to Choose vCloud Air Looking to create an agile, productive, and efficient IT environment? Read this simple infographic to learn about the benefits that VMware vCloud® Air™...
- Data Visualization Techniques: From Basics to Big Data with SAS Visual Analytics This paper discusses some of the basic issues concerning data visualization, from data size and column composition, to solving unique challenges presented by...
- 5 Hybrid Cloud Starting Points Did you know that more than 50% of organizations are already using or planning a move to hybrid cloud?
- Cloud BI in Action: Recorded Webinar of Customer, Kony, Inc. See how Kony, Inc., a leading enterprise mobility company, is using TIBCO Jaspersoft for Amazon Web Services and Redshift to achieve embedded analytics...
- Cloud BI Overview: Jaspersoft for AWS Check out this overview of Jaspersoft for AWS, to easily and affordably build business intelligence solutions as well as embed visualizations and analytics... All Macintosh White Papers | Webcasts