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Apple makes an average income of $223 per iPhone3G, averaged between 8GB and 16GB.

Rybold

Rybold

macrumors 6502a
Original poster
Jun 23, 2008
960
0
California, USA
"Apple sold 6.9 million iPhones ...sold during the quarter ended Aug. 30." So, for the three months of June+July+August, Apple sold a total of 6.9 million iPhones. If I remember correctly, the iPhone 3G was released on July 11, and prior to that, during the month of June, Apple was "out of inventory" on the original iPhone. Am I right? We also know that "Apple recorded iPhone sales of $4.6 billion." Doing the math, this means Apple's revenue was ($4.6B)/(6.9M phones) = $667/phone. Of course, this is the average between the 8GB and 16GB, which we do not know the proportions of.
http://www.businessweek.com/technology/content/oct2008/tc20081021_226499.htm?campaign_id=yhoo

"Apple (AAPL) reported $7.9 billion in sales. Fiscal fourth-quarter earnings were $1.26"

"had Apple recorded sales of iPhones the same way it accounts for sales of Macs and iPods (meaning that they count all profit during the quarter the phone was sold, instead of dividing it over eight quarters, as Apple does), per-share earnings would have been $2.69 on sales of $11.7 billion."

Doing the math, 11.7B - 7.9B = 3.8B profit from the additional iPhones. And, (2.69eps - 1.26eps) = 1.43 additional eps from the additional iPhone sales. Apple's market cap is $85.81B/$96.87 per share = 885M shares. $1.43x885Mshares = $1.27B profit on a 3.8B revenue. 1.27/3.8 = 0.33

($667 revenue per phone)(0.33 profit) :)= $223 per phone average profit :) . (divided amongst 8GB and 16GB models)

:DA MacRumors official post says: "If they had been included, this would represent an additional $3.8 billion in revenue and an additional $1.3 billion in net income." http://macrumors.com/iphone/ The 3.8 and the 1.3 agree with the numbers that I calculated. Therefore, that aspect of my math is correct.

*I am confident in my math; however if you find an error, please post the correction. Thank you.
 
On a quick reading, the only problem I see with the math is that Apple officially doesn't account for iPhone sales this way, so the EPS calculations don't work. Or maybe I'm missing something.

But I do like the rough number for profits on each iPhone. I suspect it's close to the mark.
 
IJ Reilly said:
On a quick reading, the only problem I see with the math is that Apple officially doesn't account for iPhone sales this way, so the EPS calculations don't work. Or maybe I'm missing something.

But I do like the rough number for profits on each iPhone. I suspect it's close to the mark.
Click to expand...

You are right that Apple calculates their revenue based on a GAAP basis (divides iPhone revenue over eight quarters). These numbers, however, are calculated from non-GAAP data (which is based on full revenue recorded on the sales date). :)
 
Rybold said:
You are right that Apple calculates their revenue based on a GAAP basis (divides iPhone revenue over eight quarters). These numbers, however, are calculated from non-GAAP data (which is based on full revenue recorded on the sales date). :)
Click to expand...

I know, which is why I suggested that deriving EPS numbers from the non-GAAP numbers doesn't seem to work -- though I'm not really sure about this.
 
IJ Reilly said:
I know, which is why I suggested that deriving EPS numbers from the non-GAAP numbers doesn't seem to work -- though I'm not really sure about this.
Click to expand...

I think you just need to read the article that I posted a link to. I think it's pretty clear. The figures I calculated from were given as hypothetical "non-GAAP" eps. :)
 
If this is true, isn't a 33% profit margin (I think I termed that right) pretty outrageous? Aside from bottled water, I can't think of anything that would produce that much profit (It's a bottle, and it's water. C'mon).

I won't chide Apple for trying to make a buck, but I would love to see a price cut to $149 if such a thing is true. Anything to help make up for that $70/month that you have to pay for service.
 
Michael CM1 said:
If this is true, isn't a 33% profit margin (I think I termed that right) pretty outrageous? Aside from bottled water, I can't think of anything that would produce that much profit (It's a bottle, and it's water. C'mon).
Click to expand...

Software profit margins can be much higher. One-time development cost, cost of distribution essentially nil. (The cost of a bottle of water is determined mainly by distribution.)

Margins are what they are. No company ever deliberately cuts them, except to defend market share from competitors. I suspect Apple will continue to reduce the retail price of the iPhone if only to lower the price umbrella they give other smartphone competitors. If they can simultaneously drive down the cost of production they will be able to lower the price without sacrificing margins. That's the ideal scenario.
 
James L said:
Nope. Pretty standard in many industries.
Click to expand...

Heh...the guy who runs the retail division of the company I work for found his "magic number" to be 3.3 or something. As in, if he purchases the item from his suppliers for $1, he sells it for $3.30. 230% profit. He has figured out this "magic number" over many years of changing prices a little until he found the highest sales with the highest price. And his stores make a freakin' killing.
 
samiwas said:
Heh...the guy who runs the retail division of the company I work for found his "magic number" to be 3.3 or something. As in, if he purchases the item from his suppliers for $1, he sells it for $3.30. 230% profit. He has figured out this "magic number" over many years of changing prices a little until he found the highest sales with the highest price. And his stores make a freakin' killing.
Click to expand...

That's just cost of goods, and does not include operational costs. The holy grail of retail is a product which sells for double the wholesale cost. It's called a "keystone." That doesn't mean that retailers actually make a 100% profit on keystone or any other items they sell, though.
 
IJ Reilly said:
That's just cost of goods, and does not include operational costs. The holy grail of retail is a product which sells for double the wholesale cost. It's called a "keystone." That doesn't mean that retailers actually make a 100% profit on keystone or any other items they sell, though.
Click to expand...

Yes, he buys these products by the container-full (wholesale by far). And his operational costs are nearly nothing (as far as I know) because only a few people work for the company, he keeps enormous amounts of stock in a warehouse just down the street, and his store is within an exhibition space (thus I'm pretty sure he's not paying rent on it). He's selling these products for more than 3 times his wholesale cost. Trust me, he's raking it in.
 
samiwas said:
Yes, he buys these products by the container-full (wholesale by far). And his operational costs are nearly nothing (as far as I know) because only a few people work for the company, he keeps enormous amounts of stock in a warehouse just down the street, and his store is within an exhibition space (thus I'm pretty sure he's not paying rent on it). He's selling these products for more than 3 times his wholesale cost. Trust me, he's raking it in.
Click to expand...

That's hardly typical.
 
IJ Reilly said:
My point was that hardly anyone can be in business with little or no overhead.
Click to expand...
Well, if you discount the warehouse cost and the cost of running that little store front in the exhibition hall, he has zero cost. Oh, buying these items in container at wholesale I guess don't require money up front either.
 
I was just looking at a newspaper flier, and the 8GB iPod Touch is $229. And that's the retail price. Aside from software, the iPhone 3G is essentially the same thing, plus a GPS chip and a phone. That's sometiing to consider.
 
samiwas said:
Exactly my point...since the previous poster had said 33% was pretty outrageous. I don't think 33% is THAT far out of bounds.
Click to expand...

I'll be the first to admit that I know very little about selling costs and profit margins aside from the little info I know about cars. Of course their profit margins are smaller as a percentage because 10 percent of 20,000 is 2,000.

I think maybe my basis was seeing how much frickin' money Apple made last quarter. I don't blame them for one cent, but we're all looking out for ourselves as customers as well. Since those iPhone 3G's cost so much per month, it would just tempt me more to get one if all of them had $50 knocked off the price.

I would also comment that when Steve Jobs says Apple can't afford to make a $500 computer that isn't crap, he obviously means at present margins. I think it would be a slick move for Apple to cut the margin on the lowest-end Mac Mini so they could sell one for $500. Drop the firewire, keep the combo drive, a semi-"slow" CPU. That system would knock the pants off some people with 3-year-old computers, and Apple gains a little more market share.
 
Michael CM1 said:
I think maybe my basis was seeing how much frickin' money Apple made last quarter. I don't blame them for one cent, but we're all looking out for ourselves as customers as well. Since those iPhone 3G's cost so much per month, it would just tempt me more to get one if all of them had $50 knocked off the price.
Click to expand...

What keeps me from buying one isn't the cost of the phone but the cost of the cheapest AT&T plan, which I don't think Apple can do much about. I may be the exception, but I don't use my mobile phone enough to justify spending $70 a month on it. The $30/month plan I have now provides more than enough minutes. I'd be willing to pay a bit more to have an iPhone, but not more than double.
 
nickspohn said:
Don't forget that AT&T gives Apple money too.
Click to expand...

Not for the 3G, at least, and perhaps not any more for the original. The "revenue sharing" (aka Apple taking our monthly subsidy) agreement dissolved after the first year.

This was announced back in June by ATT:

"The new agreement between Apple and AT&T eliminates the revenue-sharing model under which AT&T shared a portion of monthly service revenue with Apple."

Going the opposite direction, there are rumors that each carrier gets a piece of App Store sales initiated by their customers.
 
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