To be honest, I think the point people seem to be missing is that while there's a huge profit margin, it's not the full story. MacBram said it pretty well, but I'm not sure it really took hold for some people.
It takes money to make money. That 42% profit margin doesn't appear (either that or I'm reading it wrong) to include the amount spent on developing the product line in the first place. Given that the technology used in the iPhone/iPad was in research/development since at least 2001, that's at least 6 years of engineers they had to pay for before the first iPhone shipped. How do you pay for that? Using cash saved up.
(just taking a ballpark guess. 1000 engineers at $120k/year for 6 years would be $7 billion. That'd be half of this quarter already and wouldn't include the years between the original iphone and the 4S. Salaries arn't cheap.)
How do you pay for developing the next iPhone? Using part of the profit margin. What's the rest of that for? To recoup the costs of those first 6 years and to grow that cash reserve.
Now, yeah, I think their cash reserve is freakin' ridiculous. But it does lend them flexibility. If they seriously needed to buy somebody out, they could. If something seriously went wrong and needed to recall 37 million iPhones to make their customers happy, they could without endangering themselves.
If they need to buy out the world's supply of high-DPI LCDs at top dollar for their Macs, they could. They've already demonstrated investing in other companies' manufacturing lines (capacitive touch screens) or investing in new manufacturing tech (shaping glass). All this comes from the cash reserve.
At the least, it also lends them and the US market stability. If there's a company that's doing well, and is purchasing tons of parts from other US companies (hi Broadcom, Marvell, Atheros), and obviously has the cash to pay for it, it means higher confidence in those smaller companies as well because you know their income source is stable too.
Yeah, Apple is for profit. And does have responsibility to shareholders. But at the same time, it's not like there is no benefit to having the large cash reserve. And those who are simply looking at the profit arn't taking into consideration the amount of money spent to get that profit in the first place.
In the end, a 10% price cut across a product line has a possibility of making the product line a money loser despite quarterly profits. Selling a product at cost pretty much guarantees a loss.
I understand (also referring to LTD) that they have a responsibility to shareholders to maximize profits. I am just asking a simple yes or no question.
I just cannot understand how people can curse some companies for making high profits (oil companies) yet praise others.
LTD, I was simply saying that the money that goes to Apple is doing almost nothing for the US economy, half of it is out of country and the rest sits in banks. If some of the money was being spent at small businesses would that be better? (I'm just saying that the money that apple makes does very little for the economy--at least for the moment)
Question: Would you prefer if Apple charged 10% less and made only a 20% instead of a 30% profit margin.
In your opinion, yes or no.
As for an oil company versus Apple in terms of profit margins, I'm willing to guess that it took less investment to figure out how to refine oil than it did to figure out how to make the iPhone. Therefore, I feel it should be right that profit from refining oil should be less than profit from selling an iPhone, percentage-wise.
But, as for whether or not I feel it should be a 20%, 30%, 40%, or whatever. I have no opinion because I don't know how long it takes to break even (if possible) on that kind of margin. If it takes more money to make what I feel is a better product, so be it. If you're just gouging because you can, obviously I'm not happy with that. But the fact is, we won't know because we don't have all the numbers.
