Breakdown of Costs in an Intel iMac

[bigandy]

$265 per processor? I highly doubt Apple would let themselves get raped that badly by Intel. Sure, if you're buying a handful of them, maybe $265/proccessor, but at the bulk quantities Apple is ordering? They have to be geting them for cheaper. 😎

that $265 is 10% lower than Intel quotes when you're buying in bocks of 1000, for a minimum of usually 10,000, if not more...

 

[bigandy]

I think the higher cost of Intel chips over PPC chips is probably part of the reason Apple chose to not include things like FW800 and S-Video in the MacBook Pro. They've had to cut a few features to try and keep their profit margin the same (or close to) what it was with the previous models.

the FW800 on the PowerBook ran on the same bus, so i'm not sure it would up the cost much, especially for that kind of controller - maybe $5 at most....

it's been cut because they've decided nobody uses it.

the S-Video is just a bit of extra wiring from the graphics controller, because the chips support it anyway. you can convert DVI to s-video, so it's probably been cut for the same reason...

 

[dongmin]

I have read this thread and continue to be amazed at the poor job our government schools do in teaching the difference between sales, revenues, profit, and margin. An even more basic concept that escapes folks is price.

I have read this thread and continue to be amazed at the poor job our government schools do in teaching that there is more to how a computer market works than a rudimentary supply and demand diagram.

For example, there is the concept of "loss leader." The argument goes that Apple should sell below cost, or at least below this magic supply and demand intersection people speak of, in order to grow their user base. Lose some money now, make that money back later when people upgrade their Macs and Mac software. This loss-leader strategy also has the added benefit potential of increasing the number of developers for Mac OS X which in turn will make Macs more attractive to different market segments.

The counter-argument to this loss-leader strategy is that the demand for Macs is not very price-sensitive, meaning even if they lowered the price quite a bit, there won't be much increase in sales. Now this is something ONLY Apple knows because they don't break down the sales figures by different models. If you had individual sales figures, you could track how changes in price of a given model affected its sales.

Personally, I think Apple can gamble a bit with all that money in the bank. I'm not a corporate strategist so I don't know the benefits of keeping so much cash on hand but Apple certainly is not saving that money for a major acquisition. Apple is not the kind of company to, let's say, go out and buy cable company or something. That's Google. Apple makes small technology-oriented acquisitions and partners with big companies. So what's the point of saving all that money? Surely Apple can afford to blow off a billion or two (say through a $200 rebate across the board) to get some momentum to increase the market share.

 

[nagromme]

the FW800 on the PowerBook ran on the same bus, so i'm not sure it would up the cost much, especially for that kind of controller - maybe $5 at most....

it's been cut because they've decided nobody uses it.

the S-Video is just a bit of extra wiring from the graphics controller, because the chips support it anyway. you can convert DVI to s-video, so it's probably been cut for the same reason...

FW800 is apparently unsupported by the current Intel support chips being used. It may well be back, or it may be relegated to the desktop. Some people DO use FW800 on a PowerBook--I do, but I don't insist on it when there's a fast ExpressCard/34 slot for the taking 🙂

S-Video (and composite video) are FREQUENTLY used: giving presentations and watching DVDs are very common laptop uses. So is videotaping your iMovie for the grandparents. It's not about "nobody" outputting to analog video--it's about making up some cost by selling you the $19 adapter if you need it 🙂 Which isn't so bad. At least the MacBook still DOES support TV-out, like all other Macs. Some said at first that it didn't 😱

Lose some money now, make that money back later when people upgrade their Macs and Mac software.

Do you mean that Apple should drop prices to a loss temporarily, and then raise them again later?

 

[snkTab]

i read this and the first thing i thought was 'what a load of crap'. they're omitting R & D costs, marketing, and so on...

they're also omitting the fact that that's still a custom logic board in there.

however, i do think that apple are paying a good bit less than that for the processors. making that little profit on each machine?

apple?


i think not.

Lets not forget that Apple must incur a high cost of quality.

As for those saying that Apple should have more market share, you should pay attention that what Jobs said about having more market cap than Dell. Basically, Apple has increase shareholder value tremendously, but with less market share than Dell. Basically, they can either sell low volume high price goods or high volume low price goods. Dell follows one path, Apple the other. After all, someone has to supply the people who want the best computers in the world.

 

[revfife]

Dell follows one path, Apple the other. After all, someone has to supply the people who want the best computers in the world.

Agreed, again anyone can make a laptop in plastic. Dell ships tens of thousands of them every year, but wouldn't you rather look at mac laptop any day over a dell laptop? 🙂

 

[snowmoon]

FW800 was not the performace king as many here would like to believe, it was a modest increase over FW400 after factoring in the problem with R/W performace.

S-Video is availible through a dongle "Apple Mini-DVI to Video Adapter"

Ok a little math here, 1299 retail for iMac - $900 for parts leaves $400 for other costs. Lets be optimistic and say that basic overhead of buisness and stores and all is $200... so we are now down to $200, take out OS X and iLife development so $150 left.... I would bet they are making a pure profit of $150 for retail pricing and probably $50 for educational pricing of the iMac. It's thin, but I have to imagine over time it will get much better. Using that math, in order to recoup a $100 cost break on retail pricing apple would have to TRIPLE the number of units sold.

So realisticly the might be able to cut $100 off the cost and castrate their cash flow on the unit.... real good buisness sense. Then they would have to cut something like... genuis bars, training in the stores, dropping iLife from new units, high qualiity componients, .... that would kill the basic "it just works" mentality that Apple has taken so many years to hone.

Apple already knows that it can't compete on cost, they must differentiate and they have. To compete on cost would take them down to the same level of crap that Hell, HP, Comcrap, and other big computer manufactures are. I would pay $100 more for an Apple of completly equal specs if nothing else to rid myself of XP.

 

[ChrisA]

Dell or HP haven't come out with anything truly inovative since the Pentium II!
Kevin

Dell and HP don't "inovate" anything. They are both what you call "integrators". They buy parts from other companies, package and market them. OK one could argue that Dell had an inovative bussines plan. But his inovation (and it made him rich) was to become a "just in time" parts integrator and finding a way to move mass quanities of computers while keeping inventory at very low levels.

 

[alamar]

Apple has rolled off some amazing software (iLIFE) and other bundles that no other PC manufacture has even come close too.

It takes healthy margins to do R and D!

A pill that cost only 20 cents to make cost 5.00 because the proffit in the pill is what funds research to make new pills that will cure other illness!

Kevin

1. I'm not going to talk about the overpricing of perscription drugs.....

2. the margin on this is fine (though I suspect it is more than we know)

3. I never bought a piece of software for my ibook and it was an excellent workhorse for years. The included software on the apples is a BIG part of the value.

 

[skunkworks]

I can't believe that margins are so low considering they have been making the imac for a few years and the basic design is done. They really need to concentrate on getting those costs down and making them cheaper so all could afford. In the pc world that 17" would probably cost $800 compared to apple $1299 price. Perhaps they should enlist dell to make them !

 

[alamar]

The XBox isn't even making money today, is it? They still take a loss on each one to make it up in licensing fees for games, don't they? (And does that even offset the loss yet? Last I heard, Microsoft was ONLY profitable with Windows and Office. What's the latest?)

This is standard with a game platform due to the license model. The core hardware is as far as I know always sold as a lossleader, otherwise you get no developers.

 

[Squire]

This might provide a clue to Apple's turnaround - their initial statement was that they would switch the low end consumer models first, and the performance models later.

As others have stated, this has been repeated a lot. Apple didn't publicly say anything of the sort. This started with C|Net on the Friday before the keynote, then the Wall Street Journal the next day, and finally (I think) The New York Times.

Apple has used IBM's PowerPC processors since 1994, but will begin a phased transition to Intel's chips, sources familiar with the situation said. Apple plans to move lower-end computers such as the Mac Mini to Intel chips in mid-2006 and higher-end models such as the Power Mac in mid-2007, sources said.

http://news.com.com/Apple+to+ditch+IBM,+switch+to+Intel+chips/2100-1006_3-5731398.html

-Squire

 

[alamar]

doubtful

I think Apple could increase its sales by 9% with a $100 price drop.

😱
I think that's optimistic at best.

 

[tk421]

Macs still cost too much. Apple should take the playbook from Microsoft's XBOX 360 and take a loss to build marketshare. Or take Cringely's suggestion and sell below cost.

I'll agree with what others have said in this forum, namely, that Apple would be out of business if they did this. The XBox does not make money - it's not just the system that is a loss, it's the whole operation. They don't make their money back with the games!

Microsoft can do this because they make money from Windows and Office. They are a huge company that can afford to lose money on other things. Apple would not be able to do this. The iPod alone would not keep them making money.

 

[alamar]

If you really want to compare profit and loss margin wait till mac mini goes intel then complain about Apple's profit margin. It is hard to believe with the current system and software how Apple is not losing money on the mini. Besides isn't it the mini that is designed to make people switch from PC and not the imac? 😎
I think they have priced themselves as low as they can go and still cover costs.

The mini as a loss leader or break even product might work, as few people will buy one and not migrate to a better mac later. (mac mini halo...) Still, I doubt we will ever see a loss leader on apple hardware.

 

[tk421]

This is standard with a game platform due to the license model. The core hardware is as far as I know always sold as a lossleader, otherwise you get no developers.

Nintendo, I believe, makes a profit on its console. They also have the lowest maket share. But, again, they don't have other things to back them up if they lose money on game machines. Microsoft has Windows and Office, and Sony has all of its consumer electronics. Nintendo just does games.

 

[jholzner]

Macs still cost too much. Apple should take the playbook from Microsoft's XBOX 360 and take a loss to build marketshare. Or take Cringely's suggestion and sell below cost. Seems to be heading that way, with the inclusion of the ATI Radeon X1600... they are gunning for the home livingroom.

Umm...Microsoft can take loss on the XBOX 'cause they make a lot from game liscensing.

 

[EricNau]

Everyone here seems to think that Price has nothing to do with their small market share. I think otherwise.

When I try and convince someone to switch, the first thing they always tell me is that Macs are too expensive. Sure I try and convince them that they are comparable, but they just don't want to spend $1300 for an iMac. I think chopping $300 off the price would increase their sales.

Apple's problem is not money, they have plenty of that. What Apple really needs is market share.

 

[arn]

When I try and convince someone to switch, the first thing they always tell me is that Macs are too expensive. Sure I try and convince them that they are comparable, but they just don't want to spend $1300 for an iMac. I think chopping $300 off the price would increase their sales.

By that logic, why haven't those people bought a Mac mini ($500) and a cheap LCD monitor ($100) and keyboard/mouse ($20) => $620 total and you've got a usable Mac.

arn

 

[..........?]

Who cares how much the company makes. As long as there is some sort of profit made to keep the company running then who cares. If you like computer from Apple then buy it. If you like Dell oor HP then get those. There is no need to justify the reasons of what brand is better. Computer manufacturer are greedy so they will often want the highest possible profit margins they could get.

 

[inxxcasinoxxout]

Dell or HP haven't come out with anything truly inovative since the Pentium II!
Kevin

Dell and HP don't "inovate" anything. They are both what you call "integrators". They buy parts from other companies, package and market them. OK one could argue that Dell had an inovative bussines plan. But his inovation (and it made him rich) was to become a "just in time" parts integrator and finding a way to move mass quanities of computers while keeping inventory at very low levels.

I think mister/kevin meant that the products they use in their machines aren't very innovative, which is one thing Apple is great at doing such as slot loading drives since forever, light sensors, backlights, new innovative "core duos" (HP ships AMD X2 I think, so it's even), and tons of other interesting goodies with their machines.

 

[geese]

I'd have thought the cost of a brokendown mac would be just as expensive as it is on a PPC.

 

[NWAMacTech]

Darnit. This is like the third or fourth "take apart" I've seen for the new iMacs. Who are these folks that have that kind of money (since taking it apart would apparently render AppleCare null and void forever)? .

Actually taking apart your shiny new iMac will not render the warranty void. Its when you break it that the warranty status comes into question.😀

 

[Stella]

Macs still cost too much. Apple should take the playbook from Microsoft's XBOX 360 and take a loss to build marketshare. Or take Cringely's suggestion and sell below cost. Seems to be heading that way, with the inclusion of the ATI Radeon X1600... they are gunning for the home livingroom.

You do realise how console manufacturers make their money don't you? Just like Inkjet printers etc.

They sell the hardware at a loss and make the money up by license money and income from selling the games. Likewise HP, Epson make their money on Ink cartridges.

 

[Lacero]

Exactly. Apple can sell iMacs and iLife at a loss and they make it up with .Mac subscriptions and money from Photobook orders, etc. It's a win-win situation for Apple. They increase market share and make more money off iLife orders. You agree with me, cool. 😎

Here's to the Crazy Ones ​