Wait...the first part of that says they're not making a killing off it, the second part says it's half pure profit?
Exactly, they don't need to sell many iPods for the device to break even on development costs, but they don't sell nearly enough for it to reach profits even remotely similar to the iPhone or iPad.
I'll see if I can explain it a bit better (these values aren't accurate, but they offer the correct interpretation):
Cost to develop the iPod = $5,000,000
iPod sells for 100$ profit
They need to sell 50,000 iPods, and after that, it's all profit.
But they only sell maybe 2,000,000 iPods, so they make about $200,000,000 - $5,000,000 (original development cost) = $195,000,000 profit
Cost to develop iPhone = $300,000,000
iPhone sells for $300 profit
They need to sell 1,000,000 iPhones to break even, then profit.
But they sell many more, about 10,000,000, so they make $3,000,000,000 - 300,000,000 = $2,700,000,000 profit
As you can see, they need to sell a
significantly smaller amount of iPods (950,000 less) to profit, making the device essentially, pure profit. However, they most certainly do not make a killing off of it, as you can see by comparing the iphone's $2.7 billion to the iPod's mere $195 million.
Remember, these values are ultra-rough estimates, obviously the profit per device depends on amount of memory and such (and if apple made only 195 million off of the iPod, they might not even bother), but it offers a very nice model.
The iPod costs so much less to develop (60x less) because they are essentially ripping things out of the iPhone and moving the vital pieces around. They already spent a massive amount of money on creating those vital pieces for the iPhone, there is no reason to re-develop them, or most of them at least.
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1. If they make 100 off a 200 iPod... they are making a killing.
2. research? the iPod is an gutted iPhone... it's called reused-research.
How much research do I need to invent the wheel? ... too late ... already done.
Look at the volume of sales and the street price of replacement parts...
Making a Killing: (verb) Becoming the richest company in the world.
It's an also-ran tech-reuse that's turned into a cash cow.
Read above it applies to you as well.
I did not say apple isn't making a killing, I said they are not making a killing
off of the iPod touch.
Number 2, maybe you didn't quite understand what I wrote, but I was essentially saying what you said. It's just a matter of moving some pieces, however they do have to chompletely reinvent a few resulting in development costs. For example, the wifi radio, which has cellular capabilities built in when in the iPhone (to save space), but adds too much expense (almost $100) to be contained in the iPod.
