iPad Component Costs Estimated to Begin at $219.35

[BaldiMac]

I forgot to comment about this point and it's all a matter of creative accounting. When a company grows and invests, a 30-40% profit is whittled down to "15%" due to said growth, expansion, acquisition, and other write-offs.

It isn't creative accounting. It's actual accounting. Apple's margins have been relatively consistent outside of iPhone related growth. Creative accounting would be hiding all the costs that you mentioned in one quarter or one year so they didn't affect subsequent quarters. Apple doesn't appear to do that.

The whittling down comes from actual expenses including taxes.

 

[BaldiMac]

Thin air? 7-15% is "acceptable". I didn't say it was ideal. In typical establishments valuation is determined by multiplying net revenue by a period of 5 years. Therefore if your net profit is $50,000 in your company, your company is appraised at $250,000. Do I need to discuss P/E ratios with you next? Screw it. I can keep it simple. Stable companies on the stock market, especially small cap stocks command a 10-1 P/E ratio. Therefore their profit paid to shareholders is 10% of the stock price. That 10% falls in the low end of the middle of the 7-15% acceptable range. Historically the stock market has returned a 12% net return.

Satisfied?

You appear to have lost track of any point that you were trying to make. What was it exactly?

 

[AskMeIfICare]

Just what I thought. It's a number that you pulled out of thin air.



Basically, you are saying that you don't know enough to draw valid conclusions.



Huh? That's not what you said. You said, "..."R&D" which is a generic term for all of those things that you mentioned rolled into one." It is not. If you wanted to use an umbrella term for all of those items, you could have said that and chosen one that is more appropriate.



You are not making a point here. Your 1.1 billion is a number without context. You are simply pulling meaningless numbers out of the air.

I could have but I didn't and I clarified it in a different post and then admitted it to you later. Do you want me to beg you for your approval? We both know that's not going to happen. I can be lazy or rushed because I have other things I do other than post on forums as I imagine that you do also. But at least give me enough credit that the reason I am clarifying this to you because I believe that you and I fundamentally agree. One of us or both are just not making sense to one another. All that I'm saying here is that there's no justification for their pricing and I choose not to buy one and I'm giving my points of view on how other products so that people can make their own decision whether or not they read and/or understand what I'm saying. Example: Are you saying that anybody who took 5 minutes to learn how much RAM cost would pay for Apples exorbitant upgrade fees or buy some top-of-the-line RAM (as you can do in a Mac Pro) and have it installed in 5 minutes while saving thousands of dollars? This is the main point of why I'm posting. To avoid the Apple tax. Take it or leave it.

Again, my numbers are based on the figures in front of us and sales estimates given by both Apple and Wall street analysts with respect to materials cost and then the announced SRP that is clearly posted on their website. Obviously this could change if Apple sees necessary.

 

[AskMeIfICare]

You appear to have lost track of any point that you were trying to make. What was it exactly?

See above. I broke it up into several parts for a reason. You can figure out why.

 

[BaldiMac]

All that I'm saying here is that there's no justification for their pricing

Of course there is a justification. It's the price that they believe the market will allow. The component and manufacturing costs do not define how much something is worth in an open market.

As has been brought up several times in this thread, Microsoft Office cost a couple bucks to manufacture. What is the "justification for their pricing"?

and I choose not to buy one

Fair enough.

and I'm giving my points of view on how other products

Huh?

so that people can make their own decision whether or not they read and/or understand what I'm saying. Example: Are you saying that anybody who took 5 minutes to learn how much RAM cost would pay for Apples exorbitant upgrade fees or buy some top-of-the-line RAM (as you can do in a Mac Pro) and have it installed in 5 minutes while saving thousands of dollars? This is the main point of why I'm posting. To avoid the Apple tax. Take it or leave it.

I would never buy RAM from Apple. But that really has nothing to do with the iPad.

Again, my numbers are based on the figures in front of us and sales estimates given by both Apple and Wall street analysts with respect to materials cost and then the announced SRP that is clearly posted on their website. Obviously this could change if Apple sees necessary.

No, your numbers are based on preliminary estimates, preliminary sales estimates from analysts (not Apple), retail pricing, and a "standard markup" that you pulled out of thin air.

Again, Apple's profit margins are historically less than 15%, which you deemed acceptable. There is no reason to believe that margins on the iPad will be significantly more than that.

 

[840quadra]

This is NOT gross profit. Gross profit is the difference between the sales price of a single unit, and the total cost of getting that single unit into a customer's hands. The component cost gets you a bag of parts in some place in China. Now I'd like these jokers posting here to take a bag of parts in some place in China, and open a shop in New York and sell the stuff. Without losing too much money.

Haha love it! Best three sentences I have read in this thread.

 

[AskMeIfICare]

Of course there is a justification. It's the price that they believe the market will allow. The component and manufacturing costs do not define how much something is worth in an open market.

As has been brought up several times in this thread, Microsoft Office cost a couple bucks to manufacture. What is the "justification for their pricing"?



Fair enough.



Huh?



I would never buy RAM from Apple. But that really has nothing to do with the iPad.



No, your numbers are based on preliminary estimates, preliminary sales estimates from analysts (not Apple), retail pricing, and a "standard markup" that you pulled out of thin air.

Again, Apple's profit margins are historically less than 15%, which you deemed acceptable. There is no reason to believe that margins on the iPad will be significantly more than that.

Justification for those of us who feel that we should "get what you pay for" and I do not feel that Apple upgrades give an informed consumer "what they pay for". They furthermore make it difficult if not impossible to upgrade their systems yourself. This is by design and I know you'll likely to come along and say I'm speculating, but we both know you agree with me. Enough already.

I own or invest in several private businesses. In those that are based on retail, our average (emphasizing AVERAGE) markup is 30% that we pass along to the consumer. I made the statement as a point of emphasis. How many times there is further markup, i.e. middlemen is another issue but in this case Apple is both the retailer and the middleman. At this point this is going off topic and if you want to turn this into an economics lesson you can do it on your own since we both know that you are testing me. So let's agree to disagree if we indeed disagree if that's ok with you?

Sorry...the incomplete sentence was supposed to be something to the effect of to illustrate the Apple tax using other products like the Mac Pro or MacBook Pro obscenely marks up their prices of RAM. Everybody I've asked who has actually paid that price had NO IDEA how much they could have saved if they had upgraded it themselves. Not once did I encounter someone who said something to the effect of "I know but I'll pay the extra (insert hundreds or thousands here) so I don't have to think about it". Instead they were freaked out to say the least and felt betrayed and/or cheated.

So if you want to keep claiming "thin air" after all of my explanations and background talks then I won't bother you as you lift your leg on whatever I say since this is turning into a game of semantics with an emphasis on nitpicking rather than a discussion. If you wish to clarify something in the nature of discussion, then do it since you obviously feel that you see what I'm saying but not saying in a way that you approve. But to argue to test me or see if I'll run and quote something is a waste of both of our time when it comes to the main point that I made in that one should wait. As I said, I WANTED one, but due to no USB and lack of multitasking, I'll pass on the base model.

Apple is probably the most unique and universally appealing company on the planet. I've lived in several countries and if you think Mac is a religion for the fanboys, you wouldn't believe how some cultures wear Apple products like a badge. To say it's obnoxious is an understatement. But I have a love hate relationship with Mac and their business practices with respect to broken promises of compatibility and everything else bad that I've experienced with them. But I need Mac to do what I need to do. NOW I'm off topic.

Again, bottom line is that Mac is based on fashion and mystique rather than quality. Over time said quality gets less as their high end users get left behind to market to those who don't understand what they are buying when Apple shifts to the small ticket items. Someone a couple of pages back broke it down perfectly in that Mac misleads people. It's genius and maddening at the same time.

That said I won't buy an iPad because I think it's too lacking in fundamental features at any price. Screw it...maybe I'll shift entirely to Hackintosh and use the extra money to buy 5 iPads that I'll save on the 2010 Mac Pro

 

[propynyl]

No GPS in the Wifi only model?

I find it hard to believe that for $2.60, Apple isn't going to put GPS in every iPad model. I know they are saying Wifi + 3G model only, but it just makes no sense. GPS has become such an important feature with these new mobile devices, it makes no sense not to make it standard.

Right now I'm probably going to buy the $499 model. However, if it is true that there is no GPS in the Wifi only model, then I would be forced to get the Wifi + 3G model (Apple gets to up-sell)

Like I said, my money is on ALL iPADs having GPS!

 

[BaldiMac]

Justification for those of us who feel that we should "get what you pay for" and I do not feel that Apple upgrades give an informed consumer "what they pay for". They furthermore make it difficult if not impossible to upgrade their systems yourself. This is by design and I know you'll likely to come along and say I'm speculating, but we both know you agree with me. Enough already.

As I said, I agree with you about Apple hardware upgrades, but we were talking about the $499 iPad.

I own or invest in several private businesses. In those that are based on retail, our average (emphasizing AVERAGE) markup is 30% that we pass along to the consumer. I made the statement as a point of emphasis. How many times there is further markup, i.e. middlemen is another issue but in this case Apple is both the retailer and the middleman. At this point this is going off topic and if you want to turn this into an economics lesson you can do it on your own since we both know that you are testing me. So let's agree to disagree if we indeed disagree if that's ok with you?

But your "markup" in your businesses that result in your profit margins of 7-15% that you find acceptable has nothing to do with the costs and margins of an iPad. If you were in the software business your markup would be many, many times that. Different industries and different products have different marginal and fixed costs.

Sorry...the incomplete sentence was supposed to be something to the effect of to illustrate the Apple tax using other products like the Mac Pro or MacBook Pro obscenely marks up their prices of RAM. Everybody I've asked who has actually paid that price had NO IDEA how much they could have saved if they had upgraded it themselves. Not once did I encounter someone who said something to the effect of "I know but I'll pay the extra (insert hundreds or thousands here) so I don't have to think about it". Instead they were freaked out to say the least and felt betrayed and/or cheated.

Again, nobody is arguing with this.

So if you want to keep claiming "thin air" after all of my explanations and background talks then I won't both you as you lift your leg on whatever I say since this is turning into a game of semantics with an emphasis on nitpicking rather than a discussion. If you wish to clarify something in the nature of discussion, then do it since you obviously feel that you see what I'm saying but not saying in a way that you approve. But to argue to test me or see if I'll run and quote something is a waste of both of our time when it comes to the main point that I made in that one should wait.

It isn't semantics. I'm talking about the basis of your argument that Apple has unreasonable margins on the $499 iPad. The numbers that you have used to make this argument are incorrect and incomplete.

As I said, I WANTED one, but due to no USB and lack of multitasking, I'll pass on the base model.

Which is completely reasonable.

 

[BaldiMac]

I find it hard to believe that for $2.60, Apple isn't going to put GPS in every iPad model. I know they are saying Wifi + 3G model only, but it just makes no sense. GPS has become such an important feature with these new mobile devices, it makes no sense not to make it standard.

Right now I'm probably going to buy the $499 model. However, if it is true that there is no GPS in the Wifi only model, then I would be forced to get the Wifi + 3G model (Apple gets to up-sell)

Like I said, my money is on ALL iPADs having GPS!

Not an excuse, but a likely explanation is that the GPS is tied to the 3G chipset. And GPS is relatively useless without local maps or a continuous data connection to stream map data.

 

[christian_k]

Well, I suppose you can always wait for Dell to make a tablet and buy that. Enjoy.

Why not?
If the iPad becomes a commercial success there will be many similar products. A lot of them will be poor "me too" copies, but I am sure there will be at least some really comparable, good competitors. While it will be hard to beat Apple in design and user interface, there are obvious features that could be added by competitors like USB ports, SD-Card slots, PC-Card slots, TV- or FM-reception, multitasking, freely installable software and open filesystem access or video conferencing to offer something Apple does not.

Just like there are some other good smart phones beside the iPhone and other good media players beside iPods.

Christian

 

[TsMkLg068426]

Hey, I call 'em like I see 'em. And from your original post, you read like a old fashion troll. I understand a certain sect have issues with the iPad, and that some people wish it has more features. But when one outright trashes it as "beta...half ass technology," my friend, and fails to back it up with fact, those are the incendiary words of bored troll. You just state it as fact, as if you spent hours playing with the iPad already. (In fact, those did spend some time with the iPad a few weeks ago -- Leo Laporte, Andy Inatko, Mossberger, etc., have said its a solid device - but will live/die on s/w support).

As for the last sentence in my post, it's called satire. I poking fun of your statement you heard then next Apple tablet will have OS X. From Jobs' lips to your ears. Reality is you read that on a rumor site posted by someone else that doesn't have clue and can't afford to buy one either.

And yet again I repeat, I never said this iPad is crap it is as good as it gets for first Generation. Also Jobs' did say there will be one with OS X but obviously its a ****ing rumor and too soon to tell and when I said the next iPad is going to have OS X I did not mean that they are going to stop making the iPhone OS version for the iPad.

 

[NT1440]

And yet again I repeat, I never said this iPad is crap it is as good as it gets for first Generation. Also Jobs' did say there will be one with OS X but obviously its a ****ing rumor and too soon to tell and when I said the next iPad is going to have OS X I did not mean that they are going to stop making the iPhone OS version for the iPad.

When? Where?

Did you just say "jobs said this, but its a rumor?"

 

[Carniphage]

I own or invest in several private businesses. In those that are based on retail, our average (emphasizing AVERAGE) markup is 30% that we pass along to the consumer.

If you are interested in turning a profit, you should never base your prices on a "markup" percentage.

The value of an item is determined by the market. If you charge more than the market wants, you will sell fewer units and your profits will decline.
If you undervalue your item, you will sell more, but the profit per item will be lower and you'll lose profits again.

The right pricing for an item is in the sweet spot between the two. And the sweet spot is a value determined by the market.

Apple understands this simple principle. Apple does not determine the price. The market does.

And to dismiss as fashion or voodoo seems a little bizarre. The most serious minded, professional and hard working people I know buy Apple products, because they recognise value in a product that works.

The really interesting question is how are Apple able to sell items at a price so much higher than their component cost. And that is the magic of adding value. It is the alchemy involved in creating a product that is more than the sum of its parts.

C.

 

[Consultant]

In related news, examining BOM of windows retail box determines that
it only costs Microsoft 27 cents to produce windows.

Google: Windows $0.27

 

[seedster2]

Yes, it is just a parts list. And yes, the title of the article is "iPad Component Costs Estimated to Begin at $219.35".

Exactly. Why people here get so upset about this topic repeatedly is a mystery.The other costs are not included.

Im sure Adobe and MSFT will be brought up for their software being on a disc and costing xxx.xx...

 

[LagunaSol]

In related news, examining BOM of windows retail box determines that it only costs Microsoft 27 cents to produce windows.

Google: Windows $0.27

Hmm, $300 for a $0.27 Windows Ultimate 7 disc. Wow, what's the markup percentage on that? Yet you never hear anyone here screaming about Microsoft's margins - only that Apple dares charge 2x or 3x their cost of hardware components.

Astounding.

 

[Consultant]

Hmm, $300 for a $0.27 Windows Ultimate 7 disc. Wow, what's the markup percentage on that? Yet you never hear anyone here screaming about Microsoft's margins - only that Apple dares charge 2x or 3x their cost of hardware components.

Astounding.

The markup is more than 118000% for Windows (w7 ultimate retail price is actually $319), and even higher for Office. What a drastic rip off! Analysis:
http://tinyurl.com/windows-component-costs

 

[LagunaSol]

The markup is more than 118000% for Windows (w7 ultimate retail price is actually $319), and even higher for Office. What a drastic rip off! Analysis:
http://tinyurl.com/windows-component-costs

118000%??? Wow, APPLE IS ALWAYS SCREWING ITS CUSTOMERS!

Oh, wait, you say that's Microsoft we're talking about?

Sorry, never mind. Let's talk about those iPad markups and overpriced Macs again.

 

[Consultant]

118000%??? Wow, APPLE IS ALWAYS SCREWING ITS CUSTOMERS!

Oh, wait, you say that's Microsoft we're talking about?

Sorry, never mind. Let's talk about those iPad markups and overpriced Macs again.

Well, Apple's markup is less than 1% of that for Windows, thus Apple can only be considered quasi-evil / margarin of evil when compared to Microsoft.

=p

 

[OutThere]

There's so much more than just the parts...you're paying for:

The salaries of the engineers who designed the hardware.
The salaries of the engineers who designed the software.
The prototype development.
The software and hardware component licensing.
The patents and patent lawyers.
The start-up costs for a new assembly line.
The factory workers.
The shipping from China.
The semi truck driver to the distribution facility.
The warehouse workers.
The Apple store employees.
The store.apple.com developers.
The benefits and amenities provided to Apple employees that make them want to work at Apple and produce products you want to buy.
The electricity and fuel all across the board.
The lawyers to stop the bootleggers.
The advertising to get enough people to buy it to justify the R&D.
The night janitors at the Apple headquarters & Apple stores.
Cold beers for everyone involved after the first sales figures post.

Sh** adds up.

 

[alphaod]

More price cuts would probably kill just about every other brand out there.