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iPhone Generated Record-Breaking Share of Profits Last Quarter Despite Continued Sales Decline
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Yes... profit = revenue - costs.
Last quarter Apple had $47 billion in revenue... but only $9 billion in profit.
So that means they had $38 billion in costs.
But you make it sound like all the money Apple makes is pure profit. It's not.
They only have about 20% profit margin... which sounds about right for a huge tech company.
That's why I got confused when you said "Margins are higher at Apple. that means, you are effectively paying more money per item than the costs."
Which costs? We'll never know what it truly costs Apple to develop a product at the scale of something like the iPhone. Apple is such a unique company with thousands of engineers who develop the hardware, and the software, plus services, etc. All of that costs money... apparently $38 billion in three months. It's very difficult to compare Apple to every other tech company in that regard.
But looking at their overall profit margin... even with the iPhone being their chief product... it doesn't look like their margins are obscenely high.
The goal is to sell an item for more than it costs, right? Ask any company.
Believe me... the companies who sell Android phones at cost... or below cost... don't want to do that. But they don't really have a choice. The Android market is highly competitive.
If you're trying to sell an Android phone... and 100 other companies are selling virtually the same item... you're gonna have a bad time.
We've actually seen this before. Remember the price-wars in the PC market? Too many companies all selling basically the same item... prices were driven down... and margins were driven down too. This is known as "the race to the bottom"
That's what happens in a highly commoditized market where everyone is selling the same things.
Apple is usually insulated from this... as they are the only sellers of iOS devices and MacOS computers.
But I still don't think Apple's margins are too high.
If trade-ins from phone companies weren't so good this year, I'd have held on to my 6 one more year.
I was with that thought too UNTIL they announced the 7 camera would have OIS ... and I have to say, that upgrade has been worth every penny to me.
Agreed. I'm surprised that the lack of "features" has made me so content with upgrading. I also enjoy the haptic feedback and lack of a home button.
Yet they ended up with $200 BILLION extra in the bank. And, with only 15% of the phone market, they make 90% of the profit.
Those two things did not happen because their profit margins were the same or lower than anyone else.
Give credit where credit is due: Apple is able to command high margins. (Okay, in the case of the iPhone, mostly because the majority are sold with subsidies or loans, so the real price is less in the customer's face.)
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Well sure... Apple does make a lot of profit overall... which has put plenty of cash in the bank. But that's to be expected when you consider:
1. Apple makes profit on every phone they sell
2. They can sell 50 million of them in just three months
It honestly should be no surprise that they're a profitable company.
Some other companies don't make much profit on every phone (if any)... nor do they sell them in any kind of volume.
Hell... with the exception of Samsung and Nokia (in their heyday)... no other smartphone manufacturer can sell 50 million units in a single quarter. That's what separates Apple from nearly all other manufacturers.
I'm still amazed that they had $47 billion in revenue... but they also had $38 billion in expenses.
Sure... they still ended up with $9 billion in profit... but they had to give up A LOT of revenue in expenses.
The way people talk... Apple is all profit.
But no... they've got plenty of expenses just like everyone else... with a profit margin percentage in the 20's which is somewhat normal for a company of its size.
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It's not a common profit margin for companies in their particular line of business, which is mostly hardware and a few services.
Most phone makers are getting 5-15% profit margin, and most computer makers around 5%. So Apple's computer + phone average 20+% (more like 30% before setting aside for "taxes" that they haven't actually paid anyone) is impressively high. I think the only company that approached such levels was Blackberry in its heydays.
This extra profit is reflected in their huge cash hoard, which is not being used for much at all.
More power to them if they can get it, but nobody should pretend that the extra profit is normal for their business, or that most of it is being used for anything that benefits the consumer. (The biggest myth we see here is that Apple "needs" it for R&D, which as far from reality as you can get.)
Isn't that their own fault?
There's not much profit in selling $100 smartphones or $300 computers.
If they're worried about their profit margins... stop selling cheap crap.
Apple charges a "premium" price for their products because they feel that they are selling a unique product. Like I said in an earlier comment... Apple is the only seller of iOS devices and MacOS computers.
But everyone else is selling commodity Android phones and Windows machines. Maybe that's their problem.
Would you start a company to make Android phones? That would be a horrible business. There are simply too many companies all competing selling basically the same product. If you decide to sell a phone for $500... someone else will sell a similar-enough phone for $400... or $300... etc. That's why there isn't much money to be made in Android phones.
And the same is true for Windows machines. The price of the Windows PC has fallen over the years because of the fierce competition. Oh it's great for the consumer... but the companies' profit margins are suffering. They end up stuffing terrible screens and cheap trackpads into plastic laptops and pray that they make their 5% margins.
Isn't that their own fault?
There's not much profit in selling $100 smartphones or $300 computers.
If they're worried about their profit margins... stop selling cheap crap.
Apple charges a "premium" price for their products because they feel that they are selling a unique product. Like I said in an earlier comment... Apple is the only seller of iOS devices and MacOS computers.
But everyone else is selling commodity Android phones and Windows machines. Maybe that's their problem.
Would you start a company to make Android phones? That would be a horrible business. There are simply too many companies all competing selling basically the same product. If you decide to sell a phone for $500... someone else will sell a similar-enough phone for $400... or $300... etc. That's why there isn't much money to be made in Android phones.
And the same is true for Windows machines. The price of the Windows PC has fallen over the years because of the fierce competition. Oh it's great for the consumer... but the companies' profit margins are suffering. They end up stuffing terrible screens and cheap trackpads into plastic laptops and pray that they make their 5% margins.
And yet I'm finding, recently, that high margin Apple just isn't as innovative as some of the low margin ones.
Well... "innovation" can be defined in a number of ways.
Some would say that high-resolution wide gamut P3 screens and super-fast PCIe SSDs are innovative. It's good stuff!
But at the same time... the Touch Bar could be described as a useless gimmick... and the move to USB-C a bit premature.
It's always about striking a balance.
Imagine if Apple kept everything the same from the 2015 Macbook Pro... but swapped in a Skylake processor.
People would be raising their pitchforks saying "Apple doesn't innovate anymore!"
Well... "innovation" can be defined in a number of ways.
Some would say that high-resolution wide gamut P3 screens and super-fast PCIe SSDs are innovative. It's good stuff!
But at the same time... the Touch Bar could be described as a useless gimmick... and the move to USB-C a bit premature.
It's always about striking a balance.
Imagine if Apple kept everything the same from the 2015 Macbook Pro... but swapped in a Skylake processor.
People would be raising their pitchforks saying "Apple doesn't innovate anymore!"
They just got access to super fast SSD somebody else made before anyone else. Samsung announced them for everyone else shortly after the MBP announcement.
So are you saying Apple's decision to use this SSD was not innovative? Sometimes choosing the right components is a huge part of the overall product.
It reminds me of the story of the original iPod. Toshiba developed the 1.8" hard drive... and they didn't even have a use for it.
But Jon Rubinstein saw it... and it became the central component in the iPod.
While everyone else was making hard drive MP3 players with 2.5" laptop hard drives which resulted in bulky devices with poor battery life... Apple had a better idea.
Sure... we can give the credit to Toshiba for actually making the hard drive... but it was Apple's implementation of that hard drive that was commendable.
Again... sometimes choosing the right components makes all the difference.
I'm saying that using the fastest SSD isn't innovative, yes. Even your example of the 1.8" HDD doesn't fit here. Apple did something innovative with it. In this case, they're doing the same thing as everyone else, just their SSD is faster for a small period of time. The only innovative thing from them recently is related to having the best ARM chips, which they squander by doing basically nothing that can use that sort of power.
It's not exclusive to them so no. You could say that the A10 processor in an iPhone is innovation as it isn't available to everyone else. But my definition of innovation encompasses a lot more than specs bumps.I classify the iPhone iPad and iPod as he biggest innovations in tech history .The pro and Plus iPhones are tweaks made to the formula to satisfy the urge to upgrade.The Surface Studio is an innovation. The latest iMac could come with a specs bump but that's not innovationSo are you saying Apple's decision to use this SSD was not innovative? Sometimes choosing the right components is a huge part of the overall product.
It reminds me of the story of the original iPod. Toshiba developed the 1.8" hard drive... and they didn't even have a use for it.
But Jon Rubinstein saw it... and it became the central component in the iPod.
While everyone else was making hard drive MP3 players with 2.5" laptop hard drives which resulted in bulky devices with poor battery life... Apple had a better idea.
Sure... we can give the credit to Toshiba for actually making the hard drive... but it was Apple's implementation of that hard drive that was commendable.
Again... sometimes choosing the right components makes all the difference.
In my opinion, as opposed to earlier when Microsoft was this unwieldy dinosaur and Apple the nimble lean one trying out wild new moves the tables have turned and I find Microsoft taking far more risks and gambles then Apple does. If they just manage to come out with an x86 Windows Surface Phone now That is innovation. Running PC apps on a handheld. I could sync my iPhone to Windows by connect iOS to Windows on a phone.How cool is that?
I think the closest we will get to that is Project Cobalt, since Intel dropped mobile.
That's cool.
Though looking at the definition of "innovative" I find this:
make changes in anything established
to introduce (something new) for or as if for the first time
Making changes in the established Macbook Pro would be innovative.
And if Apple is truly the first company to put these new super-fast SSDs in a shipping product... that would actually count as an innovation too.
You said no one else got access to them, right?
But anyway... I hate these talks of "this is innovative" or "this is not innovative"
Can't we simply conclude that these are amazing machines?
That's cool.
Though looking at the definition of "innovative" I find this:
make changes in anything established
to introduce (something new) for or as if for the first time
Making changes in the established Macbook Pro would be innovative.
And if Apple is truly the first company to put these new super-fast SSDs in a shipping product... that would actually count as an innovation too.
You said no one else got access to them, right?
But anyway... I hate these talks of "this is innovative" or "this is not innovative"
Can't we simply conclude that these are amazing machines?
So you believe that the first company to put Kaby Lake in their laptops innovated? You have a rather low bar for innovation. And no, I don't think these are amazing machines. Apple made a beautiful machine, yes. They made it thin and light, yes. But these are pro machines, thin and light is what normal consumers want.
No... I don't think a processor choice by itself is an "innovation"
But this goes beyond a single component.
It wasn't just the super-fast SSD... it was also the wide-gamut screen... and a high-resolution screen at that.
And all in a thin-n-light chassis. With four Thunderbolt ports. And while some people bemoan the loss of MagSafe... the ability to charge from either side is a welcome addition.
I also think the Touch Bar is an innovation. Other laptops have had some sort of touch-sensitive bar before... but they didn't have this level of customization and OS support. It's basically a little iOS computer built into the laptop!
It's LOTS of things combined... not just a single component.
So yes... I do think, overall, that the new Macbook Pro is "innovative"
But that word can mean so many different things to different people.
Opinions are like... you know. Everyone has one.
Honestly, then maybe you ought to rethink why you are buying apple products. If a company didn't produce a product I wanted, I would move on to the next company. Certainly throwing this generic label at an unknown group of people is not going to get apple to change what is developing and producing.
I did. I stopped buying any ios products and switched to Android, and I couldn't be happier. I might switch back to a pc for my next computer, but I don't know too much about them since it's been so long.
So your hurling the ad-Homs and don't even own the products? Got it.
We're an Apple/Microsoft house and are very satisfied.