So Far, Rivals Cant Beat iPads Price
By JENNA WORTHAM
Published:
March 6, 2011
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There have been nearly a hundred competitive tablets that have been introduced since the iPad, said Toni Sacconaghi, an analyst at Sanford C. Bernstein. But it seems that no one has eclipsed or even matched Apple on pricing.
Analysts and industry experts point to a number of reasons. Primarily, they say, Apples deep pockets a staggering $60 billion in cash reserves have allowed it to form strategic partnerships with other companies to buy large supplies of components, for example, in expensive flash memory. By doing this, the company probably secures a lower price from suppliers, ensuring a lower manufacturing cost.
At the same time, they say, Apple has sidestepped high licensing fees for other items it needs, like the A4 and A5 processors within the iPads. Those parts, designed in-house at Apple by a company that Apple bought, are among the costlier components needed to make a tablet computer.
Mr. Sacconaghi said Apple also could subsidize some of the cost of building iPads with the money it makes through its App Store, which generates more than a billion dollars each year. This means that Apple can take a lower profit margin on the iPad, 25 percent, than it does on, for example, the iPhone, which can yield as much as 50 percent profit.
Yet another advantage is Apples wide net of its own global retail shops and online stores; for customers, this means they can avoid a markup from a third party like Best Buy.
Although other companies have some of these factors in their favor, no one but Apple has all of them.
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