5 ms·

Insane profit margins here. Love AAPL!

by barista 14y ago

fredoliveira 14y ago
If these guys can build a phone of this quality and make a big profit, imagine how much money their competition is making by using cheaper materials (and judging by what we know, lower production/r&d costs) while selling for the same prices.
- bradleyland 14y ago
  Yet no one else is posting anywhere near the profits that Apple (AAPL) is, quarter after quarter. Yes, their margins are slimming, but they still lead their market in terms of actual profits.
  - fredoliveira 14y ago
    You're over-simplifying what can't be over-simplified. If you look at Apple's business holistically you'll know that their profits come not only from smartphone sales, but from a wide range of products. Do they have great profit results Q/Q and Y/Y in general? Absolutely. Does that mean others don't have the same kind of profit per smartphone unit sold? No. And that's the key difference between what we're saying.
    - cooldeal 14y ago
      While I agree with you in general, Apple charges the carriers much more than other manufacturers, to the extent that carriers' margins are knocked down really low, and Sprint was expecting to be profitable on the iPhone only a few years after launching it. In fact, the lower the sales of the iPhone, the higher the margin of the carrier(assuming same number of handsets). http://money.cnn.com/2012/07/24/technology/att-verizon-iphones/index.htm http://money.cnn.com/2012/07/24/technology/att-verizon-iphon... The carriers are rumored to be pushing back on the iPhone prices, but they know they need it or the competition will lap up the sales for the expensive data plans.
    - huxley 14y ago
      Apple apparently brings in 75% of all profits in the smartphone industry: http://www.asymco.com/2012/02/03/first-apples-rank-in-mobile-phone-profitability-and-revenues/ http://www.asymco.com/2012/02/03/first-apples-rank-in-mobile... So it is hard to imagine how any of the other players have anything near Apple's profit per smartphone unit sold. Samsung was a distant 2nd at about 16% of profits during the period when Samsung was reportedly outselling Apple in total units sold.
- mtgx 14y ago
  Apple is also making this low profit by negotiating too hard with Foxconn and other suppliers, which in turn hurts the workers there. At the end of the day Apple cares more about profit than anything else.
  - fredoliveira 14y ago
    I believe what you're saying can be true, but when apple hires Foxconn to build their products, they should assume (and expect) that Foxconn treats their employees decently. If I hire a company to write a piece of code, at the end of the day I'll care more about the quality than anything else. I will expect and hope however, that everyone who's working on it is treated fairly. I believe Apple does a their due diligence on this when picking their partners. And regardless of that, it's mostly on Foxconn to do the right thing.
    - 7952 14y ago
      Doesn't the end customer have a similar expectation? Should consumers have to check the record of every single contractor that Apple employs?
  - tobylane 14y ago
    In every sentence I've seen this week that contained Apple and Foxconn the sentence becomes so much better and fairer when you replace Apple with 'Foxconn customers (Microsoft, HP, Dell, Apple, Samsung and others)'.
- thezilch 14y ago
  Source? Cheaper materials? Lower R&D costs? I see it touted a lot, but it stops there, as cheap shots in the wind. I have a portable music player, phone, laptop, and desktops that match or beat competing Apple products. I've yet to see that Apple spends anything close to other players' R&D. PR maybe. A lot of us are questioning whether the "Apple polish" is the extent of their "innovation" and it is anywhere the sink others put into R&D.
  - fredoliveira 14y ago
    Source: http://www.ciozone.com/index.php/Editorial-Research/Top-50-Technology-R&D-Spenders/50-Biggest-R.html http://www.ciozone.com/index.php/Editorial-Research/Top-50-T... They're at number 15, but I don't see any of their competitors in the smartphone manufacturing business above them. Now, do they spend more on PR? Yes, in fact, 3x as much. But look at the numbers yourself, they don't lie. Another article: http://www.usatoday.com/money/perfi/columnist/krantz/story/2012-03-20/apple-marketing--research-and-development-spending/53673126/1 http://www.usatoday.com/money/perfi/columnist/krantz/story/2...
- qq66 14y ago
  The competition is making FAR less profit per smartphone sold than Apple, largely because of the volume per model sold, and also because of vertical integration. In fact, outside of Samsung, most competitors are probably losing money. Apple only sells one model of iPhone per year, in about 10 very similar configurations, which gives them huge economies in assembly and strong negotiating power on components (they're buying 100 million of a certain type of display, instead of 5 million of 10 different kinds of displays). Furthermore, the supply chain economics are much better, with lower inventory costs (if you are trying to keep 10 items in stock with variable demand, you'll need to have more inventory on hand than if you have only one item). The second big profit driver for Apple is vertical integration -- they sell a good chunk of iPhones, especially in the US, themselves, whether online or at Apple Stores. This means they get to keep the entire profit instead of handing over some of it to a retailer.
  - huxley 14y ago
    One qualifier: Apple only sells one NEW model of iPhone per year
    - strmpnk 14y ago
      Techically that'd be new revisions since the iPhone comes in multiple SKUs. I think there are 3 different storage capacities multiplied by 3 different radios (http://www.apple.com/iphone/LTE/ http://www.apple.com/iphone/LTE/) and 2 different colors so that makes it 18 different iPhone 5 configurations.
      - huxley 14y ago
        You are technically correct ... and that is the best kind of correct.

Insane profit margins here. Love AAPL!

by barista 14y ago

Insane profit margins here. Love AAPL!

If these guys can build a phone of this quality and make a big profit, imagine how much money their competition is making by using cheaper materials (and judging by what we know, lower production/r&d costs) while selling for the same prices.

bradleyland 14y ago
Yet no one else is posting anywhere near the profits that Apple (AAPL) is, quarter after quarter. Yes, their margins are slimming, but they still lead their market in terms of actual profits.
- fredoliveira 14y ago
  You're over-simplifying what can't be over-simplified. If you look at Apple's business holistically you'll know that their profits come not only from smartphone sales, but from a wide range of products. Do they have great profit results Q/Q and Y/Y in general? Absolutely. Does that mean others don't have the same kind of profit per smartphone unit sold? No. And that's the key difference between what we're saying.
  - cooldeal 14y ago
    While I agree with you in general, Apple charges the carriers much more than other manufacturers, to the extent that carriers' margins are knocked down really low, and Sprint was expecting to be profitable on the iPhone only a few years after launching it. In fact, the lower the sales of the iPhone, the higher the margin of the carrier(assuming same number of handsets). http://money.cnn.com/2012/07/24/technology/att-verizon-iphones/index.htm http://money.cnn.com/2012/07/24/technology/att-verizon-iphon... The carriers are rumored to be pushing back on the iPhone prices, but they know they need it or the competition will lap up the sales for the expensive data plans.
  - huxley 14y ago
    Apple apparently brings in 75% of all profits in the smartphone industry: http://www.asymco.com/2012/02/03/first-apples-rank-in-mobile-phone-profitability-and-revenues/ http://www.asymco.com/2012/02/03/first-apples-rank-in-mobile... So it is hard to imagine how any of the other players have anything near Apple's profit per smartphone unit sold. Samsung was a distant 2nd at about 16% of profits during the period when Samsung was reportedly outselling Apple in total units sold.
mtgx 14y ago
Apple is also making this low profit by negotiating too hard with Foxconn and other suppliers, which in turn hurts the workers there. At the end of the day Apple cares more about profit than anything else.
- fredoliveira 14y ago
  I believe what you're saying can be true, but when apple hires Foxconn to build their products, they should assume (and expect) that Foxconn treats their employees decently. If I hire a company to write a piece of code, at the end of the day I'll care more about the quality than anything else. I will expect and hope however, that everyone who's working on it is treated fairly. I believe Apple does a their due diligence on this when picking their partners. And regardless of that, it's mostly on Foxconn to do the right thing.
  - 7952 14y ago
    Doesn't the end customer have a similar expectation? Should consumers have to check the record of every single contractor that Apple employs?
- tobylane 14y ago
  In every sentence I've seen this week that contained Apple and Foxconn the sentence becomes so much better and fairer when you replace Apple with 'Foxconn customers (Microsoft, HP, Dell, Apple, Samsung and others)'.
thezilch 14y ago
Source? Cheaper materials? Lower R&D costs? I see it touted a lot, but it stops there, as cheap shots in the wind. I have a portable music player, phone, laptop, and desktops that match or beat competing Apple products. I've yet to see that Apple spends anything close to other players' R&D. PR maybe. A lot of us are questioning whether the "Apple polish" is the extent of their "innovation" and it is anywhere the sink others put into R&D.
- fredoliveira 14y ago
  Source: http://www.ciozone.com/index.php/Editorial-Research/Top-50-Technology-R&D-Spenders/50-Biggest-R.html http://www.ciozone.com/index.php/Editorial-Research/Top-50-T... They're at number 15, but I don't see any of their competitors in the smartphone manufacturing business above them. Now, do they spend more on PR? Yes, in fact, 3x as much. But look at the numbers yourself, they don't lie. Another article: http://www.usatoday.com/money/perfi/columnist/krantz/story/2012-03-20/apple-marketing--research-and-development-spending/53673126/1 http://www.usatoday.com/money/perfi/columnist/krantz/story/2...
qq66 14y ago
The competition is making FAR less profit per smartphone sold than Apple, largely because of the volume per model sold, and also because of vertical integration. In fact, outside of Samsung, most competitors are probably losing money. Apple only sells one model of iPhone per year, in about 10 very similar configurations, which gives them huge economies in assembly and strong negotiating power on components (they're buying 100 million of a certain type of display, instead of 5 million of 10 different kinds of displays). Furthermore, the supply chain economics are much better, with lower inventory costs (if you are trying to keep 10 items in stock with variable demand, you'll need to have more inventory on hand than if you have only one item). The second big profit driver for Apple is vertical integration -- they sell a good chunk of iPhones, especially in the US, themselves, whether online or at Apple Stores. This means they get to keep the entire profit instead of handing over some of it to a retailer.
- huxley 14y ago
  One qualifier: Apple only sells one NEW model of iPhone per year
  - strmpnk 14y ago
    Techically that'd be new revisions since the iPhone comes in multiple SKUs. I think there are 3 different storage capacities multiplied by 3 different radios (http://www.apple.com/iphone/LTE/ http://www.apple.com/iphone/LTE/) and 2 different colors so that makes it 18 different iPhone 5 configurations.
    - huxley 14y ago
      You are technically correct ... and that is the best kind of correct.