5 ms·

Well, Apple cares about its competition, but I think it cares more about making a profit and they do that by build great products that they can charge a lot for

Well, Apple cares about its competition, but I think it cares more about making a profit and they do that by build great products that they can charge a lot for. Selling a product with a high margin is actually easier in some ways than with a low margin because with a high margin you can afford to advertise, market, and push harder to sell a product. Amazon can sell the Kindle Fire at break even because it owns its own sales and marketing channel at Amazon.com. Google sells the Nexus 7 with no margin because that is the only way for them to gain a foothold against the Kindle Fire. A $329 iPad Mini with say a $129 margin means Apple can spend $129 per sale in advertising and marketing and still be as profitable as the Kindle Fire or Nexus 7. We all know it doesn't cost Apple $129 to make a sale, so there's a nice profit left over. Ultimately, Apple's goal is to be a profitable, sustainable company and they do that by turning a profit on hardware sales. That's their model. Amazon and Google have a different business model.

bryanlarsen 14y ago
The iPad mini margin is definitely more than $129.
- tomkinstinch 14y ago
  Based on what information?
  - bryanlarsen 14y ago
    We "know" that Nexus 7 / Kindle Fire has a cost of $200. Subtract $? in assembly profit because Foxconn's role building iPad's is much smaller than ASUS/Quanta's role building Nexus 7/Fire Subtract $? because Apple receives better component prices than ASUS & Quanta do. Subtract $? because the iPad mini has a cheaper screen. Subtract $? because the iPad mini has less RAM. Subtract $? because the iPad mini has a cheaper CPU. Add $? because the iPad mini has more flash. Add $? because the iPad mini has a rear camera. Add $? because the iPad mini uses Aluminum rather than plastic. You have to guess which column is bigger, but in my estimation, the "subtract" column is at least $20 larger than the "add" column.
    - tomkinstinch 14y ago
      Who's to say that the Nexus 7 and Kindle are not being sold at a loss to drive sales of cloud content? Pulling $200 out of the air for their production costs does not mean we "know" anything. Have you seen a component by component breakdown with estimated extended pricing in line with their production scale? I'm not saying you're wrong, but a citation or three would strengthen your argument.
- Spooky23 14y ago
  iSupply data estimated the low-end retina iPad margin at 37%, which is consistent with a $129 profit. Apple is of course a master at extracting more profit by market segmentation. Apple is basically the BMW of technology. The difference between a run of the mill 3-series BMW and a Honda to the average commuter is image + $10,000. The iPad yields a premium because its an iPad.
  - objclxt 14y ago
    ...this is exactly what people don't seem to understand. Lots of people buy Fords and Hondas, and not so many people buy BMWs and Mercedes Benzs, but there's still room in the market for both categories, and BMW and Ford both turn a profit. I don't know why it need to be a 'winner takes all' scenario when it comes to tablets.
    - jlgreco 14y ago
      I think it is because ever since the 90s we don't think a company is "winning" until the DoJ starts getting worried about anti-trust stuff. Profit is not good enough, a company must start crushing its competition beneath its feet until people in tech can declare a "victory"; until that happens we have to keep cheering/jeering.
    - jerf 14y ago
      Network effect. The more people on platform X, the more developers on platform X and the more attractive it is to users, and so on. While this simplistic model suggests a full winner-take-all model, history strongly suggests one often ends up with two markets, the "high cost, lower penetration" & the "low cost, higher penetration". Most recently, Apple OSX vs. Microsoft Windows. But the resulting duopoly can be as impenetrable as the simplistic monopoly to an upstart.

bryanlarsen 14y ago

The iPad mini margin is definitely more than $129.

tomkinstinch 14y ago
Based on what information?
- bryanlarsen 14y ago
  We "know" that Nexus 7 / Kindle Fire has a cost of $200. Subtract $? in assembly profit because Foxconn's role building iPad's is much smaller than ASUS/Quanta's role building Nexus 7/Fire Subtract $? because Apple receives better component prices than ASUS & Quanta do. Subtract $? because the iPad mini has a cheaper screen. Subtract $? because the iPad mini has less RAM. Subtract $? because the iPad mini has a cheaper CPU. Add $? because the iPad mini has more flash. Add $? because the iPad mini has a rear camera. Add $? because the iPad mini uses Aluminum rather than plastic. You have to guess which column is bigger, but in my estimation, the "subtract" column is at least $20 larger than the "add" column.
  - tomkinstinch 14y ago
    Who's to say that the Nexus 7 and Kindle are not being sold at a loss to drive sales of cloud content? Pulling $200 out of the air for their production costs does not mean we "know" anything. Have you seen a component by component breakdown with estimated extended pricing in line with their production scale? I'm not saying you're wrong, but a citation or three would strengthen your argument.
Spooky23 14y ago
iSupply data estimated the low-end retina iPad margin at 37%, which is consistent with a $129 profit. Apple is of course a master at extracting more profit by market segmentation. Apple is basically the BMW of technology. The difference between a run of the mill 3-series BMW and a Honda to the average commuter is image + $10,000. The iPad yields a premium because its an iPad.
- objclxt 14y ago
  ...this is exactly what people don't seem to understand. Lots of people buy Fords and Hondas, and not so many people buy BMWs and Mercedes Benzs, but there's still room in the market for both categories, and BMW and Ford both turn a profit. I don't know why it need to be a 'winner takes all' scenario when it comes to tablets.
  - jlgreco 14y ago
    I think it is because ever since the 90s we don't think a company is "winning" until the DoJ starts getting worried about anti-trust stuff. Profit is not good enough, a company must start crushing its competition beneath its feet until people in tech can declare a "victory"; until that happens we have to keep cheering/jeering.
  - jerf 14y ago
    Network effect. The more people on platform X, the more developers on platform X and the more attractive it is to users, and so on. While this simplistic model suggests a full winner-take-all model, history strongly suggests one often ends up with two markets, the "high cost, lower penetration" & the "low cost, higher penetration". Most recently, Apple OSX vs. Microsoft Windows. But the resulting duopoly can be as impenetrable as the simplistic monopoly to an upstart.