This was a minor thow-away story but others are starting to run with it like it’s some sort of panic, let’s set the story straight.
The recap is that someone tore open an Apple TV and told BusinessWeek the components cost Apple $237 or when Apple sells one for $299, they “only” make $62 or about 20%.
It WOULD be time to worry if there was a MINUS sign in front of the $62 but no, it’s a PLUS in the profit margin so what’s the panic? We know that Apple’s margins are generally in the 26-30% during a great quarter so is a few points off something they sell for $299 enough to cause a panic?
AND that few points is based on a guess from iSuppli? While most people had a good idea an iPhone was coming, NO ONE knew exactly when it was coming AND of the THOUSANDS of mockups, “secret” spy shots and guesswork of the iPhone (besides the obvious – it’ll have an ipod, wifi, bluetooth and GSM), the accuracy rate of the iPhone guess was about .00001% – of course, here they have the actual components but you’re really going to tell you can say 100% you know exactly what Apple pays for each component? The most secret company in the world?
Are they willing to say that NONE of the component manufacturers are willing to cut Apple an additional 5% to get their “prestigious” business or that Intel isn’t willing to sell to Apple an older, slower processor with discount? Or any of them maybe offering Apple a rebate for 6 months in hopes of getting more iPod/iPhone business down the line? Or they might be willing to risk a dollar less today in hopes that Apple hits another iPod like home run? Inconceivable? $10 in savings gets Apple close to their normal high 20% margin – inconceivable?
I understand it’s an interesting story if the components probably cost $450 and it sells for $299 (like a couple video game consoles) or even if the margins might be an unlikely Apple 5% of something like that but when $10-$12 in easy to negotiate costs will get Apple to their margins?
It’s not like it’s a device that is profitable and might help Macs, Airport Extremes, iPods and iTunes tracks … oh wait, should we panic yet?
Or the new Apple-only benchmark, if it doesn’t sell 100 million in 6 years, it’s a “flop.”
Of course, at the end of the story, they point out the new ($399) 160 GB AppleTV margins are nearly 30% – humm, imagine that.