$799 for the xoom

[quetzalcoatl]

Just curious, but how can some of you justify the Xoom at a price of $599. It makes no sense, especially when you consider that the Droid X is $579 off contract. So, you want the Xoom off contract for $20 more than the X? Seriously?

Gotta side with the last three posters on this one, I'm getting the Xoom on launch day. Hopefully the 2/17 date sticks, since waiting for the next 22.5 days is gonna suck as it is. If there's another leak in 2 weeks with a later date, my head will probably explode.

I would say it is because off contract prices are inflated anyway. Look at the Evo $499 off contract yet the Incredible is $599. The Evo has an additional radio and a 4.3 in screen. Yet is $100 less. What this tells me is the handset manafacturers set the price based off what the mobile operators tell them. Since there is no real competition in the US market they can play these games.
I am looking forward to a teardown buy isuppli to see what the Xoom costs to produce.

 

[Chris Kerrigan]

A tear down will be great to see. Keep in mind most of these things are priced retail quite a couple hundred dollars more than it actually cost to manufacture, though. So if this thing actually cost close to $500 to manufacture, there ya go.

 

[quetzalcoatl]

A tear down will be great to see. Keep in mind most of these things are priced retail quite a couple hundred dollars more than it actually cost to manufacture, though. So if this thing actually cost close to $500 to manufacture, there ya go.

I suspect if will not be much more than the iPad was at $287. Which is why I think $800 price is out of line if it turns out to be true. Even the $700 price which it what I expected they are still making a profit that is above and beyond what most companies short of Apple enjoy.

Looking at the math if Moto ships the 800K they hope to in Q1 and they sold them at $400 that would be over $80mil in sales. Then if the price is at $700 that would be $240mil for the end retailers. Where the markup on most electronics is no where near 75%. Back when I had a friend that managed a Circuit city the markup on TVs was about 20%. Where they made the money was on extended warranty plans and cables. They could buy stuff 10% over cost and a $90 cable would cost them less than $15 as an employee.

Mid-Range iPad to Generate Maximum Profits for Apple, iSuppli Estimates

 

[ckeegan003]

Look at the Evo $499 off contract yet the Incredible is $599. The Evo has an additional radio and a 4.3 in screen. Yet is $100 less.

Maybe they just dock $100 off the value because it's on Sprint! J/K.

Totally understand your point, but it's not as if the Xoom price is double even the EVOs off contract price. I mean, you figure the Nexus One unlocked price was $529. I just don't see any problem with a 50% increase for the Xoom, let alone a 32% increase if it ends up launching for $699.

I personally think it's going to be instant savings at Best Buy and MIR at Verizon, which is why we're seeing two different price points.

 

[Maikai.Guy]

I suspect if will not be much more than the iPad was at $287. Which is why I think $800 price is out of line if it turns out to be true. Even the $700 price which it what I expected they are still making a profit that is above and beyond what most companies short of Apple enjoy.

Let's take the $287 price for the iPad. I won't even begin to argue about some of their suspect costs. $10 for manufacturing and test. I don't freakin' think so!

Let's concentrate on the most important thing: This iSupply price leaves out the most expensive parts of the equation, which are design and development, procurement (cost of money), shipping of the components, shipping of finished goods, storage (space and cost of money) and distribution (middle men). And all these costs are compounded, not simply added.

I'm going to ignore design and development, because it's too huge a thing for me to even remotely guess at. Also, it's amortized over multiple products, but continues to grow as new products are defined. It's a difficult thing to calculate on a per product basis. Just know it's big... probably tens of millions of dollars.

Let's start with the components shipping. The devices are sold FOB their point of manufacture/origin. Any shipping costs from there are the responsibility of the equipment manufacturer. It's probably in the neighborhood of $10 per unit.

$297

These devices are typically paid for within 90 days of delivery. Those are actually good terms. Let's say they will need to pay for the parts about time the units are finished with production test and packaging. After that, between the time they pay for the components and actually receive the money someone paid for the unit, they lose money. It's essentially a loan they give to their supply chain. There is a cost of money. Let's assume 10% and only three months delay (because we think these things will sell as fast as they can make them). On $300, that's $7.50.

$304.50

Shipping can be quite expensive because of the wide distribution. The cost is typically evenly distributed so the the guy in Palukaville or Corn-town will not be paying more than the guy in Los Angeles. Let's say another $10 per unit, but I'm probably underestimating a lot.

$314.50

All these units have to go someplace... temporary storage to be split up to secondary distribution sites, etc... In the semiconductor industry, these people want approximately 20% to 30%. Let's say 25% or 78.50 per unit.

$392.50

It might not be exactly like that, but I'm not far off and probably err on the lower cost side.

So we are already around $400 and we haven't even discussed recouping the investment for creating the darn thing, the company's profit margin, or even the commission the sales guy makes for selling it to you.

Bottom line, phone and pads are probably the lowest profit margin electronics on the market. Apple makes most of it's money off of it's iStore. Why do you think they refuse to allow Flash and Java? It's because people would be able to write their own apps and bypass the store. Everything Apple does is directed at generating residual income off of their products. That's why they are so profitable, not because they are reaping huge profits off of their phones and pads.

Apple's notebooks and computers are another story. The profit margins on those are truly obscene.

 

[dsignori]

Bottom line, phone and pads are probably the lowest profit margin electronics on the market. Apple makes most of it's money off of it's iStore. ....

Uh .. not at all. You are mistakingly comparing the discounted, contract-tied consumer purchase price to the cost of making the device. The iPhone 4 costs about $188 in parts per iSuppli . They get about $600 per iPhone 4 per phone from AT&T (and soon from Verizon), who then discount it to customers on-contract.. Even with some additional money added in per phone to build, Apple is making about $300- $400 per phone, or a 200% profit margin ..

 

[tntdroid]

Just curious, but how can some of you justify the Xoom at a price of $599. It makes no sense, especially when you consider that the Droid X is $579 off contract. So, you want the Xoom off contract for $20 more than the X? Seriously?

Gotta side with the last three posters on this one, I'm getting the Xoom on launch day. Hopefully the 2/17 date sticks, since waiting for the next 22.5 days is gonna suck as it is. If there's another leak in 2 weeks with a later date, my head will probably explode.

I have the X and she needs a friend.

Sent from my DROIDX using Tapatalk

 

[Maikai.Guy]

Uh .. not at all. You are mistakingly comparing the discounted, contract-tied consumer purchase price to the cost of making the device. The iPhone 4 costs about $188 in parts per iSuppli . They get about $600 per iPhone 4 per phone from AT&T (and soon from Verizon), who then discount it to customers on-contract.. Even with some additional money added in per phone to build, Apple is making about $300- $400 per phone, or a 200% profit margin ..

But they aren't getting $600 per phone. I bought my iPhones for around $200. The $600 is a penalty price if you need to replace your phone before it's contract expires. Apple made it's money on selling insurance (only one year for about $80 if I remember correctly) and the residual income from AT&T's exclusive deal with them. The story I heard was the majority of that $50 per month went straight to Apple.

Tablets are using a completely different formula. Most won't have a residual income stream (voice and data plan) attached to them. Look at the model for Samsung Galaxy Tab through Verizon now.

Considering the cost differences between a phone and a tablet, it looks like tablets makers are assuming large volumes and passing on the economies of scale from the get go.

I really don't believe people who wait for the price to come down will see a really significant movement. They might save $100 if all the planets align.

Or... I could be completely wrong. Please take my lack of response to any future "I told you so" messages as my acknowledgment that I am, indeed, a fool. ;-)

 

[dsignori]

But they aren't getting $600 per phone. I bought my iPhones for around $200. The $600 is a penalty price if you need to replace your phone before it's contract expires. ...

You don't get it, that's ok. When you buy a iPhone in a AT&T store, you are paying AT&T money (be it $200 or $600), not Apple. AT&T is paying Apple for every iPhone ($600). AT&T makes up the difference 10-fold with contract revenue from the user. Apple gets $600 per AT&T iPhone, no matter what price you purchase it for from AT&T.

The point is these companies make PLENTY of profit on these devices at a $600 or $800 price point. Tablets and phones. You seem to be arguing the other points against yourself now, since no one is saying otherwise ..

 

[Maikai.Guy]

You don't get it, that's ok. When you buy a iPhone in a AT&T store, you are paying AT&T money( $200 or $600), not Apple. At&T is paying Apple for every iPhone ($600). Apple get's $600 per At&T phone, period, no matter what price you purchase it for from AT&T.

The point is these companies make PLENTY of profit on these devices. You seem to be arguing the other points against yourself now, since no one is saying otherwise ..

AT&T does not pay $600 per phone. They pay far less than that. The details of the deal with AT&T are known in my industry (semiconductor sector) by word of mouth. It's not 100% reliable, but the story makes sense and it's not a rumor from the general public. The bottom line is Apple makes their good money off of residual income streams generated by the phone, not the phone itself. Insurance, accessories, a piece of the service contract, and iStore revenue...

Not sure what you mean by "the other points". I thought all my points supported my opinion about the cost of these devices.

 

[dsignori]

ok then ..

 

[Menno]

AT&T does not pay $600 per phone. They pay far less than that. The details of the deal with AT&T are known in my industry (semiconductor sector) by word of mouth. It's not 100% reliable, but the story makes sense and it's not a rumor from the general public. The bottom line is Apple makes their good money off of residual income streams generated by the phone, not the phone itself. Insurance, accessories, a piece of the service contract, and iStore revenue...

Not sure what you mean by "the other points". I thought all my points supported my opinion about the cost of these devices.

You're wrong on this one.

Apple said that the average sale price of an Iphone4 (how much they got for it) was $650. That's the price they are paid for the PHONE. Now, this number is lower in some markets (china) and much higher in others (USA).

Att, Verizon, etc pay the FULL cost of the devices to hardware makers, their retail markup is often $20 or less (which barely covers fees).

Apple is a HARDWARE company, that's where they make their revenue. They're not making the 200% profit like some people are claiming. isupply is practically pointless when it comes to pricing the true cost of a device, but they ARE making a significant profit with their iDevices.

You're only paying $200 to ATT for that phone on contract, but ATT is paying apple the retail cost +exclusivity cost +(likely) a portion of the revenue.

Apple's profit margin last quarter was 22%, with a majority of that coming from iphones, ipads, and ipods. They have higher prices on their devices, but more than likely their profit margins are much higher on the wireless side.

 

[Maikai.Guy]

You're wrong on this one.

Could be. I reserve the right to be wrong, but I don't think I am on this one.

Apple said that the average sale price of an Iphone4 (how much they got for it) was $650. That's the price they are paid for the PHONE. Now, this number is lower in some markets (china) and much higher in others (USA).

It would be interesting to see exactly what they "said". The wording is probably ambiguous and could mean they are enjoying an average return of $650 per phone. I could see that. But actually getting a $650 payment per phone. Sorry, no.

Att, Verizon, etc pay the FULL cost of the devices to hardware makers, their retail markup is often $20 or less (which barely covers fees).

We actually agree on this. The carriers don't use the phones as a profit center. The phones are a means to a residual income stream, their voice and data services.

Apple is a HARDWARE company, that's where they make their revenue. They're not making the 200% profit like some people are claiming. isupply is practically pointless when it comes to pricing the true cost of a device, but they ARE making a significant profit with their iDevices.

Yes, I agree Apple is a hardware company.... that makes a bunch of money on services, accessories, licensing, etc... as well.

And I too believe the isupply info is pointless and misleading.

And I too believe they are making a significant profit with the iDevices. All the versions of iPod and iTouch are great profit centers. I just don't believe they make anywhere near the same kind of margins with iPhone or iPad.

You're only paying $200 to ATT for that phone on contract, but ATT is paying apple the retail cost +exclusivity cost +(likely) a portion of the revenue.

Yes to everything except we don't agree on the cost of the phone to AT&T.

Hey! We're agreeing more than we're not! If we don't watch out, we're going to be singing "kumbaya" soon.

Apple's profit margin last quarter was 22%, with a majority of that coming from iphones, ipads, and ipods. They have higher prices on their devices, but more than likely their profit margins are much higher on the wireless side.

Look, Apple doesn't break out the specifics you claim they do. I own a lot of Apple stock. I listen to the calls. I read their 10Ks. They just don't share the detail we would need to see which one of us is right. I think all the data points to me being right, but I've been known to be wrong quite a few times in my life. Just ask my wife. :-*

On Apple's 10K, the best detail you get is "iPhone and related products and services" which "Includes revenue recognized from iPhone sales, carrier agreements, services, and Apple-branded and third-party iPhone accessories".

Yeah, that's right. They lump the sales of the phone, the agreements, the services, all the accessories and even the income from licensing agreements with third parties incorporating iPhone docks in their equipment! That's a close as you or I are going to get to the actual price AT&T pays for a phone. And don't rely on some book price listed in an AT&T computer. That's all for daily operating purposes. My company does exactly the same thing. We have one price on the books for stuff in inventory at our distributors, but everyone gets "back-ended" handsomely. The fact is, you'll never get close to the actual price.

I really wish there was some definitive way to see who's right (because I know I am ), but there isn't. I am VERY sure of my opinion, but in the end it is still just an opinion. We'll have to agree to disagree, at best.

 

[Menno]

I know ATT agent reps and owners, I know what they have to buy the iPhone for, it's very close to the listed retail price.

Sure, ATT might be getting some special deal here, but I highly doubt it because if you look at other product (blackberry's, androids, etc) what corp pays and what indirects pay is very similar. I can't imagine apple EVER giving up a dime unless they had to, and considering ATT was paying apple millions/billions ON TOP of every iphone purchase for the exclusive deal, I don't see why Apple would give them a per unit discount.

It would be like if I was throwing money at you, and you said "you know what, you don't have to give me this much."

 

[Maikai.Guy]

I know ATT agent reps and owners, I know what they have to buy the iPhone for, it's very close to the listed retail price.

Sure, ATT might be getting some special deal here, but I highly doubt it because if you look at other product (blackberry's, androids, etc) what corp pays and what indirects pay is very similar. I can't imagine apple EVER giving up a dime unless they had to, and considering ATT was paying apple millions/billions ON TOP of every iphone purchase for the exclusive deal, I don't see why Apple would give them a per unit discount.

It would be like if I was throwing money at you, and you said "you know what, you don't have to give me this much."

I don't know what deal AT&T forces upon it's independents. Generally, franchisees are taken advantage of... usually very badly.

I have really good sources that tell me differently from what you hear and this is supported by financial data coming from Apple.

I suggest you simply go Apple's latest 10K and do the math. As I've previously informed you, the segment they list for iPhone "Includes revenue recognized from iPhone sales, carrier agreements, services, and Apple-branded and third-party iPhone accessories."

Think about that for a moment. Really understand it. That reported dollar figure includes net proceeds (not profit... all income before costs) from the phone, from their agreement with AT&T, from all services offered, for all Apple branded accessories, and from all the license income derived from third parties.

Apple claims to have shipped nearly 40 million phones. At $650 each, as you claim, the net income for just the phones alone should be $26B.

The net income Apple reports from the entire iPhone lineup is just a touch over $25B. Huh?

For your claims to be correct, Apple must have given away $1B worth of iPhones for free. Apple also much not charge for any "carrier agreements, services, Apple branded and third party iPhone accessories." So let's run down to the Apple store and pick up a bunch of iPhone accessories for free.

I know you believe what you've been told, but it's illegal for Apple to lie on their 10K. Feel free to look up Apple's annual report and see for yourself. I'm sorry to say the math doesn't add up to support you position. But it adds up great to support mine.

The truth is Apple sells the phone to AT&T VERY cheaply and makes A LOT from the monthly data plan. I've heard the majority of the that charge goes to Apple.

Again, please do the math. The numbers don't lie.

 

[Menno]

There is a big difference between "Average sale price of x" and "we sold them all at x price."

This is doubly true when your sales figures include first and third world countries.

So in the US, they could be getting upwards of $900 per iphone when you add all that in.

Then in a country like china, the sales could be much lower (300-400). Since the Kang market is so vibrant there, expect this number to be even lower, because a lot of accessories wouldn't be officially apple branded.

When you take ALL the sales, the Median would hover around 650.

And I'm not believing what I've been told. I have no experience with apple iphone purchases personally, that's true, but I do know how purchasing phones from phone makers (and carriers) works. For the record, indirects are screwed over when it comes to commissions, NOT hardware. (with the exception of not getting popular phones at launch).

 

[thekarens]

Correct me if I'm wrong, but doesn't the Xoom come with 32gb? If so then you should be comparing it to the 32gb iPad 3g, in which case the prices are comparable.

Sent from my HTC Evo 4g

 

[Maikai.Guy]

Correct me if I'm wrong, but doesn't the Xoom come with 32gb? If so then you should be comparing it to the 32gb iPad 3g, in which case the prices are comparable.

Sent from my HTC Evo 4g

Yes! In fact the price is MORE for the less equipped Apple, but people seem to be fixated on a $500 price and fail to make the right comparison.

 

[Maikai.Guy]

OK Menno.

I think the XOOM is gonna look great on both of us. O

 

[Menno]

OK Menno.

I think the XOOM is gonna look great on both of us. O

The xoom's shaping up to be fantastic. Business just needs to pick up some for me to justify buying one.