Print 19 comment(s) - last by erple2.. on Jul 23 at 2:20 PM

Apple says its iPhone 4 profit margin is not as big as some published reports claim.  (Source: Apple)

Apple revealed in its conference call that its $1B USD N.C. data center will be online by the year's end, but, secretive as ever, it would not discuss what it was for.  (Source:
Company opts not to talk about Facetime interoperability, data center in conference call

For Apple there's the good, the bad, and the ugly right now.  The good is that the company just posted another quarter of impressive sales and earnings.  The bad is that it's finding itself increasingly the target of antitrust attention in the U.S. and abroad thanks to its growing size.  And the ugly is certainly the reaction of customers to Apple's announcement that it would not be offering a recall or direct engineering fix to the iPhone's antenna woes (Apple's preferred solution is to hand out free cases that limit the issue).

Amid that backdrop Apple chief executive officer Steven P. Jobs, chief financial officer Peter Oppenheimer, and chief operations officer Tim Cook took part in a quarterly conference call that was equally interesting for what was left unsaid as what was said.

The first jewel from the press conference was an attack by Oppenheimer on iSuppli's estimates of the iPhone's cost.  According to iSuppli, the recently released fourth generation iPhone costs $187.51 in parts (and with contract reportedly brings Apple around $600 per phone sold).  And iSuppli also has estimated that the $499 Wi-Fi iPad costs a mere $260 to make.

If accurate, even given the cost of labor and engineering, those numbers would indicate a massive profit margin.  While not officially calling out iSuppli by name, Oppenheimer suggest that the published estimates may be suspect.  He stated in the call, "I'm suggesting you don't put a lot of credence in these third party reports."

Actually this may be more than just Apple trying to disguise its profit margins -- there may be a legitimate question of the iSuppli estimates' validity.  According to 
Techcrunch, "iSuppli is well-known for low-balling these numbers in an effort to convince manufacturers to contact them in order to connect with their preferred suppliers, so grains of salt must be taken."

Also interesting in the conference call was Apple's refusal to talk about its upcoming $1B USD North Carolina data center that will be completed by the end of the year.  The 500,000 foot structure is five times larger than the company's current data center in Newark, California.  While Apple refused to discuss how it would be put to use it is widely expected that Apple may use it to launch a streaming music subscription service.

If Apple launches a service it will likely come bundled with a DRM scheme different than that backed by its competitors.  Sony, Samsung, Nokia, Adobe, Cisco, HP, Toshiba, Microsoft and Intel are all backing a new cloud DRM scheme called UltraViolet -- which Apple wants no part of and will likely try to lock out of its devices.

Of the data center's completion Oppenheimer would only cryptically state: "And then we plan to use it."

Also interesting was that Apple failed to discuss Facetime interoperability.  Currently only available for video chats between iPhone 4s, Steve Jobs has said a spec would be published allowing calls to other devices.  He has not made it clear whether this might include competitors' phones like the Sprint HTC EVO 4G powered by Android.  Video chats with webcam-equipped Windows notebooks could also be possible.  Cook deflected this question, though, stating, "Punting that one for another day."

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Bottom Line...
By bplewis24 on 7/21/2010 12:19:46 AM , Rating: 5
If Apple wanted to contradict iSupply's data, they could give us the exact figures since they know them (while taking out fixed costs like marketing, etc, since that is irrelevant to individual unit sales). But they won't do that, because they know the number is close and doesn't contradict the high profit margin.

So, Apple... if you're not going to publish your own numbers, STFU about it.


RE: Bottom Line...
By AliShawkat on 7/21/2010 12:52:29 AM , Rating: 1
Why the hell would they disclose they're profit margin? that's retarded. Apple is in the business of making money. Not in the business of giving information out to competitors to satisfy people's ego.

RE: Bottom Line...
By Mitch101 on 7/21/2010 8:47:28 AM , Rating: 3
And since when has Apple disclosed credible numbers? Last time they counted iPods with iPhones because they didn't want to reveal how well Droid was doing against the iPhone.

RE: Bottom Line...
By someguy123 on 7/21/2010 1:16:28 AM , Rating: 2
In this case there's no winning for apple. If they post the exact figures and they're close to isupply's pricing, then they damage their public image, and if their margins are actually quite low they damage their investor image.

I hate apple for their "advertising and gloss is more important" business mentality, but whether or not a product should have a high profit margin is pretty subjective.

RE: Bottom Line...
By dark matter on 7/21/2010 2:33:34 AM , Rating: 2
I guess knowing the profit margin on your nice shiny new iPhone 4 means you're going to want a little but more than a $2 rubber band to be given away to make it work. No?

RE: Bottom Line...
By alanore on 7/21/2010 4:39:31 AM , Rating: 3
Apple: "We really don't make as much money on iphones as you think"...

...and in other, unrelated news, Apple has just had the most profitable quarter in history.

RE: Bottom Line...
By Mitch101 on 7/21/2010 8:49:25 AM , Rating: 2
Theres a chart for that and iPhone appears to be the biggest part of it.

RE: Bottom Line...
By Shatbot on 7/21/2010 5:24:36 AM , Rating: 2
Don't iSupply know how much it costs to put a full glass backing on a delicate phone? Let alone replacing it...

Out of interest I had a brief check - $199 from an Apple store.

They might even be posting a loss! ;)

RE: Bottom Line...
By fstarnella on 7/21/2010 8:14:19 AM , Rating: 2
199 with a 2 year contract with ATT which is heavily subsidizing the hardware.

Try buying one without a 2 year contract and see how much it costs then.

RE: Bottom Line...
By Daniel8uk on 7/21/2010 9:09:16 AM , Rating: 2
In the UK it's priced at £699 for the 32GB model which is just stupidly expensive I could buy two (well, nearly two :P ) HTC desires for that price or a Samsung Galaxy S for about £400, both phones are far better than the Iphone 4 and are much cheaper.

Shame on Apple and shame on the Sheepple.

RE: Bottom Line...
By marvdmartian on 7/21/2010 8:56:34 AM , Rating: 2
Could even be that the figures iSupply gave were too high, and Apple is making an even bigger profit margin than they thought. Would you tell your customers they were schmucks for buying overpriced electronics, or would you simply continue raking in the bucks, while directing a little misdirection toward the other guys?

That new data center is really for them to store the GPS data they're collecting. That way, when the iTerminators take over, they'll know where the iFanboys are, and allow them to live. Everyone else is an iTarget!!

RE: Bottom Line...
By Mitch101 on 7/21/2010 10:43:10 AM , Rating: 2
I live near the facility and the rumor mill is even though Apple is denying it that Apple has been developing a search engine.

The second is they are creating a social network.

Could be both or could be neither.

RE: Bottom Line...
By echtogammut on 7/21/2010 7:34:34 PM , Rating: 2
Not iTerminators, the iCybermen. The iCybermen will assimilate all iProduct users, linking them all together via this data center, the iMind. Jobs will become iGod and control the collective iMind.

"I'm an Internet expert too. It's all right to wire the industrial zone only, but there are many problems if other regions of the North are wired." -- North Korean Supreme Commander Kim Jong-il

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