New Apple video-capable iPod dissected, gross profit margin estimated

“Apple Computer’s latest iPod has some new capabilities — namely the ability to play videos — and also a notable new supplier, according to a market research firm which has taken apart the new gadget to see what’s inside,” Arik Hesseldahl reports for BusinessWeek.

“That market researcher, iSuppli, says chipmaker Broadcom is the new name among a list of chip and component suppliers that has changed little from other iPod models over the years. Broadcom’s chip handles the video, while longtime suppliers PortalPlayer and Wolfson Microelectronics are still responsible for audio chips,” Hesseldahl reports.

“The latest iPod, like its smaller sibling, the iPod Nano, enjoys similarly fat gross profit margins in the neighborhood of 50%, according to iSuppli analyst Chris Crotty, who estimated the price of the parts used in the iPod. He reckons the 30-gigabyte version of the new iPod, which sells at retail for $299, costs Apple $151 to manufacture. ‘This is in line with what we have seen with other iPod products from Apple,’ he says,” Hesseldahl reports.

Full article here.

The New iPod with Video.  The ultimate music + video experience on the go.  Buy it now at the Apple Store. From $299. Free shipping.
Of course, Apple has additional costs with the iPod apart from raw materials, including everything from offering free shipping via the Apple Store to product packaging on up to global marketing.

Related articles:
USA Today: Apple’s new iPod + video: world’s foremost portable music players have gotten only better – October 20, 2005
Comprehensive review of Apple’s iPod 5G with Video – October 20, 2005
The Motley Fool: ‘Apple’s new video-enabled iPod is about to save the televised content industry’ – October 20, 2005
Ars Technica reviews Apple’s new video-capable iPod – October 20, 2005
NY Times Pogue: ‘watching video on new iPod’s 2.5-inch screen is completely immersive’ – October 19, 2005
MSNBC columnist: after initial coolness wears off, Apple’s video iPod will wind up in dresser drawer
Apple’s $1.99 iTunes TV show downloads may be ‘the savior of good television’ – October 17, 2005
Apple opens Pandora’s box for the media business, could have profound long-term consequences – October 17, 2005
BofA analyst: Apple video play an ‘evolutionary opportunity,’ 9.3m iPods to be sold this quarter – October 17, 2005
Apple has the potential to change not just the audio industry, but the whole entertainment industry – October 17, 2005
Advertisers welcome Apple’s iTunes Store commerical-free content – October 17, 2005
New York Times writer can’t think different: ‘video iPod may not be ready for prime time’ – October 17, 2005
Podfather: iPod porn is going to be huge – October 14, 2005
Forrester Research: Apple transformed music distribution, now it is doing the same for video – October 14, 2005
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Using QuickTime Pro to create videos for playback in new Apple iPods – October 13, 2005
Analyst: Apple has just produced ‘the tipping point’ for entertainment content – October 13, 2005
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  1. Correction. iTMS has been profitable for quite a while. It was profitable last quarter and the quarter before. It’s been profitable for something like a year and a half. Its revenues may still only be a fraction of iPod revenues, but contrary to conventional wisdom, has been slightly profitable for quite a while.

  2. Toataly off topic but I would like to take this oportunity to welcome all the Windows users who have suddenly come out of the woodwork over at the Apple site. You wanna play porn, START RIPPING INTO MP4 OR H264. Its that simple. Steve, you’re a genius. Introing video, no matter how crap it is in it’s first release will certainly hook more people.

  3. Is there something wrong with Apple making a profit? I say, “More power to ’em!”

    Let the good times roll!!!


    And now Apple can affors that $1 a year that they are paying Steve. ” width=”19″ height=”19″ alt=”smile” style=”border:0;” />

    er… 1st post

  4. Amazing, this is Business Week and this guy doesn’t realise that the margin is actually 100%.

    For instance, if they were sold for $450, this guy says that would be 33% margin when it is actually 150%.

    I guess his major wasn’t business, but I can guess it was weak.

  5. Joe; “Amazing, this is Business Week and this guy doesn’t realise that the margin is actually 100%.”

    A margin is based on the cost as a percentage of the sale price. If the cost is $150 and the sale price is $299 the margin is 50% because $150 is 50% of the sale price.

    There’s no such thing as a margin of 100%. That would mean the product cost nothing to produce.

  6. margin is not same as markup. Maybe the markup from manufacture to retail is 100%, but a lot of fingers are into that piece of pie along the way. Anyway, gross margins, profits whatever, have no real meaning. Net is what matters, unless we are talking about movie grosses, which you want a piece of, vs. movie nets, which are always zero or less if you believe the studios.

  7. JOe, joe, joe….
    Not every journalist is an idiot. The guy does work at Business Week and that´s why he knows what he (and all the editors and proof readers that check his work) is doing…and that´s why you don´t work there. ” width=”19″ height=”19″ alt=”wink” style=”border:0;” />
    To quote you: “I guess his major wasn’t business…”

  8. My wife is a 30 year veteran journalist and one of the best in her field. I asked her about BusinessWeek and she said that they are one of the best financial publications in the world.

    If you don’t like the truth then cover your eyes and ears but don’t ever, ever, shoot the messenger. This article is well written and sounds tight.

    Joe, one final point, I was a journalist for over ten years and I never made anything up, it was always sourced. There are some members of the media who are a disgrace to the profession. This guy is “legit”. That’s more than I can say for you. Where are your sources to back up your assertions? Yeah right!!!

    MDN word: “speak” as in speak the truth

  9. There’s no such thing as a margin of 100%. That would mean the product cost nothing to produce

    For example, a service, like a blowjob..

    But seriously, this is COST OF GOODS SOLD. Just the physical parts.. there is something called OVERHEAD, which is huge for technology, because of.. R&D.

    Unfortunately, despite all the Kool Aid, Apple employees do not work for free.. you have to pay them.. and the iPod absorbs this through overhead costs.. So what is this estimation worth? *shrug.. I think they’re trying to say that Apple has flexibility in how they allocate costs to determine their own profit margins.

    The actual profit margins could be very healthy when Apple starts reissuing old tech under new iPods (eg. no additional R&D costs.. this is how each version of MS Office gets more and more profitable)

  10. Wrong wrong wrong except for hinky. Margin is the sales minus the cost of goods and services sold. In the case of this ipod it is $150ish, and cost is $150ish, which, being equalish, makes it 100%. It is actually a function of the “markup”.

    Hinky is right because it IS the proofreaders job to prevent such gaffes. But notice, I didn’t say idiot.

    nansani and macaholic, with their pud pulling BA’s, might apply to this magazine.

    And poor mike, oblivious to the meaning of “gross” in a business sense, went to great pains to explain “net”, after a fashion.

    Bikersrule, who can argue with your credentials, subject as they are to complete verification and believability? And who can deny that any publication can make a mistake occasionally? Although I am sure your old lady and you, with 40 years of combined perfection, never were party to one. BTW is she one of those glassy eyed, leather clad occupants of a bitch seat?

  11. For example, a service, like a blowjob..

    You’re kidding, right? Risk of disease, or other physical harm. Wear and tear on your mouth or throat’s lining. Cleaning costs: tissues, gargle, toothpaste, brushes, laundry (spills)…. Mental anguish if you’re doing it for money. Medical bills, doctor’s consultancy fees….

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