“A change in the way Apple Inc. sells its upcoming iPhone could increase how much the consumer electronics giant makes on each phone sold, potentially boosting the company’s revenue by billions of dollars, as well as reduce the number of potential lost subscribers,” Ben Charny reports for Dow Jones.
“While the consumer will be paying about $200 less for each iPhone, Apple is seen as making more money, thanks to the subsidies that the phone’s carriers, including AT&T Inc., will pay. While the companies involved won’t comment on the plan, industry observers now suspect the subsidies may total more than $300 a phone, giving Apple an extra $100 or more on each phone sold,” Charny reports.
“Based on analysts’ forecast that between 35 million and 45 million iPhones will be sold before the end of 2010, that could add $4 billion or more to Apple’s top line,” Charny reports.
“Carriers likely are more willing to pay the high subsidy because of a simple change in the way iPhones are sold – Apple now is requiring a service contract at the time of sale. The move is seen cutting down on those iPhone buyers who ‘unlock’ their phones and use the devices on other cell phone networks,” Charny reports. “This action should help carriers benefit as much as possible from their iPhone relationship. It was estimated that about a quarter of the first-generation iPhones were unlocked, preventing those carriers from collecting the monthly subscription fee, which generally ranges between $70 and $130.”
“Analysts reckon Apple is pocketing as much as $352 per iPhone sold, based on estimates carriers pay about $525 per phone, which Apple is thought to spend about $173 to make, according to iSuppli, which tracks manufacturing costs,” Charny reports. “That means Apple could make between $12.3 billion to $15.8 billion in gross profit on the iPhone over the next two and a half years.”
Charny reports, “Apple might do even better in a few years. The cost of manufacturing the iPhone is expected to drop by at least 30% by 2010, according to iSuppli.”
Full article here.
cha ching!
Surely these numbers are wrong.
I can’t see our beloved Apple ripping it’s customers off now, would it?
ever consider becoming a shareholder of our beloved compmany??
The cost of manufacturing the iPhone is expected to drop by at least 30% by 2010, according to iSuppli.
This will give Apple two choices. Start reeping more profits while continuing to hose the competition.
Lower the price thereby eliminating the only potential differentiator between iPhone and iPhakes thus royally hosing the competition.
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Yes, I am a shareholder, but I’m also not one to be greedy. It doesn’t pay in the long term to piss off the masses.
Steve Jobs went from being an agent of change to an agent of tolerance. He sold his soul for these subsidies and became the mobile carriers’ best friend.
What happened to all that talk about how big bad Jobs kicked down AT&T;’s door, slapped an iPhone on the table and told the frightened execs “THIS is how it’s gonna be! We’re doing this MY way!” I thought he was a revolutionary?
The Man waved a few bucks in his face and he got down on his knees. He’ll probably be wearing a three-piece suit at the next Stevenote.
I been an AAPL shareholder for a long time. Purchased all my stock at under $20.00 and everyone called me crazy at the time.
Sold a small % of my AAPL holdings in December 2007 at $156.00. Let’s just say, I’m on the Feds, Christmas Card list of favorite tax payers now. I owe no one anything (no mortgage payments, nothing).
Now who looks crazy!
As Carl Sagan would say…
Billions and billions of dollars.
/BHA
why does profit (from AT&T;) mean Apple is ripping people off? Maybe you aren’t so much a cynic as a fool…..
@cynic:
This estimated “profit” number is based on estimated hardware costs for iPhone manufacture, which don’t include R&D;, software development, customer service, etc. I’m sure Apple has a large part of that “profit” already spent in developing the iPhone SDK, MobileMe, OS X for iPhone/iPod Touch, etc.
I’m sure Apple will make it’s customary 25% to 30% profit margin, perhaps more. And when the component costs decrease, we’ll see a decrease in iPhone prices.
“Yes, I am a shareholder, but I’m also not one to be greedy. It doesn’t pay in the long term to piss off the masses.”
People have a choice. They set the price. People can choose to pay for it or not. What’s to be pissed off about?
If people feel like they are getting ripped off then they have themselves to blame. My feeling is that if people value the phone that much they aren’t going to feel that way. It’s not like they are being forced to buy it.
Ok,
Why can’t there be an iPhone (with features) fo the carriers AND an iPhone that is unlocked?
There are no stoopid questions, only stoopid answers.
The Man waved a few bucks in his face and he got down on his knees. He’ll probably be wearing a three-piece suit at the next Stevenote.
I doubt it: in any case, if some of the forecasts are correct, Apple will be worth more than practically every phone company on the planet in around three to five years.
On that basis, most people around here – myself included – wouldn’t care if he turned up wearing nothing but a tutu and a Richard Nixon mask.
To all the piss heads who ‘think’ Apple are ripping anyone off.
– Where else can you buy a phone like this one? At least not for the next 3 years.
– As a shareholder, I want Apple to capitalise on their amazing products, not give them away thank you.
– It is patently obvious that demand for the iPhone will likely outstrip supply. Would that be so if it were being sold at a rip-off price?
@ MCCFR
Now that would be a kewl look!
“iPhone 3G to bring Apple billions of dollars more revenue”
And the stock nosedives in response. -6.50 today and -0.98 after-hours.
Friggin’ sheeple.
Baaa!! Baaa!! Baa-aaa-aaaallllmer!! Come baaaaaaack!!
It is so wrong to just look the cost of the manufacturing parts from iSuppli and consider the difference as pure profit. There are many more costs to the iPhone. bizlaw is right.
R2: I believe much more in Steve Jobs acute use of leverage than your limited judgmental analysis.
Was so happy when Jobs said it’s gonna be 199 but then it comes with a catch: it actually costs more than the first generation iPhone (with all those crazy phone plans).
Was planning to use free wireless hotspots in the city but then phone companies force you to pay and use their own wifi hotspots. Rip off. Don’t think it’ll be much more interesting than the previous phones anyway.
Shame.
oh no my shorts writes, “And the stock nosedives in response. -6.50 today and -0.98 after-hours.”
Blame it on fallout from $143/barrel oil and a sinking dollar. Market averages have been in a funk in recent weeks and are down some 20% from last fall’s peaks.
mw: blue – how I feel when I look at my monthly statements
AAPL went up $7.50 the other day and it fell about $7.70 today. This is just the BS that hedge funds pull trying to make some money.
The iPhone 3G does more than the original iPhone. Why shouldn’t you pay more to operate it. At least the cost is spread over 2 years, rather than the big nut up front. The numbers are all there to crunch. Either you can afford it and benefit from capabilities or you can’t. There are other phones and other plans. I don’t plan to upgrade to the iPhone 3G until I hear real world reports on ATT’s 3G network and see how the GPS is implemented. Otherwise, my first gen iPhone rolls happily along.
If you are a bit creative, it could cost you less than the first one. Here’s how.
Buy the new iPhone. Pay $200 for it, and use the remaining $200 to buy one single share of AAPL. There are online brokers that charge less than $10 per transaction. Let’s assume for the moment that in ten days, when iPhone goes on sale, AAPL shares climb to $190 (very unrealistic, since they are now $168). You now have one share of AAPL stock. For the life of your contract (two years), it is very realistic to expect that Apple will at least double its profits. Even under adverse economic conditions, it would be reasonable to expect that the stock price would follow, at least to an extent. With some conservative thinking built-in, your stock should be worth at least $300 by the time your contract is up. You sell it and pocket $90 ($100 minus $10 transaction fee). As we all know, the difference between cheapest plans on two iPhones is $40 in the end. Clearly, you came out ahead, while spending same $400 initially.
“The Man waved a few bucks in his face and he got down on his knees”
Then he started sucking. The result is the current reality, Steve moved from trying to change things to becoming the provider’s bitch.
Clearly you know nothing about company valuations, but keep posting anyway. Every opinion board needs it’s idiots.