“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.