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January 18, 2007

Apple: still a hardware maker

Posted by Tricia Duryee at 12:05 PM

Questions have popped up about Apple's business model since it announced it will launch its own mobile phone in June.

Was the phone a way to generate more sales on iTunes (unlikely since initial reports suggest that users will be unable to buy songs through the phone)? Or is it in line with Apple's traditional model, where it makes most of its money off of hardware, like the iPod?

Today, iSuppli, a market intelligence firm, took a shot at answering that question.

It estimated that each Apple iPhone sold will generate nearly a 50 percent gross margin for Apple and partner Cingular Wireless, giving the companies a hefty profit. Said iSuppli analyst Andrew Rassweiler:

iSuppli estimates the 4Gbyte version of the Apple iPhone will carry a $229.85 hardware BoM (Bill of Materials) and manufacturing cost and a $245.83 total expense, yielding a 50.7 percent margin on each unit sold at the $499 retail price. Meanwhile, the 8GByte Apple iPhone will sport a $264.85 hardware cost and a $280.83 total expense, amounting to a 53.1 percent margin at the $599 retail price."

Perhaps that will lead to price cuts down the road?

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Tricia Duryee
Tricia Duryee
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Angel Gonzalez
Angel Gonzalez
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Kristi Heim
Kristi Heim
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