IDC estimates large iPod shuffle profit margin

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IDC estimates large iPod shuffle profit margin

Analysts at IDC estimate that Apple makes a 35 to 40 percent profit margin on each iPod shuffle the company sells, and stands to make even more from expected drops in flash memory pricing. IDC said the iPod shuffle’s flash memory, made by Samsung, is the most expensive component used in the device. IdaRose Sylvester, a senior semiconductor research analyst at IDC, estimates that the 512MB chip in the $99 shuffle costs Apple around $37.50 for each player—about two thirds of the estimated $59 that the company spends on total materials needed to make each 512MB shuffle.

“Apple is making very, very good margins on the shuffle,” Sylvester says. “We based our cost analysis on fourth quarter production prices, which would have been when they sourced [the components]. At some point they’ll switch to cheaper flash and the margins will improve.”

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Comments

1

And yet competing flash products tend to cost more. Screens must be expensive

Posted by Nagromme on February 24, 2005 at 7:01 AM (PDT)

2

Nagromme, not to mention all other “necessities” competitors think we need - voice recorders, fm tuners, memory card slot, line in recording, etc;.

I’m sure some people probably use these things, just not the 1 million shuffle owners at the end of this quarter

Posted by ipod21 on February 24, 2005 at 7:30 AM (PDT)

3

It may be true, and it may be an argument for a lower cost of the Shuffle (will the $199 mini hurt the $149 1gb shuffle….we’ll see), but is it really relevant? What is the margin on CD’s? I’ve heard the material cost of a CD is under a dollar, but the CD’s cost $20… I know, there’e the artist and marketing costs, but should a CD cost $20? Who decides the cost of a product….the market. If the margin is 40%, but people will still buy shuffles like crazy, does it really matter?

Posted by jimlat on February 24, 2005 at 7:42 AM (PDT)

4

where the heck are you buying cds for $20 and why?

even the major retailers like best buy tend to sell cds between $10-13

Posted by ACLeroK212 on February 24, 2005 at 7:57 AM (PDT)

5

the market may decide the profit margin, but some may chose to buy or not buy things on the perception of “getting a good deal” or peronal principle

For example, the 60gb photo ipod cost $600. Now you can get it (with all accessories) at buy.com for $430. I doubt Buy.com is selling it below their cost. So there was a MINIMUM of $170 profit (28%).

With the much cheaper prices now, people may be more inclined to buy it, and they could think that they are “sticking it to the man” by not buying at the “early adopter’s” price.

Posted by uicandrew on February 24, 2005 at 8:16 AM (PDT)

6

> will the $199 mini hurt the $149 1gb shuffle….we’ll see

Oh yes, it will.

But selling UP is the good kind of hurt

Posted by Nagromme on February 24, 2005 at 11:01 AM (PDT)

7

I don’t see anything wrong with this.
Not all iPods are sold direct by Apple, I’d like to see the % that goes through the retails channel where Apple has tio give margin for resellers etc.

I don’t feel ripped off by Apples margins on the iPods but I wouldn’t buy an accessory from them ( must be making 500%+ on the iPod socls )

Posted by Martin R in Mostly LA on February 24, 2005 at 8:29 PM (PDT)

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