iPhone nanos and the myth of 60% margins
I'm glad to see this. Pipe Jaffray analyst Gene Munster notes that reporters have overestimated Apple's margin on iPhones, probably because they have confused parts cost with the cost of goods (at least that's my supposition).
Now if we can just get other analysts to stop theorizing that Apple's going to introduce an iPhone based upon the iPod nano design that you dial using a simulation of a rotary dial on a touch pad. I know Apple filed a patent on it, but how wowed would you be to see dialing on a circular touch pad from a company that prides itself on great design? I mean can you see Steve Jobs doing a keynote bragging about what a great experience the rotary dial is?
[Drawing from Apple's patent application]
Mark my words: Music-playing phones with touch-button interfaces are already a dime a dozen. Apple addresses markets with great experiences that consumers will pay for, not mediocre experiences that compete tooth-and-nail to be the cheapest. Any cost-reduced iPhone is going to have 95% of the capabilities of its big brother and deliver a similarly delightful user experience because that is the brand value Apple has established for the iPhone. Anything else would undermine all that Apple has done with the product and brand.
Remember, most consumers hate their mobile phones because they provide lousy user experiences. The iPhone is the first mobile phone handset that consumers actually love to use. Apple's not going to race Motorola to the money-losing bottom of the mobile phone handset business by providing a poorer experience to save a few bucks.
UPDATE: J.P.Morgan's Bill Shope agrees with Blackfriars' point of view, thereby contradicting what his Asian colleague said. Specifically:
Full Disclosure: the author owns Apple stock at the time of writing.
And one other key point: Munster says estimates that gross margins for the iPhone are in the 40%-60% range “are too high.” He says the iPhone’s margins are likely in line or slightly higher than the corporate average of about 30%. He does say, though, that the company can gain some economies of scale from building new iPods with similar parts to the iPhone.
Now if we can just get other analysts to stop theorizing that Apple's going to introduce an iPhone based upon the iPod nano design that you dial using a simulation of a rotary dial on a touch pad. I know Apple filed a patent on it, but how wowed would you be to see dialing on a circular touch pad from a company that prides itself on great design? I mean can you see Steve Jobs doing a keynote bragging about what a great experience the rotary dial is?
[Drawing from Apple's patent application]
Mark my words: Music-playing phones with touch-button interfaces are already a dime a dozen. Apple addresses markets with great experiences that consumers will pay for, not mediocre experiences that compete tooth-and-nail to be the cheapest. Any cost-reduced iPhone is going to have 95% of the capabilities of its big brother and deliver a similarly delightful user experience because that is the brand value Apple has established for the iPhone. Anything else would undermine all that Apple has done with the product and brand.
Remember, most consumers hate their mobile phones because they provide lousy user experiences. The iPhone is the first mobile phone handset that consumers actually love to use. Apple's not going to race Motorola to the money-losing bottom of the mobile phone handset business by providing a poorer experience to save a few bucks.
UPDATE: J.P.Morgan's Bill Shope agrees with Blackfriars' point of view, thereby contradicting what his Asian colleague said. Specifically:
“We caution that the potential for a low-end, subsidized phone from Apple seems unlikely in the near term,” Shope writes this morning. “Perhaps Apple will choose to eventually replace its iPod family with phones over time, but it could be premature to assume this will happen in volume any time soon.”
Full Disclosure: the author owns Apple stock at the time of writing.
posted by Carl Howe at
11:12 AM
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