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Originally Posted by dan30306  /t/755048/b-w-owners-thread/18090#post_24676452


I know for an absolute fact that they are losing money on the iPhone. They pay more in licenses for the latest and greatest technology than they do for parts. Do you really think Apple has their own fab to manufacture silicon chips like that nifty A7? They also have to pay the Qualcomm taxes for the wireless protocols, plus a bunch of other things they have licensed over the years. Per phone (just on the physical hardware) they are losing money. The bill of materials for the phone, then when you add in all the licensing, manufacturing costs, development costs to get a "loaded BOM"... exceeds the retail sales price by 22%.


They still make money on the phone long term, but they lose on the physical phone itself if you never take it out of the box and turn it on. Do you have any idea how much money Apple paid to Foxconn for custom equipment to even be able to manufacture them?

Unless you're a senior Apple executive, you of course don't know this as fact. Frankly, nor do I. However, take a look at their last quarter for example.

Apple announced its second quarter results for 2014 with revenue for the quarter coming in at $45.6 billion. That’s compared to the guidance it previously provided of $42 – $44 billion and estimates by analysts averaging approximately $43.5B. Apple’s $45.6 billion in revenue reported today is also up from the $43.6 billion in revenue in the year ago quarter.


Break down of device sales for Q2 2014 include 43.7m million iPhones, 16.3 million iPads, and 4.1 million Macs. Compare that to an average of 38M iPhones, 19.3M iPads, 4M Macs, and 3M iPods predicted by the analysts leading up to today. In the same quarter last year, Apple sold 37.4 million iPhones, 19.5 million iPads, just under 4 million Macs, and 5.6 million iPods.


It also reported net quarterly profit of $10.2 billion, or $11.62 per diluted share in contrast to quarterly net profit of $9.5 billion, or $10.09 per diluted share in the same quarter last year.



Not even listed in the breakdown is a relatively modest 4.5b in revenue for services, which includes iTunes and App Store sales among several other services, including AppleCare. Given that Apple returns 70% of iTunes and App Store sales to the content provider, and is responsible for paying for the delivery infrastructure of those services, what do you think was the major contributor to that 10.2b in net profits? A low margin portion of the 4.5b in sales, or the profits from the 43.7m iPhones and 16.3m iPads?
 

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Originally Posted by thrang  /t/755048/b-w-owners-thread/18090#post_24676549


Unless you're a senior Apple executive, you of course don't know this as fact. Frankly, nor do I. However, take a look at their last quarter for example.

Apple announced its second quarter results for 2014 with revenue for the quarter coming in at $45.6 billion. That’s compared to the guidance it previously provided of $42 – $44 billion and estimates by analysts averaging approximately $43.5B. Apple’s $45.6 billion in revenue reported today is also up from the $43.6 billion in revenue in the year ago quarter.


Break down of device sales for Q2 2014 include 43.7m million iPhones, 16.3 million iPads, and 4.1 million Macs. Compare that to an average of 38M iPhones, 19.3M iPads, 4M Macs, and 3M iPods predicted by the analysts leading up to today. In the same quarter last year, Apple sold 37.4 million iPhones, 19.5 million iPads, just under 4 million Macs, and 5.6 million iPods.


It also reported net quarterly profit of $10.2 billion, or $11.62 per diluted share in contrast to quarterly net profit of $9.5 billion, or $10.09 per diluted share in the same quarter last year.



Not even listed in the breakdown is a relatively modest 4.5b in revenue for services, which includes iTunes and App Store sales among several other services, including AppleCare. Given that Apple returns 70% of iTunes and App Store sales to the content provider, and is responsible for paying for the delivery infrastructure of those services, what do you think was the major contributor to that 10.2b in net profits? A low margin portion of the 4.5b in sales, or the profits from the 43.7m iPhones and 16.3m iPads?

No, I'm not an Apple executive however I do know the facts around hardware design and total cost of ownership. iPhone is very expensive to manufacture and the technologies for wireless are very expensive to license. You can't get around the wireless protocols and licenses involved to build a 4G device even if you are Apple. That's what keeps Qualcomm in business and their stock healthy. For example, as an engineer if you came to me and said you want to design a cell phone, I would tell you that you need $20M up front in just licensing to get started...but that's not the end of licensing. That's the beginning. After you get the provisional development licenses- you need to negotiate a per unit royalty in licensing with Qualcomm. Once that's out of the way- you better hit the minimum quantities per contract with Qualcomm or they will hit you with a penalty to make up for it. Now, add in the same thing for Bluetooth, WiFi, etc. Then break down the costs for the additional technologies bought by Apple- like Siri. Siri wasn't an Apple developed software- it was a company they bought. What that cost nobody knows but you can roll it into the piece price. Then add in all those other companies bought to the per piece price for devices. Once you add in manufacturing costs.. Apple is losing money between licensing, manufacturing, acquisitions etc.


Where they are making money is the combination of iTunes and data brokering. Did you know that State Farm insurance pays Apple for statistical data? They use the maps information to help calculate insurance premiums based on driver habits and traffic patterns. Any time you use Apple's native maps application as a consumer you are giving all your info to State Farm. Due to the volume of iPhone's out there- that data is worth a ton of money and sold at a premium. That's where Apple makes the most revenue- on the back end. The hardware itself is nothing more than a cost of doing business, but the device itself they lose money on.


OnStar, Mercedes MBrace, etc. all work on similar strategies by the way. Lose the money up front and make 5x on the back end of the deal.
 

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Quote:
Originally Posted by dan30306  /t/755048/b-w-owners-thread/18090#post_24676815


No, I'm not an Apple executive however I do know the facts around hardware design and total cost of ownership. iPhone is very expensive to manufacture and the technologies for wireless are very expensive to license. You can't get around the wireless protocols and licenses involved to build a 4G device even if you are Apple. That's what keeps Qualcomm in business and their stock healthy. For example, as an engineer if you came to me and said you want to design a cell phone, I would tell you that you need $20M up front in just licensing to get started...but that's not the end of licensing. That's the beginning. After you get the provisional development licenses- you need to negotiate a per unit royalty in licensing with Qualcomm. Once that's out of the way- you better hit the minimum quantities per contract with Qualcomm or they will hit you with a penalty to make up for it. Now, add in the same thing for Bluetooth, WiFi, etc. Then break down the costs for the additional technologies bought by Apple- like Siri. Siri wasn't an Apple developed software- it was a company they bought. What that cost nobody knows but you can roll it into the piece price. Then add in all those other companies bought to the per piece price for devices. Once you add in manufacturing costs.. Apple is losing money between licensing, manufacturing, acquisitions etc.


Where they are making money is the combination of iTunes and data brokering. Did you know that State Farm insurance pays Apple for statistical data? They use the maps information to help calculate insurance premiums based on driver habits and traffic patterns. Any time you use Apple's native maps application as a consumer you are giving all your info to State Farm. Due to the volume of iPhone's out there- that data is worth a ton of money and sold at a premium. That's where Apple makes the most revenue- on the back end. The hardware itself is nothing more than a cost of doing business, but the device itself they lose money on.


OnStar, Mercedes MBrace, etc. all work on similar strategies by the way. Lose the money up front and make 5x on the back end of the deal.

$10b net profits driven mostly from data brokering offsetting net losses from 60m units in iPhone and iPad sales...?


Back to our regularly scheduled programming...
 

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Originally Posted by thrang  /t/755048/b-w-owners-thread/18090#post_24676927


$10b net profits driven mostly from data brokering offsetting net losses from 60m units in iPhone and iPad sales...?


Back to our regularly scheduled programming...

OnStar was in the red for almost a decade. Until they took this same business model- they didn't become profitable. Apple has a ton of different hardware and of course the margin they are making on the computer hardware is significant. I was just addressing iPhone in my comments, however yes, the recurring monthly revenue is A LOT of Apple's business model. They get revenue from content publishers, all iTunes purchases, and data brokering with that being the largest of their revenue stream. Apple spent over $1B to have that data center built for a reason. It all surrounds iCloud and mobile traffic. Those ads that pop up in "free" apps are there for a reason and the content within them comes from one place.....
 

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Quote:
Originally Posted by dan30306  /t/755048/b-w-owners-thread/18090#post_24677012



OnStar was in the red for almost a decade. Until they took this same business model- they didn't become profitable. Apple has a ton of different hardware and of course the margin they are making on the computer hardware is significant. I was just addressing iPhone in my comments, however yes, the recurring monthly revenue is A LOT of Apple's business model. They get revenue from content publishers, all iTunes purchases, and data brokering with that being the largest of their revenue stream. Apple spent over $1B to have that data center built for a reason. It all surrounds iCloud and mobile traffic. Those ads that pop up in "free" apps are there for a reason and the content within them comes from one place.....
Quote:
Originally Posted by fokakis1  /t/755048/b-w-owners-thread/18090#post_24677132


Dan is right. No one makes a penny from outright iPhone sales post production.
http://www.forbes.com/sites/markrogowsky/2013/09/11/marginal-cost-and-benefit-apples-addiction-to-iphone-profits/
 

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Quote:
Originally Posted by thrang  /t/755048/b-w-owners-thread/18090#post_24676549


Unless you're a senior Apple executive, you of course don't know this as fact. Frankly, nor do I. However, take a look at their last quarter for example.



Not even listed in the breakdown is a relatively modest 4.5b in revenue for services, which includes iTunes and App Store sales among several other services, including AppleCare. Given that Apple returns 70% of iTunes and App Store sales to the content provider, and is responsible for paying for the delivery infrastructure of those services, what do you think was the major contributor to that 10.2b in net profits? A low margin portion of the 4.5b in sales, or the profits from the 43.7m iPhones and 16.3m iPads?

I figured using apple as a example would be a good one since everybody knows how they work i guess not sorry for pushing the discussion to that area people
. Apple _never_ sells hardware at a loss since they avoid being in these segments of the market. The content part until a few years ago with the explosion of the app store was always flat. It was (as you noticed) more split out then they put about 2B in max and got 2B out to run it. Now they added lots of crap to that part so its harder to see but its 'only' 4.5B in that part as you noted and can't make up for the overal profit.


For some idea on how much tech companies make while writing this post :

https://www.worldpayzinc.com/tech-wealth


for real info :

http://www.asymco.com


Now back to topic, that was the weird idea that parts make the cost of a product, in a way its true there are many companies that do use a different model amazon with its hardware is probably closest to what Dan outlines but they are a profit neutral company and i am still not convinced they can flip the switch into that mode if they want.


Daniel.
 

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Quote:
Originally Posted by thrang  /t/755048/b-w-owners-thread/18090#post_24677176


http://www.forbes.com/sites/markrogowsky/2013/09/11/marginal-cost-and-benefit-apples-addiction-to-iphone-profits/

They aren't telling you where they are making the money. Is Apple making a boatload of money on iPhone- the answer is yes. That's not my argument. My argument is on the physical hardware of iPhone costing more than they sell it for. It does- by 22%. Where they make up that 22% and add in a few hundred % of profit is in content aggregation. Its the whole sell the printer for $100 but charge $40.00 for ink game. Since the usage of the phone spans multiple years- they can count on 2 years worth of recurring revenue from multiple streams. Even if they gave the phone away for free, with no carrier subsidy on the device- Apple would still make money overall. They take money off the top of every sale in iTunes and they learned how to effectively monetize a device after the one time sale to create a substantial recurring revenue model. Apple is making money off of you from the day you buy the phone indefinitely most of the time because consumers are dumb enough to stand in line to buy the next version and keep buying content while they are standing in line.
 

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Hey, I resemble that remark!


Apple's gross margin on the phone was between 49-58% back in 2010-2012. Just the phone. That is a great business model.
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Originally Posted by dan30306  /t/755048/b-w-owners-thread/18090#post_24677782


They aren't telling you where they are making the money. Is Apple making a boatload of money on iPhone- the answer is yes. That's not my argument. My argument is on the physical hardware of iPhone costing more than they sell it for. It does- by 22%. Where they make up that 22% and add in a few hundred % of profit is in content aggregation. Its the whole sell the printer for $100 but charge $40.00 for ink game. Since the usage of the phone spans multiple years- they can count on 2 years worth of recurring revenue from multiple streams. Even if they gave the phone away for free, with no carrier subsidy on the device- Apple would still make money overall. They take money off the top of every sale in iTunes and they learned how to effectively monetize a device after the one time sale to create a substantial recurring revenue model. Apple is making money off of you from the day you buy the phone indefinitely most of the time because consumers are dumb enough to stand in line to buy the next version and keep buying content while they are standing in line.
 

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Originally Posted by Patrick Butler  /t/755048/b-w-owners-thread/18090#post_24677792


Hey, I resemble that remark!


Apple's gross margin on the phone was between 49-58% back in 2010-2012. Just the phone. That is a great business model.

How is that possible? It defies physics. The bill of material for the entry level iPhone 5C (just parts) is over $200.00. That's just chips. The 5S is probably pushing $300.


Then you need to add in:


1. The cost of development (engineering): Hundreds of millions

2. Licensing: Tens of millions per technology (CDMA, GSM, 3G, 4G, WiFi, Bluetooth, NFC)

3. Certifications (for every country that they ship the phone in): Tens of millions

4. Custom manufacturing tooling: Hundreds of Millions. Apple had to spend $750M on just custom robots for Foxconn to build the 2nd generation iPhone.

5. Advertising: Tens of Millions

6. Infrastructure for device specific features (i.e. Siri, iCloud, etc): Billions. The NC data center was $1B to build, and that doesn't include the TCO to run it.


How do you take just those 6 line items, which add up to billions, and pay for them? You aggregate the cost to a per device unit which adds to the cost of the device. You're telling me that when you take billions of dollars and break it down across the number of devices shipped it only adds up to a dollar per phone? Think about the monthly cost to run that $1B data center that supports iCloud, Siri, and Maps. Those features are free to the consumer once they buy the device- they aren't free to Apple. Assuming the two year contract life cycle- take that data center cost per month and multiply by 24.


Apple only shipped something like 4M (Jan 2008) of the original iPhone. The 3G license for CDMA (Verizon & Sprint) is more than $12M in IP licensing to Qualcomm... and then you have to pay a per unit royalty to Qualcomm per device. That's why there are only a handful of OEM cell phone manufacturers. The cell phone game is very expensive to get in before you even get started designing anything.


Is Apple making money- yes, absolutely. Are they making money on the phone day 1- no.
 

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Answer- it's gross margin, not net. While I may only pay $200 for a phone, the real cost is actually much higher. The 2 yr contract spreads the real cost over a much longer period of time. No contract phones are available from Apple. The 16gb 5S will cost you $649.


We know what Apple has a whack of change in the bank. How much they actually net on each device sold is a closely guarded secret I'm sure. We only know that gross margins they disclosed as part of their lawsuit with Samsung.

Quote:
Originally Posted by dan30306  /t/755048/b-w-owners-thread/18090#post_24677825


How is that possible? It defies physics. The bill of material for the entry level iPhone 5C (just parts) is over $200.00. That's just chips. The 5S is probably pushing $300.


Then you need to add in:


1. The cost of development (engineering): Hundreds of millions

2. Licensing: Tens of millions per technology (CDMA, GSM, 3G, 4G, WiFi, Bluetooth, NFC)

3. Certifications (for every country that they ship the phone in): Tens of millions

4. Custom manufacturing tooling: Hundreds of Millions. Apple had to spend $750M on just custom robots for Foxconn to build the 2nd generation iPhone.

5. Advertising: Tens of Millions

6. Infrastructure for device specific features (i.e. Siri, iCloud, etc): Billions. The NC data center was $1B to build, and that doesn't include the TCO to run it.


How do you take just those 6 line items, which add up to billions, and pay for them? You aggregate the cost to a per device unit which adds to the cost of the device. You're telling me that when you take billions of dollars and break it down across the number of devices shipped it only adds up to a dollar per phone? Think about the monthly cost to run that $1B data center that supports iCloud, Siri, and Maps. Those features are free to the consumer once they buy the device- they aren't free to Apple. Assuming the two year contract life cycle- take that data center cost per month and multiply by 24.


Apple only shipped something like 4M (Jan 2008) of the original iPhone. The 3G license for CDMA (Verizon & Sprint) is more than $12M in IP licensing to Qualcomm... and then you have to pay a per unit royalty to Qualcomm per device. That's why there are only a handful of OEM cell phone manufacturers. The cell phone game is very expensive to get in before you even get started designing anything.


Is Apple making money- yes, absolutely. Are they making money on the phone day 1- no.
 

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Quote:
Originally Posted by dan30306  /t/755048/b-w-owners-thread/18090#post_24677782


They aren't telling you where they are making the money. Is Apple making a boatload of money on iPhone- the answer is yes. That's not my argument. My argument is on the physical hardware of iPhone costing more than they sell it for. It does- by 22%. Where they make up that 22% and add in a few hundred % of profit is in content aggregation. Its the whole sell the printer for $100 but charge $40.00 for ink game. Since the usage of the phone spans multiple years- they can count on 2 years worth of recurring revenue from multiple streams. Even if they gave the phone away for free, with no carrier subsidy on the device- Apple would still make money overall. They take money off the top of every sale in iTunes and they learned how to effectively monetize a device after the one time sale to create a substantial recurring revenue model. Apple is making money off of you from the day you buy the phone indefinitely most of the time because consumers are dumb enough to stand in line to buy the next version and keep buying content while they are standing in line.

Dan, you really should look at actual earnings reports to check what you are saying.


Some time ago, Apple expressly carved out a separate category in their earnings report to isolate their non-hardware revenue to accurately reflect to the market where their revenues are emanating:

http://venturebeat.com/2014/01/27/apple-sees-record-itunes-software-revenue-at-4-4b/


To summarize, this includes all revenue from the iTunes Store, the iOS App Store, the Mac App Store, and the iBooks Store and revenue from sales of AppleCare, licensing, and other services. The total revenue was 4.4bn for the quarter. 70% of the iTunes, iOS AppStore, and iBooks store goes back to the content provider. iAds, which for 2013 was about $500+m, has a 60/40 split going to the advertiser. As noted, Apple also is responsible for the infrastructure costs delivering these services, so I'd be shocked if the net was more than 30%.


So say 1.3-1.5bn net for the quarter for this logical business unit. Out of 10.2 bn for the quarter.


There is no question Apple has built an incredible eco-system, where success in one category feeds another, which in turn feeds another. As long as they keep developing and delivering superior products and services, they are golden.


But the services/software net profits pale in comparison to the HW profits they are generating. You cannot get to 10.2bn in net profits for the quarter without huge profits on iOS HW devices given the revenue/profits in the services/software category. The iOS devices are the substantial majority of their sales. If they were losing money on every of the 60m units, their offsetting revenues/margin in remaining categories would have to be astronomical.


Of course they have costs beyond BOM...so does everyone, and at Apple's volumes, for as many years as they have been doing this, they likely are seeing maximum economics of scale. You know they purchased billions on custom fab equipment for their manufacturing parters in return for dedicated production contracts.


I understand loss-leader sales, but it is not done at this scale nor certainly do Apple's performance numbers indicate this.
 
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Originally Posted by Patrick Butler  /t/755048/b-w-owners-thread/18090#post_24677856


Answer- it's gross margin, not net. While I may only pay $200 for a phone, the real cost is actually much higher. The 2 yr contract spreads the real cost over a much longer period of time. No contract phones are available from Apple. The 16gb 5S will cost you $649.


We know what Apple has a whack of change in the bank. How much they actually net on each device sold is a closely guarded secret I'm sure. We only know that gross margins they disclosed as part of their lawsuit with Samsung.

No.... that's not how it works. The subsidy of the phone on the contract is done by the carrier- not Apple. Apple makes no recurring revenue on the carrier's business (cell phone bill). Carriers like AT&T and Verizon who sell the phone with contract for $200.00 are the ones taking the hit up front to subsidize the phone. We're talking about Apple's margin. If the 5S is $649, and half of it is $300 in parts- that leaves about $350 left for profit right? That $350 quickly gets eaten up to the point that it becomes negative when you roll in the few billion Apple had to spend upfront to build it, and add in the 2 years worth of data center costs to support the "free" features. Assume that Apple spent about $20B to build the multiple data centers, iTunes architecture, maps architecture, etc. as a safe number. Spread that out over the number of devices and that $350 profit is gone.
 

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Quote:
Originally Posted by dan30306  /t/755048/b-w-owners-thread/18090#post_24677875


No.... that's not how it works. The subsidy of the phone on the contract is done by the carrier- not Apple. Apple makes no recurring revenue on the carrier's business (cell phone bill). Carriers like AT&T and Verizon who sell the phone with contract for $200.00 are the ones taking the hit up front to subsidize the phone. We're talking about Apple's margin. If the 5S is $649, and half of it is $300 in parts- that leaves about $350 left for profit right? That $350 quickly gets eaten up to the point that it becomes negative when you roll in the few billion Apple had to spend upfront to build it, and add in the 2 years worth of data center costs to support the "free" features. Assume that Apple spent about $20B to build the multiple data centers, iTunes architecture, maps architecture, etc. as a safe number. Spread that out over the number of devices and that $350 profit is gone.

You're throwing numbers around like Oscar Madison threw spaghetti against the wall...at least look at the earnings and see how you can back your assumptions into the facts.
 

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Originally Posted by thrang  /t/755048/b-w-owners-thread/18090#post_24677861


Dan, you really should look at actual earnings reports to check what you are saying.


Some time ago, Apple expressly carved out a separate category in their earnings report to isolate their non-hardware revenue to accurately reflect to the market where their revenues are emanating:

http://venturebeat.com/2014/01/27/apple-sees-record-itunes-software-revenue-at-4-4b/


To summarize, this includes all revenue from the iTunes Store, the iOS App Store, the Mac App Store, and the iBooks Store and revenue from sales of AppleCare, licensing, and other services. The total revenue was 4.4bn for the quarter. 70% of the iTunes, iOS AppStore, and iBooks store goes back to the content provider. iAds, which for 2013 was about $500+m, has a 60/40 split going to the advertiser. As noted, Apple also is responsible for the infrastructure costs delivering these services, so I'd be shocked if the net was more than 30%.


So say 1.3-1.5bn net for the quarter for this logical business unit. Out of 10.2 bn for the quarter.


There is no question Apple has built an incredible eco-system, where success in one category feeds another, which in turn feeds another. As long as they keep developing and delivering superior products and services, they are golden.


But the services/software net profits pale in comparison to the HW profits they are generating. You cannot get to 10.2bn in net profits for the quarter without huge profits on iOS HW devices given the revenue/profits in the services/software category. The iOS devices are the substantial majority of their sales. If they were losing money on every of the 60m units, their offsetting revenues/margin in remaining categories would have to be astronomical.


Of course they have costs beyond BOM...so does everyone, and at Apple's volumes, for as many years as they have been doing this, they likely are seeing maximum economics of scale. You know they purchased billions on custom fab equipment for their manufacturing partners in return for dedicated production contracts.


I understand loss-leader sales, but it is not done at this scale nor certainly do Apple's performance numbers indicate this.

Right- but my argument is the cost of the phone; not that Apple is turning a profit. Its HOW they are turning a profit and its not on the hardware. iOS and the infrastructure behind it, along with the multiple recurring revenue streams is where they are making up for the loss on the hardware. Its still goes back to the inkjet printer model.


Inrix, the largest aggregator of real-time traffic paid Apple almost $450M last quarter just for iPhone GPS streams that are used to overlay real time traffic on a map. State Farm pays Apple $25M a quarter for the same information to use in calculating traffic patterns which they use for statistical risk analysis based on zip code driving habits. The list goes on and on to the point that the astronomical amount of funds Apple is making as a data broker gives them astronomical earnings. How they want to spin that to investors and the SEC is a totally different topic. My only argument is that at $649 for the phone Apple is losing money on it until the consumer powers it up and starts using it. Then they quickly start making the loss back and over the 2 year usage lifecycle they end up making a substantial profit.
 

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Originally Posted by thrang  /t/755048/b-w-owners-thread/18090#post_24677883


You're throwing numbers around like Oscar Madison threw spaghetti against the wall...at least look at the earnings and see how you can back your assumptions into the facts.

Earnings mean nothing. They can spin it how they want to.... a loaded bill of material is just that- loaded. The fancy accountants can break up costs in whatever sector they want and argue it until they are blue in the face. All operational, development, and manufacturing costs have to be accounted for in the piece price. That goes across every product that is ever built. If I designed you an amplifier for just you, and it only cost $100 to build- will you still build it if it costs $25K in tooling to build one, and then $100 a month to support it? You must aggregate the total cost of ownership in somehow..... regardless of how they want to spin it to the SEC and investors.
 

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Quote:
Originally Posted by dan30306  /t/755048/b-w-owners-thread/18090#post_24677888


Right- but my argument is the cost of the phone; not that Apple is turning a profit. Its HOW they are turning a profit and its not on the hardware. iOS and the infrastructure behind it, along with the multiple recurring revenue streams is where they are making up for the loss on the hardware. Its still goes back to the inkjet printer model.


Inrix, the largest aggregator of real-time traffic paid Apple almost $450M last quarter just for iPhone GPS streams that are used to overlay real time traffic on a map. State Farm pays Apple $25M a quarter for the same information to use in calculating traffic patterns which they use for statistical risk analysis based on zip code driving habits. The list goes on and on to the point that the astronomical amount of funds Apple is making as a data broker gives them astronomical earnings. How they want to spin that to investors and the SEC is a totally different topic. My only argument is that at $649 for the phone Apple is losing money on it until the consumer powers it up and starts using it. Then they quickly start making the loss back and over the 2 year usage lifecycle they end up making a substantial profit.

Where do you purport these data brokering revenues are reported? In the unit sales numbers? No, it would be in the 4.4bn revenue number for services and software. So how much net can you extract out of that category to contribute to the 10.bn?
 

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Originally Posted by thrang  /t/755048/b-w-owners-thread/18090#post_24677907


Where do you purport these broker revenues are reported? In the unit sales numbers? No, would be in the 4.4bn revenue number for services and software. So how much net can you extract out of that category to contribute to the 10.bn?

I would guess so. I'm not an accountant so I don't know how they can spin it. I know that when I do a hardware design I have to account for all the potential costs (licensing) and potential revenue streams in the RFQ's that come in. I had to account for the $1.33 per unit license cost for MP3 back in the day when I was doing radio designs. I had to account for the $6.12 per unit to Apple for the iPod co-processor license in every radio. When I finished the radio design- the licenses to support various technologies added up to more than the parts involved in building the radio.


Do you think Apple is going to tell consumers (hey by the way we are selling all your usage data to multiple companies)? Apple is providing Siri for free just to be nice. Consumers don't care most of the time- but if they knew all the hidden details and agendas it starts quickly driving down sales. Would you think that Apple is selling your info to State Farm? Do you care and is it going to stop you from buying a phone? Google does the same thing with Android, its not just Apple.
 

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What we know about Apple is that they know how to make money. There is no evidence that Apple is losing money on each phone sold. That is not their business model, although it may be HP's or Canon's with printers. Industry estimates has put the complete construction costs of an iPhone 5s at around $200. By that phone with no contract for $649, and you are grossing some nice money. Once again, what are they grossing on each phone sold? We'll never know. What we do know is that they are sitting on north of $130B in cash. They do that by making money on everything, like every other premium brand out there.


As for the Siri part, there is nothing nice about it. It's a service that helps differentiate the product and helps Apple maintain their premium brand status.
 

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Quote:
Originally Posted by Patrick Butler  /t/755048/b-w-owners-thread/18090#post_24677924


What we know about Apple is that they know how to make money. There is no evidence that Apple is losing money on each phone sold. That is not their business model, although it may be HP's or Canon's with printers. Industry estimates has put the complete construction costs of an iPhone 5s at around $200. By that phone with no contract for $649, and you are grossing some nice money. Once again, what are they grossing on each phone sold? We'll never know. What we do know is that they are sitting on north of $130B in cash. They do that by making money on everything, like every other premium brand out there.

If it costs $200.00, and you are selling it for $649, your hardware profit is $449 is what you are saying. Okay- but where are you accounting for the costs associated with supporting the sale? The data centers to host Siri, Maps, and so on that make people buy the product? Let's assume that $200 includes just the parts which is what these websites like iSupply are calculating. They aren't calculating the licensing, certifications, and so on in because they can't. They don't know what the IP license agreement is between Apple and Qualcomm. What about the $ Apple spent buying companies to put technology into the phone. How much did Apple pay for the company that developed Siri? How about how much did they spend on the company that originally designed the A7 chip? The list keeps going and going on money spent to get the phone to production but nobody is adding it in nor are they aggregating it across the piece price. That's where the loss comes in though on the hardware. I agree that in the end Apple is still making a boat load of money on the phone and that's not my argument. My argument is that the total bill of material with all costs added in is more than $649 per phone and Apple is losing money until the phone starts getting used. Once the phone turns on for the first time though- the cash starts pouring in which quickly puts them into the positive for that single device.
 
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