Originally Posted by peter02l
Don't give him a hard time. He is right. Apple should adjust its margins to the same level as Microsoft. Microsoft sold XP for 10 years at the same price. That is the proper way to take care of our customer. Office too has stayed a bargain for decades.
The general level of economic ignorance in this thread is astounding.
Not only do the cost figures not include design, hardware R&D (they don't just pick some random set of parts from a bin and say "there's our new phone" after all, and in the case of the CPU, they've done the custom engineering), test facilities (e.g., the now revealed highly advanced isolated signal labs), product testing on the line, defective units, etc. - they also leave out simple things like packaging, shipping, order-taking and processing (at the wholesale, company store and retail level), warehousing, marketing/advertising, returns, warranty service, tech support (consistently rated best in their industries, year after year, so you know they're putting more into it).
And beyond simple things, there are the costs of building, designing/architecting, maintaining and frequently refreshing a network of innovative, attractive upscale stores, sales staff, geniuses, stock, Apple.com, testing and vetting apps, etc., etc.
And beyond that there's the whole massive software development effort that leads to iOS 4 (and 5 and 6, etc.) - which, if it were simple, MS and Nokia would've gotten right years ago. Both at the kernel and UI levels (and everywhere between) - which has to be integrated across an increasing range of device - and interface reasonably seamlessly with OS X, Windows, the app, tunes and bookstores - and the phone networks in umpteen countries and a gaggle of languages. This could be the biggest single "cost" of making the devices.
And then there's economics - which seems to utterly elude many posters. For one example, by concentrating on a relatively small number of intensively engineered SKU's compared to the cranking out of endless quickly engineered (and quickly abandoned) models by companies like Motorola, HP, Dell, HTC, Samsung, Sony, etc., etc., Apple literally bets the store on each new product - a business model requiring a high gross margin. While it's working, it, yes, produces a high net profit, but when it's not (as in the '90's), the company can easily begin to skate the edge of a near-death experience.
E.g., if "Antennagate" was more than the smallish kerfluffle it now appears to be, the damage to the entire company could be significant and lasting.
Suggesting Apple "adjust its margins to the same level as Microsoft" - which loses money on most of its products except for its effective near monopoloy in Windows, Office and server software, while constantly throwing money down ratholes like Kin, Pink, UMPC, Plays for Sure, Zune, WinPhone, Money, photo-editing software -- and Bob! (and one could go on and on with this list) - is not only naive, but would, of course be illegal price-fixing, assuming Apple even had access to all the MS data necessary.
Apple and MS have entirely different business models and practices - MS being primarily a software company dependent on the enterprise market for reliable revenue streams, and Apple a device maker which supplies its own software depending primarily on the consumer and niche markets. It has to make its money and support all of the above from profits on selling devices.
I chose this particular post (among many low-hanging fruits of ignorance) because while jumping on the Apple's-margins-are-too-high bandwagon, it gives MS Office as an example of "a bargain." So what is MS's cost of "making" Office? A couple of plastic discs in a box (or a long download) - based on engineering and coding mostly done many years ago (throwing in a few new features and interface tweaks in infrequent new versions - many of which are arguably not advances at all, e.g., the ribbon interface, and others intended mostly to guide users into other MS products - the Live initiative, Exchange, etc.) - which they sell over and over for years between versions - for a likely "cost" of what, $20 (maybe) a pop? And sold for hundreds. Now there's a bargain!!Full disclosure: Apple obviously also designs its ecosystem to direct people to its other offerings - as does Sony. The question is whether those other products also appeal and add to the collective momentum. How's that Memory Stick, Mini-Disc, Atrac, etc. stuff working out for you, Sony?
And the same is true of Windows itself - a box of bits with a shelf life of years. The margins are fantastic, with the company's bottom line pulled down only by its failure to make popular, innovative products in any other areas.
And pointing to the price stability of XP ignores that Apple's OS prices haven't risen either - nor have the price of their machines in general - computers, pods, phones, etc. - or have fallen even as their functionality has increased.
What's next? An Apple Czar at the federal level deciding what's "fair" for Apple to make from its amazing, unique organization? Listen, if Apple stumbles in usability, functionality and appeal to Android, Windows or any other of the many competitors around the world, no one has to buy their stuff, and people will abandon them. So enough with talk of how they need to be humbled, shackled or regulated for the public good.
Apple's far from perfect, their goods aren't right for everyone and not everyone can afford them, but I'm more than willing to leave their fate in the hands of their decisions and practices and the world's collective willingness to buy in or not. It'll all sort itself out in the real world. Not everyone can afford a BMW either, and their gross margins are probably higher than a Ford Focus, and I'm wonderfully happy with my Camry, but I'm willing to allow them to work out their own fate as well.