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Google Nexus 7 parts estimated to cost $152 - Page 2

post #41 of 110
Quote:
Originally Posted by kotatsu View Post

 

Do you Apple fanboys really want to live in a world with no competition? Do you think that would spur Apple on to innovate and keep prices down?  Would it hurt you to once in every 10 million venom filled posts to say that someone other than Apple is capable of producing something nice?

 

The Nexus 7 is getting great reviews and is priced extremely aggressively. There's no reason why it shouldn't do well.

I have no issues or concerns with Apple's ability to innovate. It's the rest of the barren tech landscape populated by mainly cheap, second-tier, third-rate wannabes -- probably the only world that you understand -- that I find laughable. No, make that pitiful.

 

Yeah, "great reviews" for Nexus 7. Same as the reviews that worked out so fabulously for Amazon's "iPad killer."lol.gif

post #42 of 110
Quote:
Originally Posted by Gazoobee View Post

 

I think it extremely unlikely that Apple would bother to make an 8GB iPad mini (or an 8GB anything for much longer).  

It's just too small, even for crap magazines and a few PDF's and games.  

 

IMO it's far more likely that Apple will do what they typically do which is produce the mini in the same "size steps" as the regular iPad.  They will be 16GB, 32GB, & 64GB, and the low end one (16GB), will certainly not be $300.  

 

I agree with this. Application sizes for iPad Apps have ballooned because of the Retina display. 8Gb is just not enough, and the cost difference is relatively small $13.50 v $21. Apple wants us to have enough space to buy more Apps & Content.

post #43 of 110
Quote:
Originally Posted by AdonisSMU View Post

I will be getting my Nexus 7 next week. 

 

What, time to update the JooJoo?

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Better than my Bose, better than my Skullcandy's, listening to Mozart through my LeBron James limited edition PowerBeats by Dre is almost as good as my Sennheisers.
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post #44 of 110
Quote:
Originally Posted by AdonisSMU View Post

I will be getting my Nexus 7 next week. 

I feel for you bro. Not everyone can afford the best.

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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post #45 of 110
Quote:
Originally Posted by kotatsu View Post

I'm so pleased I don't live in the Apple fanboy bizzaro world where everything without an Apple logo is worse than sewage.  Did you even bother to read any Nexus 7 reviews before spewing hate?  I've read a few, and it's getting great scores, as it should based on the extremely good specs (the CPU and GPU are considerably quicker than the iPad 3 for example) and great OS.  And as a bonus, no hideous skeumorphism in the built in apps. 

Not the high road.

Quote:
Originally Posted by patpatpat View Post

I've looked at almost all the available reviews on the Nexus 7 and the consensus is far from garbage. Now I would agree there are a lot of garbage Android phones out there, but this tablet does appear to be quite good. I'll defer final judgement though until these things start shipping to the masses.

The high road.
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post #46 of 110
Beyond being cheap, I can't see a reason for wanting this thing.

Tim Cook said something about people that buy brand X tablets for whatever reason, and how great they are when first open the box, but how the excitiment drops off quickly due to a lack of quality in terms of apps, build quality, user experience and ecosystem. These same people end up as iPad customers more often than not.

This is exactly what happened to the Kindle Fire, and the Nexus 7 will suffer the same fate.
post #47 of 110
Quote:
Originally Posted by Macky the Macky View Post

I feel for you bro. Not everyone can afford the best.

Douchebags like you are what give apple fans a bad name. From the New york times, engadget, the verge, CNET, Washington post, Allthings D, Mashable, CNN, Fox, NBC the list goes on and on, have said this tablet is not only good but its very good. The opinion on this tablet is that it is an absolute steal at the price point. I have not read one review that does not recommend getting this tablet.

 

Most reviews also agree this makes Kindle fire look like a joke. I have an ipad 2 and a Mac pro. But I also have a galaxy nexus, and a Samsung Windows 7 desktop. My favorite product out of all 3 is without a doubt my ipad 2 followed by my nexus. I just love technology. Pathetic attitudes like that, are makes outsiders without apple products think were all douchbags that walk around smelling our own farts. 

 

I plan on getting one, I can't pass up that price point with those amazing reviews. Take my money google. Im on board. Just like if the iphone 5 amazes me ill be dumping my nexus. I hate pathetic fanboys. Glad I'm not one. 

post #48 of 110
Quote:
Originally Posted by Technarchy View Post

Beyond being cheap, I can't see a reason for wanting this thing.
Tim Cook said something about people that buy brand X tablets for whatever reason, and how great they are when first open the box, but how the excitiment drops off quickly due to a lack of quality in terms of apps, build quality, user experience and ecosystem. These same people end up as iPad customers more often than not.
This is exactly what happened to the Kindle Fire, and the Nexus 7 will suffer the same fate.

Have you read the reviews. 

 

Here is a few.

 

http://www.theverge.com/2012/6/29/3125396/google-nexus-7-review

 

http://www.nytimes.com/2012/07/05/technology/personaltech/nexus-7-googles-new-tablet-seriously-challenges-the-ipad-state-of-the-art.html?pagewanted=all

 

From big time apple product users.

 

https://allthingsd.com/20120710/from-google-the-toughest-challenger-to-the-ipad/

 

http://venturebeat.com/2012/06/29/nexus-7/#s:dsc02161

 

 

Conclusion main reason to get this tablet is its high quality. Google, and Asus did a great job. Steve Job's ghost wont hunt you down if you admit it. 

post #49 of 110
Quote:
Originally Posted by kevt View Post

 

I agree with this. Application sizes for iPad Apps have ballooned because of the Retina display. 8Gb is just not enough, and the cost difference is relatively small $13.50 v $21. Apple wants us to have enough space to buy more Apps & Content.

Apple wants us to have enough space to buy more apps and content?

 

How much space does the New iPad 16gb leave?  maybe the ipod touch 8gb?

 

or the iphone 4 8GB?

 

They are equally as pathetic as the 8/16 provided by google/asus.


or worse, as Apple are looking at 100$-200$ to add 16gb - 32GB of memory...   

Household: MacBook, iPad 16gb wifi, iPad 64gb wifi, iPad Mini 32gb, coming iPhone 5S, iPhone 4S 32gb, iPhone 32gb, iPod Touch 4th gen x1, iPod nano 16gb gen 5 x2, iPod nano gen 3 8gb, iPod classic...
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Household: MacBook, iPad 16gb wifi, iPad 64gb wifi, iPad Mini 32gb, coming iPhone 5S, iPhone 4S 32gb, iPhone 32gb, iPod Touch 4th gen x1, iPod nano 16gb gen 5 x2, iPod nano gen 3 8gb, iPod classic...
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post #50 of 110
If the iPod touch goes down in price, that leaves room for iPad mini.

Cheapest iPod touch for $150
Cheapest iPad mini for $250

IPod shuffle being phased out and replaced by cheaper iPod nano.
post #51 of 110

So the difference between 8gb and 16gb is 6.50$ 

 

Apple why do you charge an extra 100$

post #52 of 110
Quote:
Originally Posted by jragosta View Post

I'd love to see your evidence for that - from a reliable source.
As it is, Apple doesn't report gross margin by product line AFAIK, so you can only guess. But given that their average GM is 40% and Apple's strategy doesn't include loss leaders, it's extremely unlikely that they're selling the iPod Touch at cost.
BTW, have you noticed the gross inconsistency in your position? On one hand, you argue that Apple is selling the iPod Touch ($229) at or near cost, but on the other hand, you argue that they could make a decent margin on a 7" iPad at $199 (and a healthy margin at $249). Considering that the iPad has a lot more materials, 4x the screen size, faster processor, and much larger battery, those two positions are contradictory. If they sell the iPad Mini at roughly the same cost as the iPod Touch ($249 vs $229), the margins will be much lower on the iPad Mini. If they sell the iPad Mini below the current price of the iPod Touch (i.e., $199), they would lose money - or, at the very least, not make anything.

1- It's as "reliable" a source as this thread is.  There are 3rd party webpages that estimate the cost of materials- just like the one here for the Nexus.  The numbers I got were from iFixit.  Google and you'll get a handful of others in the same ballpark.

2- The touch isn't $229, its $199.  And iFixit estimated the cost currently at $140ish (its almost 1am and I don't remember the exact number).

3- I was stating that it is close to cost based on what you mentioned (~20% GM before R&D, etc). My basis was that what you are saying about the nexus and it's costs are almost identical to the iPod touch and its costs for the past several years (although the last $140ish was over a year ago so has obviously gone down since).

4- A decent margin is relative.  20% isn't shabby for most manufacturers- just not Apple.  But its been proven that Apple will lower margins on their cheaper items- i.e.- the touch.  So I was simply stating they COULD release a $199 mini and still have a profit- I never said a "Decent margin".  Just a profit.  I still don't think they will- again- I AGREE WITH YOU IT WILL BE $249-$299.  But they have had similar margins in the past, so it wouldn't be out of the realm of possibility is all I'm saying.

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2012 27" iMac i7, 2010 27" iMac i7, 2011 Mac Mini i5
iPad Air, iPad Mini Retina, (2) iPhone 5S, iPod Touch 5
Time Capsule 5, (3) AirPort Express 2, (2) Apple TV 3

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post #53 of 110
Quote:
Originally Posted by jragosta View Post

There's not a chance in he77 that Apple would price an iPad Mini at $199. That leaves no margin after the real costs are considered (see above) - and Apple is not interested in selling a device at cost.

I'd say the 7.85" iPad would start at $299

Sure it's $100 more than the Nexus 7..... but it's also an iPad...

The only reason the Kindle Fire may (or may not) have sold is because it was $300 less than the $500 iPad.

But you'd be crazy to spend $200 on a Kindle Fire or Nexus 7 if you could get an iPad Mini for only $100 more.

.
Edited by Michael Scrip - 7/11/12 at 11:13pm
post #54 of 110
Quote:
Originally Posted by Techstalker View Post

Have you read the reviews. 

Here is a few.

http://www.theverge.com/2012/6/29/3125396/google-nexus-7-review

http://www.nytimes.com/2012/07/05/technology/personaltech/nexus-7-googles-new-tablet-seriously-challenges-the-ipad-state-of-the-art.html?pagewanted=all

From big time apple product users.

https://allthingsd.com/20120710/from-google-the-toughest-challenger-to-the-ipad/

http://venturebeat.com/2012/06/29/nexus-7/#s:dsc02161


Conclusion main reason to get this tablet is its high quality. Google, and Asus did a great job. Steve Job's ghost wont hunt you down if you admit it. 

You'll notice that no one puts this thing in the same league as the iPad.

The two points that come up most are that android tablets sucks, but Nexus 7 sucks the leaast, but it's cheap so that's okay.

Sorry if I don't see that as high praise or an endorsement.
post #55 of 110

I wonder why "cost analyses" are always limited to "Parts + Manufacture"… OK, throw in "fuzzy" mention of the inevitable but unknown R&D costs… but why do they always stop there, as if there are no other associated costs of bringing a product to market, and maintaining its presence there? These are not insignificant factors weighing on potential profitability.

 

Here are a few that leap to mind, in no particular order:

 

- Packaging (if not included in the "manufacturing cost" total)

 

- Warehousing, Distribution and Fulfillment. (probably outsourced, but still represents a substantial cost for volumes numbering in the millions)

 

- Marketing & PR.

 

- Customer Support. (Never insignificant for large-volume "computer" products)

 

- Warranty & Service processing, fulfillment and defective-product replacement. (Consider a 5% replacement/repair rate to be the high side of normal)

 

- All of the personnel and administrative costs of supporting the above list...

 

 

Just these can easily add quite a few $ per unit to the costs, depending on volume sell through. They are more like R&D costs in that they are "fuzzy" and unknowable… but they shouldn't be discounted in articles like these. For the "total cost of doing business" around a product, surely you could add another estimated 10% to the base cost without being too far off the mark…?


Edited by tribalogical - 7/12/12 at 2:16am
post #56 of 110
Quote:
Originally Posted by Michael Scrip View Post


I'd say the 7.85" iPad would start at $299
Sure it's $100 more than the Nexus 7..... but it's also an iPad...
The only reason the Kindle Fire may (or may not) have sold is because it was $300 less than the $500 iPad.
But you'd be crazy to spend $200 on a Kindle Fire or Nexus 7 if you could get an iPad Mini for only $100 more.
.

 

And a 7.85" 4:3 ratio display is about 30 square inches of screen real estate, vs. up to 22" square on the competing 7", 16:9/16:10 screens… 

 

40% more screen real estate, in a smaller form factor iPad, only $100 more. That would certainly be a competition...

post #57 of 110
I have my I/O version 1wink.gif doesn't hurt to work for this giant everyone hates.

I like it. Love it? Meh.

Verdict on Nexus 7?

Replacement for my iPad or Any 9" plus tablet? : No
Blazing fast, smooth running, good battery life?: Yes
Good app selection?: Meh, as always in android,many apps aren't optimized or incompatible 
Screen quality is pretty good.
Easiest OS to use compared to iOS? Not so much.( Based on GF's opinion)
iPad killer? Not really, Kindle fire killer is more like it.
So far jellybean is intuitive and isn't completely unpolished/terrible. The non orienting/ no landscape mode home screen (on the N7)is killing me (though a fix is in the works sans google)

Loving it so far, but would I completely fall in love? Meh. I like to have more screen real-estate from a larger tablet. 

The 7" still feels a bit niche.  

My verdict: Worth the $199 introduction price @8GB
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post #58 of 110
Quote:
Originally Posted by kotatsu View Post

 

Do you Apple fanboys really want to live in a world with no competition? Do you think that would spur Apple on to innovate and keep prices down?  Would it hurt you to once in every 10 million venom filled posts to say that someone other than Apple is capable of producing something nice?

 

The Nexus 7 is getting great reviews and is priced extremely aggressively. There's no reason why it shouldn't do well.

You are missing the point. The majority of posts around here are made not by true Apple fanboys but by the Apple shareholders. Yes, they do want to live in a world with no competition, they don't really care if Apple innovate or not and they don't want to keep prices down. In fact they want Apple to raise prices as high as possible! Yes, Nexus 7 has great reviews and the thought that Nexus 7 might be profitable at 199$ scare them, because Apple might be forced to lower prices and make less profit. And while that is good for the consumer, it is bad for the greedy shareholders who posts here!

post #59 of 110
Quote:
Originally Posted by jragosta View Post

There's not a chance in he77 that Apple would price an iPad Mini at $199. That leaves no margin after the real costs are considered (see above) - and Apple is not interested in selling a device at cost.

Your costs are mostly, with the exception of shipping and packaging - and the former is not always free - sunk costs or costs to the rest of the company. R&D is definitely sunk. Advertising is bought in bulk, they just add the iPad mini to the advertising spend. You also added licensing which would apply to competitors of Apple but not Apple. Even to Google paying MS. Not Apple. Support costs the client if they get AppleCare. Etc.

Quote:
Originally Posted by Gazoobee View Post

I think it extremely unlikely that Apple would bother to make an 8GB iPad mini (or an 8GB anything for much longer).  
It's just too small, even for crap magazines and a few PDF's and games.  

IMO it's far more likely that Apple will do what they typically do which is produce the mini in the same "size steps" as the regular iPad.  They will be 16GB, 32GB, & 64GB, and the low end one (16GB), will certainly not be $300.  

Not necessarily as they had a 4G iPod touch for $199 and the idea was to use that to attract customers and curtail the competition. Apple are fully aware that they killed the competition with the lower end iPod touches.
Quote:
Originally Posted by jragosta View Post

No, it hasn't been debunked. See my posts where I demonstrate that this 'analysis' grossly underestimates the costs and overestimates Google's share of the revenue. You don't have any idea of whether Apple would make money at $200.
I'd love to see your evidence for that - from a reliable source.
As it is, Apple doesn't report gross margin by product line AFAIK, so you can only guess. But given that their average GM is 40% and Apple's strategy doesn't include loss leaders, it's extremely unlikely that they're selling the iPod Touch at cost.
BTW, have you noticed the gross inconsistency in your position? On one hand, you argue that Apple is selling the iPod Touch ($229) at or near cost, but on the other hand, you argue that they could make a decent margin on a 7" iPad at $199 (and a healthy margin at $249). Considering that the iPad has a lot more materials, 4x the screen size, faster processor, and much larger battery, those two positions are contradictory. If they sell the iPad Mini at roughly the same cost as the iPod Touch ($249 vs $229), the margins will be much lower on the iPad Mini. If they sell the iPad Mini below the current price of the iPod Touch (i.e., $199), they would lose money - or, at the very least, not make anything.

Firstly the iPod touch costs from $199.00 see:

http://store.apple.com/us/browse/home/shop_ipod/family/ipod_touch

Notice how fast the costs of the iPod touch goes up and the big increment from the 8GB to the 32G with no 16G? Why not start at 16G? Because the point is to have crap memory so people go to the middle costing iPod. Memory doesnt cost Apple that much, the entry level iPod touch may be a loss leader, or have a small margin but the line has a healthy one. As I have mentioned before.

And since we dont know the average margins on all devices how can we know if they have a loss leader or not, particularly if we add all your "extras", which you want to do for the iPad mini but not for existing products? ( I'll look for iSuppli on the iPod touch in the next post if I can find it)

So, the average selling price of the iPod touch line is increased by the higher end models in the same line with useful memory. The ASP of the line is much higher than $199 - and somebody did work this out, I need to go look it up - because people were willing, or coerced by salesmen or the lack of useful memory, to buy the higher model when in the store. And thats where the margins are made. The overall margins of a line - the iPad line, the iPod touch line, the iPad mini line, are what counts. Not the margin on the cheapest models. And thats why you cant open them folks. And why the memory is glued.

Also, one particular point on screens. Non-retina screens would sell for nothing, the process they use cuts up larger chunks of screens into the size, you just change the cutter for the iPad mini. The costs of the retina screens are probably higher regardless of the size.

Lastly the iSuppli numbers are retails costs, not the costs a company which has invested billions in these very technologies would be paying.
Quote:
Originally Posted by NelsonX View Post

You are missing the point. The majority of posts around here are made not by true Apple fanboys but by the Apple shareholders. Yes, they do want to live in a world with no competition, they don't really care if Apple innovate or not and they don't want to keep prices down. In fact they want Apple to raise prices as high as possible! Yes, Nexus 7 has great reviews and the thought that Nexus 7 might be profitable at 199$ scare them, because Apple might be forced to lower prices and make less profit. And while that is good for the consumer, it is bad for the greedy shareholders who posts here!

Yes, it is not a fanboy site but a investor site, at least originally. Hence the lack of concern about market share and the concern about margins. Apple is priced by the market to assume a drop in margins, I dont think the market is assuming that they will not continue to grow.
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post #60 of 110
Quote:
Originally Posted by asdasd View Post

Your costs are mostly, with the exception of shipping and packaging - and the former is not always free - sunk costs or costs to the rest of the company. R&D is definitely sunk. Advertising is bought in bulk, they just add the iPad mini to the advertising spend. You also added licensing which would apply to competitors of Apple but not Apple. Even to Google paying MS. Not Apple. Support costs the client if they get AppleCare. Etc.

Think it through. When Google makes an Android device, they have to pay Microsoft a license fee - so that is a cost that must be included.

When Apple makes an iOS product, they use their own OS - which is included in the R&D numbers. As for support, there are warranty costs even if the customer gets AppleCare. The first 90 days is covered by warranty.
Quote:
Originally Posted by asdasd View Post

Not necessarily as they had a 4G iPod touch for $199 and the idea was to use that to attract customers and curtail the competition. Apple are fully aware that they killed the competition with the lower end iPod touches.
Firstly the iPod touch costs from $199.00 see:
http://store.apple.com/us/browse/home/shop_ipod/family/ipod_touch
Notice how fast the costs of the iPod touch goes up and the big increment from the 8GB to the 32G with no 16G? Why not start at 16G? Because the point is to have crap memory so people go to the middle costing iPod. Memory doesnt cost Apple that much, the entry level iPod touch may be a loss leader, or have a small margin but the line has a healthy one. As I have mentioned before.
And since we dont know the average margins on all devices how can we know if they have a loss leader or not, particularly if we add all your "extras", which you want to do for the iPad mini but not for existing products? ( I'll look for iSuppli on the iPod touch in the next post if I can find it)
So, the average selling price of the iPod touch line is increased by the higher end models in the same line with useful memory. The ASP of the line is much higher than $199 - and somebody did work this out, I need to go look it up - because people were willing, or coerced by salesmen or the lack of useful memory, to buy the higher model when in the store. And thats where the margins are made. The overall margins of a line - the iPad line, the iPod touch line, the iPad mini line, are what counts. Not the margin on the cheapest models. And thats why you cant open them folks. And why the memory is glued.
Also, one particular point on screens. Non-retina screens would sell for nothing, the process they use cuts up larger chunks of screens into the size, you just change the cutter for the iPad mini. The costs of the retina screens are probably higher regardless of the size.

So you're simply guessing about Apple's costs. You could have saved a lot of typing by just stating that up front.
Quote:
Originally Posted by asdasd View Post

Lastly the iSuppli numbers are retails costs, not the costs a company which has invested billions in these very technologies would be paying.
Yes, it is not a fanboy site but a investor site, at least originally. Hence the lack of concern about market share and the concern about margins. Apple is priced by the market to assume a drop in margins, I dont think the market is assuming that they will not continue to grow.

Not true. iSuppli most certainly does not use retail prices. In fact, for many of these components, there ARE no retail prices - they are only available at wholesale from the manufacturer. iSuppli's estimates are based on what they think the manufacturer pays. They may not be as accurate for Apple as for other companies, but it is their estimate. Regardless, that point simply makes it even less useful to look at iSuppli numbers.
Quote:
Originally Posted by Andysol View Post

1- It's as "reliable" a source as this thread is.  There are 3rd party webpages that estimate the cost of materials- just like the one here for the Nexus.  The numbers I got were from iFixit.  Google and you'll get a handful of others in the same ballpark.
2- The touch isn't $229, its $199.  And iFixit estimated the cost currently at $140ish (its almost 1am and I don't remember the exact number).
3- I was stating that it is close to cost based on what you mentioned (~20% GM before R&D, etc). My basis was that what you are saying about the nexus and it's costs are almost identical to the iPod touch and its costs for the past several years (although the last $140ish was over a year ago so has obviously gone down since).
4- A decent margin is relative.  20% isn't shabby for most manufacturers- just not Apple.  But its been proven that Apple will lower margins on their cheaper items- i.e.- the touch.  So I was simply stating they COULD release a $199 mini and still have a profit- I never said a "Decent margin".  Just a profit.  I still don't think they will- again- I AGREE WITH YOU IT WILL BE $249-$299.  But they have had similar margins in the past, so it wouldn't be out of the realm of possibility is all I'm saying.

You're still arguing contradictory points. On one hand, you're arguing that at least the base iPod Touch at $199 is sold at break even or very low margin. Then you argue that a 7-8" iPad Mini could be sold at $199 with some profit. Please explain how Apple could do that. If the iPod Touch is break even at $199 or very low margin, how do they sell a device with 4 times the screen size, much larger case, much larger battery, and much faster CPU for the same price and make a profit?

Very few manufacturing companies can survive on less than 20% margin. The general rule of thumb is that if a manufacturing margin is less than 30%, you have to think very hard about it or have a high volume/low overhead strategy to justify it.

But rather than generalizations, let's look at specifics. AMZN is not a manufacturing company in any real sense and manufactured products are only a small fraction of their revenues, so looking at their overall picture is going to underestimate their overheads (manufacturing adds overheads that don't have a major part in their current product lines - even if you outsource - things like quality, scrap, R&D etc). But in their most recent quarter, AMZN's overheads were 23% of revenues. So even if a new manufactured didn't have any costs for R&D, scrap, quality, support, etc, they'd need a gross margin of at least 23% just to break even. And since manufacturing DOES have added costs that don't appear in a pure distribution model (as represented by the 23% figure), they'd actually need greater than 23% gross margin just to break even on the product sale.
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post #61 of 110

I'm thinking about selling my new iPad and getting the Nexus 7, looks pretty sweet and while I do like the new iPad, it's not really much better than my Galaxy Tab 8.9.

post #62 of 110
Quote:
Originally Posted by JackMohack View Post

I'm thinking about selling my new iPad and getting the Nexus 7, looks pretty sweet and while I do like the new iPad, it's not really much better than my Galaxy Tab 8.9.

That's nice. I hope you're happy with your Nexus 7.
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post #63 of 110
Quote:
Originally Posted by Apple v. Samsung View Post

So the difference between 8gb and 16gb is 6.50$ 

 

Apple why do you charge an extra 100$

 

 

Because enough people will pay it that the extra profit makes up for the lost sales, yielding a net increase in profit.

 

Or, in simpler terms, because they can.

post #64 of 110
Quote:
Originally Posted by tribalogical View Post

I wonder why "cost analyses" are always limited to "Parts + Manufacture"… OK, throw in "fuzzy" mention of the inevitable but unknown R&D costs… but why do they always stop there, as if there are no other associated costs of bringing a product to market, and maintaining its presence there? These are not insignificant factors weighing on potential profitability.

 

Here are a few that leap to mind, in no particular order:

 

- Packaging (if not included in the "manufacturing cost" total)

 

- Warehousing, Distribution and Fulfillment. (probably outsourced, but still represents a substantial cost for volumes numbering in the millions)

 

- Marketing & PR.

 

- Customer Support. (Never insignificant for large-volume "computer" products)

 

- Warranty & Service processing, fulfillment and defective-product replacement. (Consider a 5% replacement/repair rate to be the high side of normal)

 

- All of the personnel and administrative costs of supporting the above list...

 

 

Just these can easily add quite a few $ per unit to the costs, depending on volume sell through. They are more like R&D costs in that they are "fuzzy" and unknowable… but they shouldn't be discounted in articles like these. For the "total cost of doing business" around a product, surely you could add another estimated 10% to the base cost without being too far off the mark…?

 

It is a standard accounting breakdown:

 

 

Definition of 'Cost Of Goods Sold - COGS'

The direct costs attributable to the production of the goods sold by a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs. COGS appears on the income statement and can be deducted from revenue to calculate a company's gross margin. Also referred to as "cost of sales".Investopedia Says

Investopedia explains 'Cost Of Goods Sold - COGS'

COGS is the costs that go into creating the products that a company sells; therefore, the only costs included in the measure are those that are directly tied to the production of the products. For example, the COGS for an automaker would include the material costs for the parts that go into making the car along with the labor costs used to put the car together. The cost of sending the cars to dealerships and the cost of the labor used to sell the car would be excluded. The exact costs included in the COGS calculation will differ from one type of business to another. The cost of goods attributed to a company's products are expensed as the company sells these goods. There are several ways to calculate COGS but one of the more basic ways is to start with the beginning inventory for the period and add the total amount of purchases made during the period then deducting the ending inventory. This calculation gives the total amount of inventory or, more specifically, the cost of this inventory, sold by the company during the period. Therefore, if a company starts with $10 million in inventory, makes $2 million in purchases and ends the period with $9 million in inventory, the company's cost of goods for the period would be $3 million ($10 million + $2 million - $9 million).

Read more: http://www.investopedia.com/terms/c/cogs.asp/#ixzz20Phx1CZD

post #65 of 110
Quote:
Originally Posted by jragosta View Post

Think it through. When Google makes an Android device, they have to pay Microsoft a license fee - so that is a cost that must be included.
When Apple makes an iOS product, they use their own OS - which is included in the R&D numbers.

The R&D for an iPad mini are largely the same as for the iPad maxi. And R&D costs dont increase per device sold - not for Apple - , those costs are sunk.
Quote:
RAs for support, there are warranty costs even if the customer gets AppleCare. The first 90 days is covered by warranty.

There are costs, but that is true about the iPod touch, our comparison model.
Quote:
So you're simply guessing about Apple's costs. You could have saved a lot of typing by just stating that up front.

I didn't guess the retail price of the iPod touch which you got spectacularly wrong. Which largely invalidates the rest of your arguments.

And way to ignore the rest of my post. Firstly you ignored the big gaping mistake you made on the retail cost of the iPod touch. You were out by $30. You are also ignoring my main point - that the margins are for the line not the cheapest models and Apple deliberately keeps it's lower models - on the touch - with inadequate memory to entice consumers to gravitate to the next model. However they still have a cheap model in the game.

You are ignoring all this because the $199 iPod touch - which has a retina display and a A4 chip - disproves your theory. As for asking me for proper stats iSuppli's recent reports on the iPod touch are behind a firewall. Which means you know as much as me on that one, but less than most people on the actual retail cost of the iPod touch. Which largely should exclude you from any discussion on margins.

Quote:
Not true. iSuppli most certainly does not use retail prices. In fact, for many of these components, there ARE no retail prices - they are only available at wholesale from the manufacturer. iSuppli's estimates are based on what they think the manufacturer pays. They may not be as accurate for Apple as for other companies, but it is their estimate. Regardless, that point simply makes it even less useful to look at iSuppli numbers.

Ok it uses wholesale prices for other companies. We would have to assume that Apple is cheaper, particularly if it uses old components used in the old iPad 2 etc.
Quote:
You're still arguing contradictory points. On one hand, you're arguing that at least the base iPod Touch at $199 is sold at break even or very low margin. Then you argue that a 7-8" iPad Mini could be sold at $199 with some profit. Please explain how Apple could do that. If the iPod Touch is break even at $199 or very low margin, how do they sell a device with 4 times the screen size, much larger case, much larger battery, and much faster CPU for the same price and make a profit?

The screen size will be cheaper as it is not a retina display. The battery size will not be huge as it needs to power as small a number of pixels as the iPhone retina displays. The graphics card - the same. Only the CPU needs to be in any way "expensive" to compete with the Nexus - but they may not care on the specs of the CPU and just depend on the iPad selling on brand. It wont be the iPad 3 chip, possibly the iPad 2. This will allow for some Android fan boy crowing but what of it.
Quote:
Very few manufacturing companies can survive on less than 20% margin. The general rule of thumb is that if a manufacturing margin is less than 30%, you have to think very hard about it or have a high volume/low overhead strategy to justify it.

That would be overall margin across the entire line, rather than on one product. Apple can use higher margins on iPhones and top end iPads, and in the over all line of iPad minis to subsidise one measly model.
Quote:
But rather than generalizations, let's look at specifics. AMZN is not a manufacturing company in any real sense and manufactured products are only a small fraction of their revenues, so looking at their overall picture is going to underestimate their overheads (manufacturing adds overheads that don't have a major part in their current product lines - even if you outsource - things like quality, scrap, R&D etc). But in their most recent quarter, AMZN's overheads were 23% of revenues. So even if a new manufactured didn't have any costs for R&D, scrap, quality, support, etc, they'd need a gross margin of at least 23% just to break even. And since manufacturing DOES have added costs that don't appear in a pure distribution model (as represented by the 23% figure), they'd actually need greater than 23% gross margin just to break even on the product sale.

Again would be overall margin across the entire line, rather than on one product. Amazons total gross margins are 2%, if they can afford a loss leading hardware device to sell content, Apple can afford a loss leading model of one device which can be offset by prices elsewhere.

Your fallacy is that one low end model model which sells below cost, at cost, or low margins will destroy margins elsewhere. It wont

We do need to get recent figures on the iPod touch - selling for $199 not $229 - and on whether it is in profit using all your extra criteria on R&D etc. What we do know is the margins on the 8G model are much less than the margins on the 64G model, which is the exact same device with a few extra memory sticks probably costing Apple an extra 10-30$ max - the tear down in the article here says that google is paying $8 more for a 16G, or 2 8G sticks, than an 8G stick. The top end iPod touch sells for $200 more, and that is where the margins on the iPod touch line are made. Simply if the iPod touch is at cost at retail, the 64G is at 50% margins, and the mid range at 30%. If the iPod touch has 10% margins, the other margins increase sequentially. Thus Apple makes enough margins on the iPod touch line even if the cheap model is not getting the 25-40% margins of the overall line. And the cheap model comes with inadequate memory - 8G not 16 G - to encourage the purchasing higher models, after the customer has entered the store, or gone online. The jump to the middle level model is 28G memory.

Apple, if it follows this model, will look at the iPad mini line and say - across the whole line how can we make 30% - and put in the massive price differentials on memory alone to make the margins, while going cheap on a lower end model with underpar memory.


No price umbrella, as Tim Cook himself says.
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post #66 of 110
Quote:
Originally Posted by JerrySwitched26 View Post

It is a standard accounting breakdown:

blah, blah, blahbity blah

What's your point?

First, your own link says "The exact costs included in the COGS calculation will differ from one type of business to another." In reality, COGS can be determined a number of different ways. As just one example, for industrial products that go through distributors, the distributor often gets a substantial commission - up to 20% of the selling price. That commission can be included in COGS if you choose to do so (at least under some circumstances), but most people don't. There is some flexibility. In fact, we had some products where the distributor commission was greater than our COGS (we didn't include commissions in COGS), so COGS could vary by over 100% depending on how you count it.

More importantly, it's really irrelevant. COGS does not determine if a product is profitable by itself. You also have to factor in the overheads. Simply:

Revenues - amount of money received from the customer
COGS - amount of money spent to manufacture or buy the product
Gross margin - Revenues minus COGS
Overheads - All costs attributed to the product that are not included in COGS. This would include indirect costs like management's time, R&D, advertising, marketing, and so on.
Net income (profit) - Gross margin minus overheads

So a product might have very high gross margins but still not be profitable. In the examples above, most of the costs that iSuppli leaves out are overhead costs - which are very real costs associated with the product even if they're not direct manufacturing costs. But iSuppli also leaves out a number of costs that ARE included in COGS so you can't even use their figures to calculate a gross margin. For example, the following costs are part of COGS but not counted by iSuppli:
- Shipping. While your source is correct that OUTBOUND shipping is generally not included in COGS, inbound shipping usually is. The cost of getting the item to your door is a real manufacturing cost attributed to the raw material
- Scrap
- Quality cost. Some quality costs can be attributed to the product and included in COGS. You would not typically include the cost of setting up a quality program, but you would typically include the cost of individual piece inspections
Even some indirect costs (R&D, support, etc) can sometimes be counted as COGS if you have a way to quantify them and calculate the amount that's attributable directly to the manufacture of the product. In the case of an iPad, for example, OS development would generally not be counted in COGS, but the cost of developing a new machining process (or Liquidmetal back) very well could be. It doesn't have to be, though - it might be preferable to capitalize it and amortize the cost over the life of the technology when that is allowed.
Edited by jragosta - 7/12/12 at 6:33am
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post #67 of 110

First, iSupply numbers are complete wrong. They have no clue what a company is paying for parts. I personally know the pricing of some parts and have seen iSupply reports and their pricing has never been right on it always too high or too low. 

 

Case and point, 6 months ago Fire was loosing money for Amazon and today it is making them money, There is no way Amaizon would be able to take that much cost out of the product in that short amount of time and suppliers do not drop their pricing that much. Have you seen component suppliers loosing or showing decrease earning not happening. So where did all the money go that iSupply claims came out of the product. It is not happening, Isupply number are just completely wrong. So this analysis is completely worthless.

post #68 of 110
Quote:
Originally Posted by kotatsu View Post

Do you Apple fanboys really want to live in a world with no competition? Do you think that would spur Apple on to innovate and keep prices down?  Would it hurt you to once in every 10 million venom filled posts to say that someone other than Apple is capable of producing something nice?

The Nexus 7 is getting great reviews and is priced extremely aggressively. There's no reason why it shouldn't do well.

i think there is a argument for, when apple has no competition they produce better products

where was the competition when the iPad was released?...
where was the competition when the iPhone was released?...
where was the competition when the iPod was released?
where was the competition when the iMac was realeased?
where was the competition when the " iApple II" (LOL... bad pun, yes) was released? (in this case it was expensive and the commodore PET was cheaper, but the PET did not have color)

IMO saying that we need competition solely to provide CHEAP prices, is stupid!...
in order for something to be the same and cheaper, requires copying.

hence, cheap means the absence of originality. (the the only thing cheap/free that is original is university research)
post #69 of 110
Quote:
Originally Posted by tribalogical View Post

I wonder why "cost analyses" are always limited to "Parts + Manufacture"… OK, throw in "fuzzy" mention of the inevitable but unknown R&D costs… but why do they always stop there, as if there are no other associated costs of bringing a product to market, and maintaining its presence there? These are not insignificant factors weighing on potential profitability.

 

Here are a few that leap to mind, in no particular order:

 

- Packaging (if not included in the "manufacturing cost" total)

 

- Warehousing, Distribution and Fulfillment. (probably outsourced, but still represents a substantial cost for volumes numbering in the millions)

 

- Marketing & PR.

 

- Customer Support. (Never insignificant for large-volume "computer" products)

 

- Warranty & Service processing, fulfillment and defective-product replacement. (Consider a 5% replacement/repair rate to be the high side of normal)

 

- All of the personnel and administrative costs of supporting the above list...

 

 

Just these can easily add quite a few $ per unit to the costs, depending on volume sell through. They are more like R&D costs in that they are "fuzzy" and unknowable… but they shouldn't be discounted in articles like these. For the "total cost of doing business" around a product, surely you could add another estimated 10% to the base cost without being too far off the mark…?

Those are mostly indirect costs that are tougher to estimate, and even if estimated, tougher to allocate to particular products of particular makers.

post #70 of 110
Quote:
Originally Posted by Techstalker View Post

Douchebags like you are what give apple fans a bad name. From the New york times, engadget, the verge, CNET, Washington post, Allthings D, Mashable, CNN, Fox, NBC the list goes on and on, have said this tablet is not only good but its very good. The opinion on this tablet is that it is an absolute steal at the price point. I have not read one review that does not recommend getting this tablet.

 

Most reviews also agree this makes Kindle fire look like a joke. I have an ipad 2 and a Mac pro. But I also have a galaxy nexus, and a Samsung Windows 7 desktop. My favorite product out of all 3 is without a doubt my ipad 2 followed by my nexus. I just love technology. Pathetic attitudes like that, are makes outsiders without apple products think were all douchbags that walk around smelling our own farts. 

 

I plan on getting one, I can't pass up that price point with those amazing reviews. Take my money google. Im on board. Just like if the iphone 5 amazes me ill be dumping my nexus. I hate pathetic fanboys. Glad I'm not one. 

You can complain all you want about Apple 'douchebags', but the ones who are really asinine are those who show up in an Apple forum to diss it. Tough, if they can't handle the pushback.

 

And, I am sure they appreciate your services in sticking up for them! Now, go play with your Nexus....

post #71 of 110
Quote:
Originally Posted by jragosta View Post

You're still arguing contradictory points. On one hand, you're arguing that at least the base iPod Touch at $199 is sold at break even or very low margin. Then you argue that a 7-8" iPad Mini could be sold at $199 with some profit. Please explain how Apple could do that. If the iPod Touch is break even at $199 or very low margin, how do they sell a device with 4 times the screen size, much larger case, much larger battery, and much faster CPU for the same price and make a profit?
Very few manufacturing companies can survive on less than 20% margin. The general rule of thumb is that if a manufacturing margin is less than 30%, you have to think very hard about it or have a high volume/low overhead strategy to justify it.
But rather than generalizations, let's look at specifics. AMZN is not a manufacturing company in any real sense and manufactured products are only a small fraction of their revenues, so looking at their overall picture is going to underestimate their overheads (manufacturing adds overheads that don't have a major part in their current product lines - even if you outsource - things like quality, scrap, R&D etc). But in their most recent quarter, AMZN's overheads were 23% of revenues. So even if a new manufactured didn't have any costs for R&D, scrap, quality, support, etc, they'd need a gross margin of at least 23% just to break even. And since manufacturing DOES have added costs that don't appear in a pure distribution model (as represented by the 23% figure), they'd actually need greater than 23% gross margin just to break even on the product sale.

Again- I think the prices would be $249/$299- I can't reiterate that enough.  But it is easily possible and reasonable chance they would have a $199.

 

First off, the iPod touch last year was a 28% GM ($144 cost $200 retail).  And that was in 2011- so costs (of say memory, connectors, speakers, etc) have dropped from there.  Second, a non-retina would be cheaper even though it is larger.  Third, the case and battery will be more.  The CPU will be the same comparably cost-wise as the A4 was last year for the iPod touch.  So its not substantially more if at all.  And if they sold the 8gb for $199, and a 32gb for $299, the 32gb model would easily make a large chunk of profit.  If Apple makes a $249 model- it will be 16gb, not 8gb- no way they do half the storage of their competitors for more $.

 

Lastly, why do you keep putting words in my mouth.  Never once did I say that an iPod Touch is sold at break even.  It's clearly not.  $144 doesn't equal $199 in the world I live in.

 

And please spare me with your knowledge of everything in the world, particularly gross margins.  I deal with those numbers daily.  14 hours ago, you thought the iPod Touch was $229- and now you're an expert on the subject matter?  Seriously examine yourself one day- you are a know-it-all... except you don't know-it-all.

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post #72 of 110

I think Google's strategy here is to build out a tablet user base and provide enough users to entice developers to write more tablet specific apps (one of the biggest complaints about the Android tablet ecosystem).  By providing a reasonably high quality and very attractively priced tablet, they might convince non-tablet owners to buy one (I don't think they have a chance of getting any iPad converts).  People have already suggested that Google is planning a stable of Nexus tablets so if this one is somewhat successful we may see a more direct challenge to the iPad.  I don't think anyone expects any Nexus tablet to take over the lead that the iPad has but they may succeed in expanding their base considerably.  Given that there are so many Android phones out there, people will want to remain in the same ecosystem and have their media files available across all of their devices.

post #73 of 110
Quote:
Originally Posted by Techstalker View Post

 

I plan on getting one, I can't pass up that price point with those amazing reviews. Take my money google. Im on board. Just like if the iphone 5 amazes me ill be dumping my nexus. I hate pathetic fanboys. Glad I'm not one. 

 

Well said! Fanboys often forget that competition between companies is what drives them to innovate and release increasingly impressive products for us to use.  We'd all be stuck using 2.5G iPhones from 2007 if nobody had challenged Apple.

post #74 of 110
Quote:
Originally Posted by lubernabei View Post

Well said! Fanboys often forget that competition between companies is what drives them to innovate and release increasingly impressive products for us to use.  We'd all be stuck using 2.5G iPhones from 2007 if nobody had challenged Apple.

This is, of course, nonsense.

Apple has a very high customer retention rate and thrives by selling new products to existing customers. They do that by making newer versions that are more attractive than the previous ones.
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post #75 of 110
Quote:
Originally Posted by JerrySwitched26 View Post

 

It is a standard accounting breakdown:

 

 

Definition of 'Cost Of Goods Sold - COGS'

The direct costs attributable to the production of the goods sold by a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs. COGS appears on the income statement and can be deducted from revenue to calculate a company's gross margin. Also referred to as "cost of sales".Investopedia Says

Investopedia explains 'Cost Of Goods Sold - COGS'

COGS is the costs that go into creating the products that a company sells; therefore, the only costs included in the measure are those that are directly tied to the production of the products. For example, the COGS for an automaker would include the material costs for the parts that go into making the car along with the labor costs used to put the car together. The cost of sending the cars to dealerships and the cost of the labor used to sell the car would be excluded. The exact costs included in the COGS calculation will differ from one type of business to another. The cost of goods attributed to a company's products are expensed as the company sells these goods. There are several ways to calculate COGS but one of the more basic ways is to start with the beginning inventory for the period and add the total amount of purchases made during the period then deducting the ending inventory. This calculation gives the total amount of inventory or, more specifically, the cost of this inventory, sold by the company during the period. Therefore, if a company starts with $10 million in inventory, makes $2 million in purchases and ends the period with $9 million in inventory, the company's cost of goods for the period would be $3 million ($10 million + $2 million - $9 million).

Read more: http://www.investopedia.com/terms/c/cogs.asp/#ixzz20Phx1CZD

 

Great references and links, thank you.

 

And you might not guess it by my post, but I actually understand a great deal about COGS… (admittedly not *everything*, as I'm not an MBA… but I also assume most people don't, and so try not to get too technical in forum posts…)

 

The problem happens for me when they start to directly assign profitability potential based on these costs alone. Unless we're saying that their profit is based on Gross Margin alone… which it isn't. Operating costs and indirect expenses also matter when we're talking about something being profitable. At the end of the day, will the Nexus 7 be a "profitable product" for them? I'd say they're skirting right on the edge of that… it could bring a trickle of revenue, or remove a bit from their overall profits.

 

Will it hurt Google to do this? Certainly not…..

 

Anyway, my point here is, it's fine for the article to talk about COGS, but equating that finding with a profitability assumption without including the remaining "standard accounting practices", is a tad unrealistic… 

 

I'm open to being corrected, by the way :)

post #76 of 110
Quote:
Originally Posted by jragosta View Post


This is, of course, nonsense.
Apple has a very high customer retention rate and thrives by selling new products to existing customers. They do that by making newer versions that are more attractive than the previous ones.


OK, I'll give you that, they do want to sell current customers new versions.  However, competition from other manufacturers still plays a role in driving innovation.  Look at Intel for example.  They delayed releasing next generation chips because the competition from AMD was so far behind they didn't see the need to spend the money releasing new ones.  Competition is good for consumers most of the time (Blu-Ray v. HD-DVD wasn't).  Nobody is forcing you to buy a Nexus 7 and I'm willing to bet that a mini iPad will probably be a better overall experience than the Nexus 7 but having the Nexus on a store shelf does nothing to hurt regular consumers.

post #77 of 110
Quote:
Originally Posted by lubernabei View Post

I think Google's strategy here is to build out a tablet user base and provide enough users to entice developers to write more tablet specific apps (one of the biggest complaints about the Android tablet ecosystem).  By providing a reasonably high quality and very attractively priced tablet, they might convince non-tablet owners to buy one (I don't think they have a chance of getting any iPad converts).  People have already suggested that Google is planning a stable of Nexus tablets so if this one is somewhat successful we may see a more direct challenge to the iPad.  I don't think anyone expects any Nexus tablet to take over the lead that the iPad has but they may succeed in expanding their base considerably.  Given that there are so many Android phones out there, people will want to remain in the same ecosystem and have their media files available across all of their devices.

Kinda stale and late as a strategy to bring to the table(t) now, no?

post #78 of 110

On the topic of "Apple killers," see this news item on ultra books: http://bits.blogs.nytimes.com/2012/07/11/some-ultra-disappointments-for-computer-makers/?hpw

 

Laughable.

post #79 of 110
Quote:
Originally Posted by lubernabei View Post


OK, I'll give you that, they do want to sell current customers new versions.  However, competition from other manufacturers still plays a role in driving innovation.  Look at Intel for example.  They delayed releasing next generation chips because the competition from AMD was so far behind they didn't see the need to spend the money releasing new ones.  Competition is good for consumers most of the time (Blu-Ray v. HD-DVD wasn't).  Nobody is forcing you to buy a Nexus 7 and I'm willing to bet that a mini iPad will probably be a better overall experience than the Nexus 7 but having the Nexus on a store shelf does nothing to hurt regular consumers.

You still haven't established any evidence that Apple is driven by innovation - you have nothing but some inane rumors.

Even your final claim is incorrect. Competition CAN hurt consumers - at least in the short run. If Apple is forced to run around in circles and invest money in things that have no real value, that's time and money that could better have been spent on something else. Most of Apple's biggest innovations were not driven by competition, but rather by their relentless internal drive. Do you think the iPhone was based on making a better Blackberry than RIM, for example? Or maybe it's supposed to be a better Motorola Razr? It is often better to stop worrying about the competition and rather start with a clean sheet and figure out what the consumers need.
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post #80 of 110
Quote:
Originally Posted by Andysol View Post

 

Again- I say this under the guise that I, too, think Apple will sell it for $249 or $299.  But lets not pretend that Apple doesn't sell a device for around cost.  iPod touches have consistently been for years ~$155 for parts just like this breakdown although the price was $229..  Now estimates on cost last year when they dropped the price, it dropped to around $142.  And... holy crap- they sell for $199.  Wow....

 

Apple, like anyone, likes to get a large market share hooked young and early.  Why else would the shuffle still exist?

The shuffle isn't a "entry level device" desinged to sink Apple's teeth into your soul. It is simply a small, ultra portable mp3 player that has a robust market with people who are active, like at the gym, biking, running and so forth. There will always be a market for such a device.

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