I know that it's the nature of a capitalist company to maximize profits, but -- since Apple is sitting on a hoard of cash, and apparently winning the handset profit race by a huge margin, why not slash prices on the iPhone line and really put the competition against the ropes?
Because the competition is already on the ropes. Apple can't, nor does it want to, compete with the low end crap phones with it's nice phones. It is very happy competing with, and selling all its capacity, in the high end models. No money could be made lowering the price of all its phones just to sell zero more phones. Plus, once prices are lowered they are nearly impossible to raise. While the price of the phone is $600, the consumer only sees $200, so there is minimal space to move down anyway. Bad idea.
While the price of the phone is $600, the consumer only sees $200, so there is minimal space to move down anyway. Bad idea.
When an iPhone-4 is free, and a Desire S is free, they still aren't the same price if the iP-4 is 40/month and the Desire-S is 20/month on the contract. Yes consumers do actually notice this.
Nokia and RIM are, for example, still quite 'profitable.' Why don't you check to see whether and how their price movements in the past year compare to that of Apple and the "....general market up/down trends" before making such statements or figuring that "it means something" (whatever that is) to you.
Or, do that for Cisco. Or Sony. Or, say, HP. Would you like me to give you some more examples?
Compared APPL, GOOG, MSFT and the Nasdaq daily average over the past 12 months all on the same chart. They match up fairly nicely overall.
EDIT: But yes, I agree I was at minimum over-reaching to wrtite that most profitable tech companies are following along the general ups and downs of the overall market. I only recalled comparing Google/MS/Apple a few weeks ago and made an assumption. Thanks for sending me on a check for the facts Anantksundaram.
When an iPhone-4 is free, and a Desire S is free, they still aren't the same price if the iP-4 is 40/month and the Desire-S is 20/month on the contract. Yes consumers do actually notice this.
That explains why the Desire is so much more popular. You can't just make things up that are clearly contradicted by facts.
Someone asked me the other day how Apple was able to make such killer profits on their devices, when everyone else was racing to the bottom and losing margin.
A couple of the points I brought up have already been touched on above - Apple leverages it's profitability to be able to subsidize manufacturing of its advanced parts under very attractive terms and conditions, which are then continued once exclusivity terms have been met, with preferred customer pricing of those same components as they are mainstreamed and available to the competition.
And in addition to the cash insulator they have in their back pockets, they also have very conservative profit thresholds for their devices as well - requiring few devices sold before they turn a profit. By playing that conservative they see the huge profit margins now being reported based on fewer sales - so that when a device goes popular it generates a deeper profit delivery.
It is the perfect model for being innovative - schedule your pricing around selling fewer items, so that you see profits earlier rather than later - even if the device only does modestly well (1st gen Apple TV) it returns some profit regardless, and use the profits to absorb any market softness.
Apple makes so many long lasting great devices that get passed on to others .
A Kinda fever grows up around apple stuff.
Apple by 2016 will be making a killing on selling Software or app,s thru it's app stores and or itunes stores .Thes virtual stores ship by wire, no more paper or pressing factories .no more out dated SW sitting on a shelf.
...hence the fallacy of assuming degree ownership by itself is reason for failure or compromised performance. Gil was not even bad at running Apple. He at least was able to see where the problems were and begin the strategy to recover the company - by eventually buying NeXT (as opposed to BeOS), among other things. His rep prior to and after leaving Apple is solid.
With state and community colleges offering MBAs to any who care to earn them, the tendency is to declared the degree devalued and of no effective use. Like many other benchmarks, the actual proof is in the performance - you judge the talent and skill of the MBA holder (since the degree itself instead of being a threshold of excellence simply becomes the basis for comparison between the holders). You can (for example) have the best set of tools in the world, but if you don't have the skills and experience to use them correctly, they simply become a more sophisticated and higher quality way of making a mess.
True, nothing inherently bad about a MBA. A lot of strong engineers pursue an MBA as they move into management role.
Because the competition is already on the ropes. Apple can't, nor does it want to, compete with the low end crap phones with it's nice phones. It is very happy competing with, and selling all its capacity, in the high end models. No money could be made lowering the price of all its phones just to sell zero more phones. Plus, once prices are lowered they are nearly impossible to raise. While the price of the phone is $600, the consumer only sees $200, so there is minimal space to move down anyway. Bad idea.
No, they see $600 ( or more) in the pre-paid market which is most of the world.
Lots of MBA's on here tonight. Time to point once again out that iOS is a platform, and Apple are not selling cars. How many they sell does matter. It also matters to consumers since it determines what we can buy, as software.
Because the competition is already on the ropes. Apple can't, nor does it want to, compete with the low end crap phones with it's nice phones. It is very happy competing with, and selling all its capacity, in the high end models. No money could be made lowering the price of all its phones just to sell zero more phones. Plus, once prices are lowered they are nearly impossible to raise. While the price of the phone is $600, the consumer only sees $200, so there is minimal space to move down anyway. Bad idea.
The 3GS must sell 0 phones then. Send Jobs a memo. In any case it doesn't need to lower all prices, just have a lower entry level device.
I recently began to look at the different environments of work and business between American companies and Asian companies. What I have found is the different priorities in the companies.
Priorities:
Asian corporations like samsung generally put its country and its workers first. This would include paying them more and not outsourcing the labor. This may be due to the more collectives society that is normally found in these countries. This means that they will rarely due anything to maximize profits that would harm its workers and/or country. Some Asian corporations have been known to reduce all employees pay including executives to avoid layoffs.
American corporations like appletend to focus on the share holders. This means they will often produce their products in countries with cheaper labor. Human capital is just as expandable as cash.
Seeing these differences it is easy to see why apple makes more then some of these other corporations where profits are not on the top of the list. This apple will continue to be the one bringing in the cash at this rate. However for many of its competitors cash is not important enough.
Comments
I know that it's the nature of a capitalist company to maximize profits, but -- since Apple is sitting on a hoard of cash, and apparently winning the handset profit race by a huge margin, why not slash prices on the iPhone line and really put the competition against the ropes?
Because the competition is already on the ropes. Apple can't, nor does it want to, compete with the low end crap phones with it's nice phones. It is very happy competing with, and selling all its capacity, in the high end models. No money could be made lowering the price of all its phones just to sell zero more phones. Plus, once prices are lowered they are nearly impossible to raise. While the price of the phone is $600, the consumer only sees $200, so there is minimal space to move down anyway. Bad idea.
While the price of the phone is $600, the consumer only sees $200, so there is minimal space to move down anyway. Bad idea.
When an iPhone-4 is free, and a Desire S is free, they still aren't the same price if the iP-4 is 40/month and the Desire-S is 20/month on the contract. Yes consumers do actually notice this.
Nokia and RIM are, for example, still quite 'profitable.' Why don't you check to see whether and how their price movements in the past year compare to that of Apple and the "....general market up/down trends" before making such statements or figuring that "it means something" (whatever that is) to you.
Or, do that for Cisco. Or Sony. Or, say, HP. Would you like me to give you some more examples?
http://finance.yahoo.com/echarts?s=GOOG#chart6:symbol=goog;range=1y;compare =aapl+^ixic+msft;indicator=volume;charttype=line;c rosshair=on;ohlcvalues=0;logscale=off;source=undef ined
Compared APPL, GOOG, MSFT and the Nasdaq daily average over the past 12 months all on the same chart. They match up fairly nicely overall.
EDIT: But yes, I agree I was at minimum over-reaching to wrtite that most profitable tech companies are following along the general ups and downs of the overall market. I only recalled comparing Google/MS/Apple a few weeks ago and made an assumption. Thanks for sending me on a check for the facts Anantksundaram.
When an iPhone-4 is free, and a Desire S is free, they still aren't the same price if the iP-4 is 40/month and the Desire-S is 20/month on the contract. Yes consumers do actually notice this.
That explains why the Desire is so much more popular. You can't just make things up that are clearly contradicted by facts.
Someone asked me the other day how Apple was able to make such killer profits on their devices, when everyone else was racing to the bottom and losing margin.
A couple of the points I brought up have already been touched on above - Apple leverages it's profitability to be able to subsidize manufacturing of its advanced parts under very attractive terms and conditions, which are then continued once exclusivity terms have been met, with preferred customer pricing of those same components as they are mainstreamed and available to the competition.
And in addition to the cash insulator they have in their back pockets, they also have very conservative profit thresholds for their devices as well - requiring few devices sold before they turn a profit. By playing that conservative they see the huge profit margins now being reported based on fewer sales - so that when a device goes popular it generates a deeper profit delivery.
It is the perfect model for being innovative - schedule your pricing around selling fewer items, so that you see profits earlier rather than later - even if the device only does modestly well (1st gen Apple TV) it returns some profit regardless, and use the profits to absorb any market softness.
Apple makes so many long lasting great devices that get passed on to others .
A Kinda fever grows up around apple stuff.
Apple by 2016 will be making a killing on selling Software or app,s thru it's app stores and or itunes stores .Thes virtual stores ship by wire, no more paper or pressing factories .no more out dated SW sitting on a shelf.
You can't stop apple its system is closed.
9
...hence the fallacy of assuming degree ownership by itself is reason for failure or compromised performance. Gil was not even bad at running Apple. He at least was able to see where the problems were and begin the strategy to recover the company - by eventually buying NeXT (as opposed to BeOS), among other things. His rep prior to and after leaving Apple is solid.
With state and community colleges offering MBAs to any who care to earn them, the tendency is to declared the degree devalued and of no effective use. Like many other benchmarks, the actual proof is in the performance - you judge the talent and skill of the MBA holder (since the degree itself instead of being a threshold of excellence simply becomes the basis for comparison between the holders). You can (for example) have the best set of tools in the world, but if you don't have the skills and experience to use them correctly, they simply become a more sophisticated and higher quality way of making a mess.
True, nothing inherently bad about a MBA. A lot of strong engineers pursue an MBA as they move into management role.
Because the competition is already on the ropes. Apple can't, nor does it want to, compete with the low end crap phones with it's nice phones. It is very happy competing with, and selling all its capacity, in the high end models. No money could be made lowering the price of all its phones just to sell zero more phones. Plus, once prices are lowered they are nearly impossible to raise. While the price of the phone is $600, the consumer only sees $200, so there is minimal space to move down anyway. Bad idea.
No, they see $600 ( or more) in the pre-paid market which is most of the world.
Lots of MBA's on here tonight. Time to point once again out that iOS is a platform, and Apple are not selling cars. How many they sell does matter. It also matters to consumers since it determines what we can buy, as software.
Because the competition is already on the ropes. Apple can't, nor does it want to, compete with the low end crap phones with it's nice phones. It is very happy competing with, and selling all its capacity, in the high end models. No money could be made lowering the price of all its phones just to sell zero more phones. Plus, once prices are lowered they are nearly impossible to raise. While the price of the phone is $600, the consumer only sees $200, so there is minimal space to move down anyway. Bad idea.
The 3GS must sell 0 phones then. Send Jobs a memo. In any case it doesn't need to lower all prices, just have a lower entry level device.
Priorities:
Asian corporations like samsung generally put its country and its workers first. This would include paying them more and not outsourcing the labor. This may be due to the more collectives society that is normally found in these countries. This means that they will rarely due anything to maximize profits that would harm its workers and/or country. Some Asian corporations have been known to reduce all employees pay including executives to avoid layoffs.
American corporations like appletend to focus on the share holders. This means they will often produce their products in countries with cheaper labor. Human capital is just as expandable as cash.
Seeing these differences it is easy to see why apple makes more then some of these other corporations where profits are not on the top of the list. This apple will continue to be the one bringing in the cash at this rate. However for many of its competitors cash is not important enough.