Even if that unlikely number were correct, it isn't the full cost, as we constantly have to bring up. That is just the direct parts cost, not including the manufacturing cost which adds at least $10 to that. Then, again as you love to fail to notice, there are all the other costs involved in the R&D, and running the company, which these silly numbers given out don't include. No matter how you look at it, there would be, if you want to use this number, which is far off from other estimates, a total cost to the company of at least $200. To that must be added another number to come up with a profit. So at the very best, they are breaking even, and at the very worst, losing $60 per.
How do you justify that a $150 BOM means a $199 product is turning a profit?
Amazon isn't stupid like all of you seem to think. I could see ownership of an amazon tablet further locking in purchases from them on more than just ebooks. Regarding high manufacturing cost, it should eventually come down, but this seems to be aimed at locking in business through Amazon. It's a different approach from using the hardware itself as the profit generator. I know there have been comments about high margins on tablets and low margins on ebooks, but it seems to be more like high margins on the ipad specifically, rather than tablets in general.
Amazon isn't stupid like all of you seem to think. I could see ownership of an amazon tablet further locking in purchases from them on more than just ebooks. Regarding high manufacturing cost, it should eventually come down, but this seems to be aimed at locking in business through Amazon. It's a different approach from using the hardware itself as the profit generator. I know there have been comments about high margins on tablets and low margins on ebooks, but it seems to be more like high margins on the ipad specifically, rather than tablets in general.
Who said Amazon is stupid? And your comment has nothing to do with the claim that a $150 BOM means a $50 net profit for each Amazon Kindle Fire, a product I hbe expressed many times that I think will be great for Amazon and Apple's bigger threat in the tablet market.
Who said Amazon is stupid? And your comment has nothing to do with the claim that a $150 BOM means a $50 net profit for each Amazon Kindle Fire, a product I hbe expressed many times that I think will be great for Amazon and Apple's bigger threat in the tablet market.
My bad I think I got off track there and meant to quote a couple other posts in there as well It was also supposed to be like "many" rather than all. I'm clearly way too tired today. Anyway if the volume is high enough, it might inch the manufacturing cost down a bit. There were a few posts which suggested that amazon sales wouldn't cover a thin margin or loss on the tablets and suggested tablets as a higher margin item even though Apple is the only one who seems to have succeeded in selling them at such an exceptional margin in the form of the ipad, and this is at least a well thought out alternative rather than what we saw with HP where it seemed to be just about getting something to market.
I think they'll profit from these on the back end. If they can get manufacturing costs to around a break even point at least after a while, it may very well end up as a big win for amazon.
And your comment has nothing to do with the claim that a $150 BOM means a $50 net profit for each Amazon Kindle Fire, a product I hbe expressed many times that I think will be great for Amazon and Apple's bigger threat in the tablet market.
I didn't claim they'd make a $50 profit. The extent of my suggestions was that the BOM wasn't as high as the $200+ that some others have guessed, and that if the $150 was more accurate they would make a profit on device sales. Certainly not $50 tho.
Anybody who thinks Amazon loses money on these things is insane. Who the hell loses money on a high margin product (tablets) in order to support a no-margin business (online retail)?
It's called a LOSS LEADER. Very common strategy in business.
No, my *guess* is much better than yours, as it's supported by understanding how businesses work, while yours is just something that ignores that. I suppose you never think about the difference between gross margins, operating margins, and net margins. In your scenario, operating margins don't exist.
Amazon isn't stupid like all of you seem to think. I could see ownership of an amazon tablet further locking in purchases from them on more than just ebooks. Regarding high manufacturing cost, it should eventually come down, but this seems to be aimed at locking in business through Amazon. It's a different approach from using the hardware itself as the profit generator. I know there have been comments about high margins on tablets and low margins on ebooks, but it seems to be more like high margins on the ipad specifically, rather than tablets in general.
The problem is that Amazon can't "lock in" purchases. People will buy what they want, from whomever they want. Amazon can't prevent that. And the iPad doesn't have a large margin. It has a margin of 30%, which is considered modest. The problem is that other tablet manufacturers have even lower margins because they can't get their supply line costs as low as Apple has. So they intro tablets at the same price as Apple, and yet have low margins. Introduce then at a lower price, assuming the tablet is as well made, and they may have almost no margin at all.
So we see lower priced, but cheaply outfitted and made tablets. Or we see companies coming out with smaller tablets which cuts the costs down. But they aren't equivalent because they are smaller. So, what can they do? If Amazon sold this tablet for $300, which they likely needed to do to ensure a decent profit, it wouldn't sell. They really are taking a chance here.
But Amazon is always willing to lose profits to gain marketshare. This has been a criticism of them going back years, and is responsible for their very low 3.37% profit last year. It will be interesting to see where their profits go if they sell a lot of these. But we may never know how many they sell, since after years, we still don't know how many Kindle's they sell.
No, my *guess* is much better than yours, as it's supported by understanding how businesses work, while yours is just something that ignores that. I suppose you never think about the difference between gross margins, operating margins, and net margins. In your scenario, operating margins don't exist.
I've taken those into account Mel. I still run a business.
iSuppli's teardown figure, the one you seem to depend on rather than the TechInsights breakdown, includes manufacturing costs of approx. $18. Add that to the $150 BOM from my (and TechInsights) estimate and that still leaves over $30 for miscellaneous costs. So it really comes down to whose estimated BOM is more accurate, making your guess as good as mine.
My bad I think I got off track there and meant to quote a couple other posts in there as well It was also supposed to be like "many" rather than all. I'm clearly way too tired today. Anyway if the volume is high enough, it might inch the manufacturing cost down a bit. There were a few posts which suggested that amazon sales wouldn't cover a thin margin or loss on the tablets and suggested tablets as a higher margin item even though Apple is the only one who seems to have succeeded in selling them at such an exceptional margin in the form of the ipad, and this is at least a well thought out alternative rather than what we saw with HP where it seemed to be just about getting something to market.
I think they'll profit from these on the back end. If they can get manufacturing costs to around a break even point at least after a while, it may very well end up as a big win for amazon.
Again, Apple's margin on the iPad is modest. Don't throw figures around when you are just making assumptions. They do make a 50% margin on the iPhone, which is in line with other goods of that nature. They make 40% margins on iMacs, Mac Pro's and MacBook Pro's, and somewhat less on MacBook Airs.
But they just make a 20% margin on iPods, though the Touch is higher. You can either get this info from their financials directly, or by understanding how to extract the numbers from reading the entire report. This analysis is done every quarter.
The same iSuppli that estimated Kindle Fire costs at $209, give the iPad2 32GB GSM version estimated manufacturing costs of $336 and the CDMA model at $333. Actual costs could be much less than that as forum members often suggest Apple gets much better component price breaks than others. At $599 list, Apple's probably not suffering too much on margins.
Comments
Even if that unlikely number were correct, it isn't the full cost, as we constantly have to bring up. That is just the direct parts cost, not including the manufacturing cost which adds at least $10 to that. Then, again as you love to fail to notice, there are all the other costs involved in the R&D, and running the company, which these silly numbers given out don't include. No matter how you look at it, there would be, if you want to use this number, which is far off from other estimates, a total cost to the company of at least $200. To that must be added another number to come up with a profit. So at the very best, they are breaking even, and at the very worst, losing $60 per.
Your guess is as good as mine Mel
OK.. i'll bite. How do you put music into an mp3 flash based device with no network connection without having to use a computer?
How many people had to rush out and BUY a new PC/Mac just so they could load music onto there brand new iPod shuffle?
How do you justify that a $150 BOM means a $199 product is turning a profit?
Amazon isn't stupid like all of you seem to think. I could see ownership of an amazon tablet further locking in purchases from them on more than just ebooks. Regarding high manufacturing cost, it should eventually come down, but this seems to be aimed at locking in business through Amazon. It's a different approach from using the hardware itself as the profit generator. I know there have been comments about high margins on tablets and low margins on ebooks, but it seems to be more like high margins on the ipad specifically, rather than tablets in general.
Amazon isn't stupid like all of you seem to think. I could see ownership of an amazon tablet further locking in purchases from them on more than just ebooks. Regarding high manufacturing cost, it should eventually come down, but this seems to be aimed at locking in business through Amazon. It's a different approach from using the hardware itself as the profit generator. I know there have been comments about high margins on tablets and low margins on ebooks, but it seems to be more like high margins on the ipad specifically, rather than tablets in general.
Who said Amazon is stupid? And your comment has nothing to do with the claim that a $150 BOM means a $50 net profit for each Amazon Kindle Fire, a product I hbe expressed many times that I think will be great for Amazon and Apple's bigger threat in the tablet market.
Who said Amazon is stupid? And your comment has nothing to do with the claim that a $150 BOM means a $50 net profit for each Amazon Kindle Fire, a product I hbe expressed many times that I think will be great for Amazon and Apple's bigger threat in the tablet market.
My bad I think I got off track there and meant to quote a couple other posts in there as well
I think they'll profit from these on the back end. If they can get manufacturing costs to around a break even point at least after a while, it may very well end up as a big win for amazon.
And your comment has nothing to do with the claim that a $150 BOM means a $50 net profit for each Amazon Kindle Fire, a product I hbe expressed many times that I think will be great for Amazon and Apple's bigger threat in the tablet market.
I didn't claim they'd make a $50 profit. The extent of my suggestions was that the BOM wasn't as high as the $200+ that some others have guessed, and that if the $150 was more accurate they would make a profit on device sales. Certainly not $50 tho.
Anybody who thinks Amazon loses money on these things is insane. Who the hell loses money on a high margin product (tablets) in order to support a no-margin business (online retail)?
It's called a LOSS LEADER. Very common strategy in business.
http://en.wikipedia.org/wiki/Loss_leader
That said, I have a hard time believing there is a $50 loss on each device.
It's called a LOSS LEADER. Very common strategy in business.
http://en.wikipedia.org/wiki/Loss_leader
That said, I have a hard time believing there is a $50 loss on each device.
I guess everyone missed the part where I mentioned that iSuppli puts the cost of parts at $209.63.
Your guess is as good as mine Mel
No, my *guess* is much better than yours, as it's supported by understanding how businesses work, while yours is just something that ignores that. I suppose you never think about the difference between gross margins, operating margins, and net margins. In your scenario, operating margins don't exist.
Amazon isn't stupid like all of you seem to think. I could see ownership of an amazon tablet further locking in purchases from them on more than just ebooks. Regarding high manufacturing cost, it should eventually come down, but this seems to be aimed at locking in business through Amazon. It's a different approach from using the hardware itself as the profit generator. I know there have been comments about high margins on tablets and low margins on ebooks, but it seems to be more like high margins on the ipad specifically, rather than tablets in general.
The problem is that Amazon can't "lock in" purchases. People will buy what they want, from whomever they want. Amazon can't prevent that. And the iPad doesn't have a large margin. It has a margin of 30%, which is considered modest. The problem is that other tablet manufacturers have even lower margins because they can't get their supply line costs as low as Apple has. So they intro tablets at the same price as Apple, and yet have low margins. Introduce then at a lower price, assuming the tablet is as well made, and they may have almost no margin at all.
So we see lower priced, but cheaply outfitted and made tablets. Or we see companies coming out with smaller tablets which cuts the costs down. But they aren't equivalent because they are smaller. So, what can they do? If Amazon sold this tablet for $300, which they likely needed to do to ensure a decent profit, it wouldn't sell. They really are taking a chance here.
But Amazon is always willing to lose profits to gain marketshare. This has been a criticism of them going back years, and is responsible for their very low 3.37% profit last year. It will be interesting to see where their profits go if they sell a lot of these. But we may never know how many they sell, since after years, we still don't know how many Kindle's they sell.
No, my *guess* is much better than yours, as it's supported by understanding how businesses work, while yours is just something that ignores that. I suppose you never think about the difference between gross margins, operating margins, and net margins. In your scenario, operating margins don't exist.
I've taken those into account Mel. I still run a business.
iSuppli's teardown figure, the one you seem to depend on rather than the TechInsights breakdown, includes manufacturing costs of approx. $18. Add that to the $150 BOM from my (and TechInsights) estimate and that still leaves over $30 for miscellaneous costs. So it really comes down to whose estimated BOM is more accurate, making your guess as good as mine.
http://www.isuppli.com/Teardowns/New...ize-Sales.aspx
My bad I think I got off track there and meant to quote a couple other posts in there as well
I think they'll profit from these on the back end. If they can get manufacturing costs to around a break even point at least after a while, it may very well end up as a big win for amazon.
Again, Apple's margin on the iPad is modest. Don't throw figures around when you are just making assumptions. They do make a 50% margin on the iPhone, which is in line with other goods of that nature. They make 40% margins on iMacs, Mac Pro's and MacBook Pro's, and somewhat less on MacBook Airs.
But they just make a 20% margin on iPods, though the Touch is higher. You can either get this info from their financials directly, or by understanding how to extract the numbers from reading the entire report. This analysis is done every quarter.
The same iSuppli that estimated Kindle Fire costs at $209, give the iPad2 32GB GSM version estimated manufacturing costs of $336 and the CDMA model at $333. Actual costs could be much less than that as forum members often suggest Apple gets much better component price breaks than others. At $599 list, Apple's probably not suffering too much on margins.
http://www.isuppli.com/PublishingIma..._iPad2_BOM.png
http://www.isuppli.com/teardowns/new...sis-shows.aspx