The number of people NOT on CDMA is meaningless to this argument. All that matters is the number who ARE on CDMA.
Since Apple makes around 50% gross profit margin, 10 million phones at $600 (times 50% = $300) equals $3 billion dollars in gross profit.
Actually, the number of potential buyers is the whole argument. Apple doesn't need to chase a very small percentage of the global market because they have the entire world at their disposal. The bottom line is that GSM is the standard that the world has adopted, and thats what Apple is playing to. And you're assumptions of profit margin are highly inflated. Just because iSuppli says the bill of materials points to a 50% margin doesn't mean thats what Apple sees. They had to invest resources in the engineering, software development, and marketing of the iPhone which take up a good chunk of that remaining 50% (I'd say their margins probably run around 30%).
Actually, the number of potential buyers is the whole argument. Apple doesn't need to chase a very small percentage of the global market because they have the entire world at their disposal.
You don't appear to see the difference between the number of potential buyers (Verizon's 80 million, or whatever) and the percentage of the global market. If Verizon's 80 million customers accounted for 50% of the global market, Apple's market opportunity would be no different - 80 million. Percentage of the market is meaningless. The only question is how many potential sales is Verizon (based on ATT's experience, the number is probably around 10 million), and how much would it cost to design and produce a new model for those 10 million. As I very clearly explained for you in my last post, it is highly unlikely that the cost to sell those 10 million phones is more than the $6 billion in revenue that they would bring.
Quote:
Originally Posted by floccus
And you're assumptions of profit margin are highly inflated. Just because iSuppli says the bill of materials points to a 50% margin doesn't mean thats what Apple sees. They had to invest resources in the engineering, software development, and marketing of the iPhone which take up a good chunk of that remaining 50% (I'd say their margins probably run around 30%).
No, my assumptions of gross profit margin are not inflated. I imagine you've never taken accounting? Gross profit by definition excludes everything except the cost to physically produce the product. That's why I said $3 billion in gross profit instead of $6 billion in sales. Is is those $3 billion that are left to pay for engineering, software development and marketing. Let's be generous and say that the engineering of swapping a chip out and programming it costs $100 million dollars. $100 million can hire a LOT of engineers and software developers for a LONG time. Marketing... hmm... yeah Apple sure will have to spend a lot to get the word out that the iPhone is available for Verizon. RIGHT! So I'll give you another $100 million for that.
That leaves $2.8 billion of profit. Seems profitable to me!
Now lets's be clear. While I am arguing that making a CDMA iPhone makes economic sense to Apple, I DO NOT believe it will happen for another 3 years. Apple's agreement with ATT precludes it, so it won't happen. But the argument over whether it makes economic sense is such a bloodbath I can't believe you would bother to speak up to take the other side.
Actually, the number of potential buyers is the whole argument. Apple doesn't need to chase a very small percentage of the global market because they have the entire world at their disposal. The bottom line is that GSM is the standard that the world has adopted, and thats what Apple is playing to.
1) First of all, Apple has had much greater success with the iPhone in the United States than else where, and so the US market is much more important to them than it would seem based solely on total cellphone/smartphone subscribers.
2) While GSM/HSPA is indeed popular, it is naive to call it the "world standard" and act like CDMA/EV-DO is solely a USA phenomenon.
Comments
The number of people NOT on CDMA is meaningless to this argument. All that matters is the number who ARE on CDMA.
Since Apple makes around 50% gross profit margin, 10 million phones at $600 (times 50% = $300) equals $3 billion dollars in gross profit.
Actually, the number of potential buyers is the whole argument. Apple doesn't need to chase a very small percentage of the global market because they have the entire world at their disposal. The bottom line is that GSM is the standard that the world has adopted, and thats what Apple is playing to. And you're assumptions of profit margin are highly inflated. Just because iSuppli says the bill of materials points to a 50% margin doesn't mean thats what Apple sees. They had to invest resources in the engineering, software development, and marketing of the iPhone which take up a good chunk of that remaining 50% (I'd say their margins probably run around 30%).
Actually, the number of potential buyers is the whole argument. Apple doesn't need to chase a very small percentage of the global market because they have the entire world at their disposal.
You don't appear to see the difference between the number of potential buyers (Verizon's 80 million, or whatever) and the percentage of the global market. If Verizon's 80 million customers accounted for 50% of the global market, Apple's market opportunity would be no different - 80 million. Percentage of the market is meaningless. The only question is how many potential sales is Verizon (based on ATT's experience, the number is probably around 10 million), and how much would it cost to design and produce a new model for those 10 million. As I very clearly explained for you in my last post, it is highly unlikely that the cost to sell those 10 million phones is more than the $6 billion in revenue that they would bring.
And you're assumptions of profit margin are highly inflated. Just because iSuppli says the bill of materials points to a 50% margin doesn't mean thats what Apple sees. They had to invest resources in the engineering, software development, and marketing of the iPhone which take up a good chunk of that remaining 50% (I'd say their margins probably run around 30%).
No, my assumptions of gross profit margin are not inflated. I imagine you've never taken accounting? Gross profit by definition excludes everything except the cost to physically produce the product. That's why I said $3 billion in gross profit instead of $6 billion in sales. Is is those $3 billion that are left to pay for engineering, software development and marketing. Let's be generous and say that the engineering of swapping a chip out and programming it costs $100 million dollars. $100 million can hire a LOT of engineers and software developers for a LONG time. Marketing... hmm... yeah Apple sure will have to spend a lot to get the word out that the iPhone is available for Verizon. RIGHT! So I'll give you another $100 million for that.
That leaves $2.8 billion of profit. Seems profitable to me!
Now lets's be clear. While I am arguing that making a CDMA iPhone makes economic sense to Apple, I DO NOT believe it will happen for another 3 years. Apple's agreement with ATT precludes it, so it won't happen. But the argument over whether it makes economic sense is such a bloodbath I can't believe you would bother to speak up to take the other side.
Actually, the number of potential buyers is the whole argument. Apple doesn't need to chase a very small percentage of the global market because they have the entire world at their disposal. The bottom line is that GSM is the standard that the world has adopted, and thats what Apple is playing to.
1) First of all, Apple has had much greater success with the iPhone in the United States than else where, and so the US market is much more important to them than it would seem based solely on total cellphone/smartphone subscribers.
2) While GSM/HSPA is indeed popular, it is naive to call it the "world standard" and act like CDMA/EV-DO is solely a USA phenomenon.
If you take a look here: http://www.cdg.org/worldwide/cdma_world_subscriber.asp,
you'll see there are 465 MILLION CDMA/EV-DO subscribers in the world, and less than a third of them are in the United States and Canada.