DanielEran

Carli said:

Good article. The aspect missing, though is that Apple consistently charges ridiculous premiums for its phones. Recognizing that they have right to do that as long as customers pay for it, is fair point, but it is still worth noting that this is nearly predatory behavior. Eventually, companies do get punished for that by consumers. Good author that wants to sound independent (i.e., avoids being labeled as fanboi) should point that out. It makes article more credible.

It's not really true that Apple charges "ridiculous premiums." What's actually the case is that most commodity PC/CE makers choose to operate with extremely thin margins because they have nothing to differentiate themselves from even cheaper competitors. Google and Microsoft fans have made "Apple margins" a talking point, but its actually backwards. 

Apple's overall margins are around 40%. Most retail has a 50% markup on merchandise (such as clothing) to sell in a store. Software is commonly sold at a tremendously high margin because there is little cost in making digital copies.

Back in the late 90s when everyone was pretending to be righteously indignant about Apple's ~40% margins on Macs, Microsoft was earning 90% margins. Google similarly charges whatever it wants without really making anything that involves real costs, so it was making incredible gross margins before its costs began rising.

If you look at overall net margins, Google and Microsoft have historically had higher margins than Apple, meaning they created less compared to the money they took in. Calling Apple predatory because it works harder and demands less money from customers is not really accurate on any level. 

Also, Samsung, Microsoft and Google have tried to copy Apple by selling premium hardware at similar prices, albeit cutting corners on quality. None sell premium hardware at similar volumes to Apple, and despite all their trying to (as you say) charge "predatory" prices, they've simply failed to pull it off out of incompetence rather than some righteous generosity. 

The difference with Apple isn't that it is charging higher prices, but that its products command a higher price because hundreds of millions of people agree that Apple's products are better and worth the premium. 

klock379 said:

"Display estimates for iPhone 7 and 8 models have suggested an LCD component cost closer to $50. Yet the screens' cost ratio to the entire iPhone BOM was only a few percentage points different. And even a nearly $50 difference component cost for the display would only result in a retail price difference of about twice that much, or around $100 of the final price. " I am sure DED has done the math and I am confident that his statement is correct. But for my own education, can someone help me understand how that conclusion is derived?

As a very general ballpark rule, the component cost of a CE device generally has to be roughly doubled to arrive at a price where it can be sold at a reasonable profit.

That's why low-end phones generally can't afford to add an expensive processor or camera that "only costs" a certain amount that by itself doesn't seem very expensive. You have to double that component cost to achieve a sellable price.

dysamoria said:

I know everyone is excitedly talking about stock values, but I wanted to point out that using the language of "a quarter billion" is an emotional fluffing of "250 million".

If somebody says the time is 2:15 or "a quarter past 2," do you also become unglued about your emotional response to an internal bias concerned that somebody has influenced others to think that time is going slower or faster than it is, despite there being zero difference between the two?

I've noticed upset critics are giving up any factual discourse to instead complain about how facts make them feel. 

larrya said:

Daniel, it’s intellectually dishonest, that’s all. People who subscribe to HBO should be considered HBO subscribers, not Apple subscribers. If they moved to Android they would continue to be HBO subscribers.  My $14 annual subscription to Keeper that I didn’t realize I had until I got a statement is simply not the same thing as an Apple storage or music subscription, and you know that, yet you would count it.  By your logic, you should add a significant portion of Apple’s “subscribers” to Amazon’s, since Amazon hosts much of it on their servers. 

You can hold whatever opinions you want, but when Apple gets paid for servicing a subscription to content or services, it is counted as "a subscription" (this is not a new invention or some original idea I coined). 

And yes, Amazon's AWS clients are counted by various people, but Amazon doesn't get a cut of each user or transaction when it sells commodity cloud to others, so I'm not sure where you're going with that logic.

If you buy a subscription through an app or the App Store, it's an Apple subscription that Apple is profiting from as a reseller. The same way that every iPad Amazon sells is an Amazon sale to an Amazon customer. This is all pretty basic stuff here. 

rogifan_new said:

Of course DED would use an Amazon shareholder letter to spin up a positive article on Apple and how Apple > Amazon.  Let’s see if he writes a feature/editorial around AAPL shares being down 2% pre-market with TSMC offering weak guidance attributing it to softening demand in the premium smartphone market.

Are you just never embarrassed to post the stuff you endlessly shovel at me? 

Also, I have never written Motley Fool style articles offering to explain daily stock price changes. That would be a fool's errand.

Also your "AAPL shares being down 2% pre-market with TSMC offering weak guidance attributing it to softening demand in the premium smartphone market" is directly ripped from a headline by 9to5 paraphrasing the genius work at CNBC repeating the total BS that iPhone X is a great disappointment and that somebody somewhere cut orders. 

There are so many sites on the internet offering to dribble out total garbage that's obviously bullshit. Why do you want AI to be another one?