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IDC offers analysis on iPod shuffle margins

updated 09:15 am EST, Thu February 24, 2005

iPod shuffle margins

IDC has released an analysis on Apple's iPod shuffle margins, saying that Apple's on each of its iPod shuffle it sells , according to IDG News Service. The market research firm said that "Apple makes a healthy 35 per cent to 40 per cent profit on each player sold, and stands to make even more from iTunes music purchases and expected drops in flash memory pricing." Currently, IDC says that iPod shuffle's flash memory, made by Samsung, is the most expensive component, costing $37.50 for each 512MB shuffle--or about two thirds of the estimated total $59 cost of the player. The product retails for $99, thus the product margins are about $40 or about 40 percent; however, its overall margins are reduced by its wholesale cost to both its own retail stores and resellers.

"Apple is making very, very good margins on the shuffle," Sylvester said. "We based our cost analysis on fourth quarter production prices, which would have been when they sourced (the components). At some point they'll switch to cheaper flash and the margins will improve."



IDC said that the flash memory component of the 512MB shuffle will fall to $31.25 during the current quarter. IDC said that the second most expensive component is SigmaTel's music decoder chip, which supports MP3 and Windows Media Audio files (as well as AAC and Audible music formats) and includes a digital-to-analogue converter, a controller for the USB2.0 interface, SDRAM (synchronous dynamic RAM) memory for buffering, and the headphone driver amplifier. The report says that chips also includes analogue-to-digital converter for voice recording, a driver for an LCD (liquid crystal display) and an FM tuner, but that these are not currently leveraged by the shuffle.




by MacNN Staff

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Comments

  1. njfuzzy

    Joined: Dec 1969

    0

    Complete accounting?

    I wonder if they did a complete accounting. They worked out the cost of the commodities, sure, but Apple often puts a little extra into how they build things. I bet they underestimated the actual costs of production. (To say nothing of R&D, design, and marketing costs.)

  1. macjockey

    Joined: Dec 1969

    0

    and the advertising

    You also need take in consideration how much Apple is spending on all those stupid iPod shuffle advertisments. LETS SEE SOME ADS ON COMPUTERS!!!

  1. slider

    Joined: Dec 1969

    0

    A bit light

    Yeah, I think they've failed to account for overhead.

  1. testudo

    Joined: Dec 1969

    0

    Re: and the advertising

    LETS SEE SOME ADS ON COMPUTERS!!!

    For what? The Power lines are outdated and need an overhaul, so any ads for those will be wasted because you all will be saying "WTF? Why not upgrade the computer, then maybe you can sell them!". Certainly not for the iMac mini, since they don't have any to sell anyway. Nothing about the other computers warrants advertising like you all expect, and everyone's going to be critical of their ads anyway "They should show how cool OS X is!" "They should say we have no viruses!" "They should say the mini is the perfect computer for your home entertainment system or putting in your car!" TV commercials aren't going to sell Macs. They never have (I know, its because they didn't listen to you about what a good mac commercial would be). They've tried funny. They've tried off-the-wall. They tried Switcher stories. They even did that Think Different, which I don't know how to categorize. Everything they try, they get railed on as being "stupid" or "wrong". Of course they'd be railed on if they tried the "interns" route or the "Dude, you're getting a Mac" route too, so basically they're screwed.

    I think what they're seeing is that print ads are more cost effective and offer better return (because you can squeeze more info in an ad if you want), and if the so-called halo-effect is taking shape as some claim, then wouldn't you want them to sell iPods, which will lead to computers.

    Finally, who cares if they have ads? The only ones should be the stockholders. And they only care if they're making money, and the iPod makes them money.

  1. cyngus

    Joined: Dec 1969

    0

    Re; Complete accouning?

    If you read carefully, IDC is talking about gross margins where, which is sales price - cost of production to produce. This would include labor costs, but would not include marketing and other SG&A items. IDC is a pretty smart company, they don't make these simple kinds of mistakes.

  1. GORDYmac

    Joined: Dec 1969

    0

    What about the others?

    Heck, if Apple's making $40 at $99 a pop, iRiver, Rio and the rest of the gang are really raking it in. They all sell for a lot more than $99, for comparable features.

  1. ibugv4

    Joined: Dec 1969

    0

    Marketing, again

    The Macintosh was a $1,499 target price system. It was $1,999 when they finished it, and sold for $2,499 beause of the $1M ad "1984." Welcome to 2005: iPod Shuffle is $99, it costs about $60 to make, and I bet $20 of each sale goes to the nice ad on TV, while Apple takes $20 home. Even if they did not, good for them at breaking everyone else's bank!

  1. cyngus

    Joined: Dec 1969

    0

    Power Lines

    "The Power lines are outdated and need an overhaul"

    Yeah, dual 2.5Ghz G5's, slow as molasses! There are very few people in the world who can really make use of anything faster. You'll notice that the x86 and other processor families have made very little speed progress lately. Additionally, the only thing that you can argue that the G5's lack is PCI Express, but that's even questionable.

  1. urapns

    Joined: Dec 1969

    0

    IDC and iPod

    IDC did s**** it up...from the article..."She estimated the 512MB of flash in the cheaper of Apple's two iPod shuffle models costs the company around $37.50 for each player. That's about two thirds of the estimated total $59 that Apple spends on materials needed to make each 512MB iPod shuffle. The product retails for $99 giving the company a profit of about $40, or roughly 40 per cent." ...They took material costs only and calculated gross profit on retail sale price and parts cost. Never mind that the bulk of Apple's sales are through third parties that get a chunk of that retail price...badly flawed analysis any way you look at it.

  1. testudo

    Joined: Dec 1969

    0

    Re: power lines

    But the line hasn't been updated really since last June. That's what I mean by outdated. No one's buying them now because they're waiting for the next bump, which you figure is coming because, well, they haven't updated them in 9 months!

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