Apple seeks higher margins

Apple's recent refresh of its iPod digital media players reveals that the company is seeking higher profit margins, rather than gaining market share. Gartner Research says that Apple's lack of aggressive pricing is the primary sign that the company is working toward higher margins, which could give the Cupertino-based company's competitors breathing room to catch up to the market leader, according to Macworld UK. "Apple is in a secure position atop the portable media player market and has decided to strategically focus on its margin this time," said Joseph Unsworth and Jon Erensen of Gartner Research. The new iPod shuffle is estimated to cost around $30 to build, as one example, but sells for $79.

Apple could have priced its new 8GB iPod nano lower than $249, based on estimated material costs of $130. The company's 4GB iPod nano -- which is priced at $199 -- holds an estimated cost of just $90, while its 2GB version for $149 likely costs around $70 to build. The research firm also disagrees with Apple's decision to drop the 1GB iPod nano, and says the expected shortage in flash memory won't be as dire this year, allowing Apple's competitors more time to secure larger pieces of the market.

by MacNN Staff