That $499 iPad only costs Apple $270; Wall Street analyst is elated

Personally I think this guy Is way off with some of his numbers. The thing is this is a wild ass guess until more info about the tablet comes out and Apple releases more hardware details.

Given that I had estimated before release that the iPad would come in under $500, retail, for the base model. That was for a model with even more flash and an assumption that the processor was dual core.

That guess was fairly easy to make as all one has to do is to talley up the cost of parts to make the unit and double that number and maybe add a fudge factor to hit a nice marketing number.

I'm actually surprised at the level of ignorance displayed in this thread about business in general. I have to wonder if people realize that this is a rather modest mark up relative to many businesses. Think about this the next time you go out to a resturant and order pasta. Or the next time you buy asprin and look at the wide array of pricing for the same basic medication.

I had an interesting conversation a year or so ago about potential business start ups. One thing that the conversation revolved around is the diffrence between selling people things they want vs things they need. Your ability to make money is far greater if you focus on selling things people want as opposed to need. Apple makes things people want as such they can command higher prices.

It is not unlike the watch industry. If you need a watch, for what ever reason, then a customer will often choose the cheapest item to get the job done. If the customer feels that he has to make a statement, that is wants, the retailer is far more likely to move a highly profitable watch.

I only bring this up because I see todays iPhone/Touch to be the modern day equivalent of a pocket watch. Like in times past a watch was a tool for successfully running a business, todays smart phone is such a modern day tool. As such it is possible for such a device to be both wanted and needed. That drives sales and helps Apple maintain margins on the iPhone.


Dave

There were so many people talking about iPad on Twitter that it was one of the top trending topics for a while - check out the video at http://www.joshrimer.com/mass-effect-2-thoughtsonthetoilet-apple-tablet/ to see some of the more entertaining ones in a funny video. :-)

R&D costs, really? How much do you think it costs to take an already existing product and simply make it larger?

I have two words - FIXED COSTS! Did the person who arrived at this estimate know anything about costing?? Can u imagine the costs of RETAIL and MARKETING for a company like Apple. And how do u arrive at a Bill of Material break-down without opening up the product. In fact, factor in Economies of Scale and high BARGAINING POWER WITH SUPPLIERS and the cost of materials will probably be lower than this per unit (as opposed to bulk purchases) estimate. This article doesn't even deserve a mention on TUAW!!!!

This is what apple has to say about there pricing http://gopost.info/76

I wonder how much money Microsoft makes on a copy of Windows 7?

Overall, it's pretty pathetic and sickening. On the bright side, at least the base model is one item for the price of two, which is a slight improvement on Apple's usual one item for the price of three. Even if some sort of law was made against outrageous markups, Apple would likely find a loophole since they are obsessed with how much money they can make. They are just lucky the world is not full of customers as informed and determined as myself; otherwise, they would not have enough business to survive on, high margins or not.

"The labour of two days is that for which you ask two hundred guineas?"

"No. I ask it for the knowledge I have gained in the work of a lifetime!"

http://en.wikiquote.org/wiki/James_McNeill_Whistler

What?! The retail cost of a product is higher than the hardware costs and also includes R&D, Marketing, Packaging, Shipping... AND profit?!
*gasp*

Also, I call shenanigans on some of the calculations? Sure, in the end, it might cost $15 to manufacture the A1 chip itself... but can you imagine how much that thing cost to develop? The chip alone probably cost Apple millions in R&D.

I wish sites would stop linking to this rubbish. These "costs" are bogus because they ignore all the R&D costs. Apple has likely spent millions of dollars over the years on a tablet device. Just because current market parts costs are a certain amount doesn't mean Apple will actually make a profit on this device any time soon.

Frankly, it doesn't matter if it cost 10 cents to make. Prices are dictated by demand, so the product will sell for whatever people are willing to pay for it. These stories are fodder for people who have no idea about what it actually costs to bring a product to market.