Originally Posted by Estuche
I am not a big fan of Steve Jobs, but he definitely "nailed" it with the iPad's price. He was able to put all those abusive e-reader manufacturers against the wall. If Jobs is able to make +200% profit on the iPad at a $499 price point (manufacturing cost = $229) I don't want to think about how much was Plastic Logic dreaming of pocketing with their outrageous prices at the expense of customers
[%] is margin, not profit.
Per definition, it's calculated top down (based on revenue), not bottom up (based on costs). > 100% per definition is not possible (although Bill Gates or Steve Jobs may be close enough.)
Assuming (no idea, whether that's valid) the $ 499 to $ 229 ratio is correct, this means a Gross Margin of 54,1%.
You have to differentiate: Gross Profit
does not mean Profit. We're not talking EBIT (profit before tax) here.
On average, general costs (sales, administration, ...) of large corporates like Apple will be in the range of 20% to 30%.
This leaves about 30%.
Usually, the R&D budget will be about 5% of total revenue. For innovation driven companies like Apple probably slightly more.
This leaves about 23%.
Over all, a seemingly huge Gross Margin of 54,1% eventually will generate a "real" Margin of maybe 5%.
Lots of hardware manufacturers need Gross Margins in the range of 50% to 60%, to actually survive.
Of course, you don't have to worry about Steve Jobs.
(He always has got his Dreamworks-billions).
Real genius in Apples' business model is the link to iTunes.
And that's why they can give such a price. And that's why others can't do it.
And in the example of Que, the picture is even more extreme: It's a startup. Meaning, they have enormous costs (R&D, marketing, sales, ...), but seriously lack any "cashcow" in parallel. So they have to re-finance. Probably another 10+%...
And they have to generate profit quickly to bare the refinance rates. Apple easily could sponsor any new business for years (like Microsoft did with X-Box for years).
And: I don't think, Apple's iPad can meet the specifications of Que. Neither in display size, contrast, battery duration, ....
(Anyway, I'll buy them both.)