[azazel1024]

Yeah, I still don't see anywhere where it says they lost money. They have reduced margins because of it, potentially. However, it is not unlike Barnes and Nobel and Amazon with their ereaders or Sony/Microsoft with their game consoles. They make relatively little money on the hardware (and in some cases, may be taking a loss), but hope and generally do, make up for it in secondary sales (books, games, etc).

In this case the carriers are paying a subsidy, which they do for a lot of phones, not just Apple's iPhones. They then make up for it in voice and data plans that they lock a cutomer in to.

For example with Verizon, the base data plan is $30 a month for 2 years. I think the most basic voice plan to go with that is around $50 per month. That is $80 per month for 2 years, or $1,920 over 2 years. The 4s runs basically $600 new unsubsidized. They sell them for roughly $160-200 each. Supposing they are not cutting a volume discount with Apple (and they might not be) then they are paying $400 odd in subsidies to lock in a cutomer for basically $2,000 in income, or a 20% up front expense.

Of course if it is a second line, then the income is less as the voice plans tend to be cheaper, yet still with data and extra voice charges, that is probably upwares of $1,000 for each extra line that is an iPhone/Smart phone.

Also, if you check, there are plenty of phones that are more expensive than the iPhone and are subsidized down to similar prices ($200-250 price range, unsubsidized price ranging from $500-800).

Even with ones that are cheaper, there are very, very few smart phones that are less than $400 unsubsidized. Most of the cheaper smart phones are subsidized down to $100 and a few $49 or occasionally free/$1...so the price per unit for the subsidy is coming out near what the iPhone's subsidy is anyway to get those customers locked in.

Back to reduced margins...part of what is cutting in to their margins in a big way is that they are spending through the nose to build out their 4G LTE network as well as trying to buy up spectrum and a bunch of other big capitol expenditures. The subsidies companies like Verizon are paying are a rather small part of their overall actual expenditures.

And yeah, everyone wants the highest margins possible. However, personally (and most companies take this route also), I'd rather earn $200 in profit on $1,000 in income than $100 in profit on $400 in income even though my margins are less.