Thursday, September 11, 2008

iPod Touch on Sale $1455 less than iPhone

Shawn Wu is wrong about this  

American Technology Research analyst Shaw Wu last night warned that Apple's recently-revealed iPod touch price cut may not go far enough, saying: "While we are pleased to see lower pricing, we are concerned that price points may remain too high given the tough macroeconomic environment and relative to the 3G iPhone at $199 and $299."
The iPod Touch is an entirely different product than the iPhone.  Regardless of price which I will get to in a moment, the product is used differently by the person who buys it.  The "price out the door" does not begin to tell the price difference.  If the iPod Touch died after 24 months of use it would cost $1455 (69*24)-199) less over that period.  So you could buy say an iPod Touch AND a really bad used car for less.

Assuming he is thinking of unit sales and he was expecting iPods to be part of the Margin Crushing trend that Apple has told us about I suggest that iPhone Accounting and broader channel Sales of Macs are margin crushing enough.

Repeat after me.  iPods are the CASH COW! ...iPods are the CASH COW!


Marcos D said...

Another idiotic post on the prices of iPhones and iPods. Comparing the service costs for communications services over 1, 2, or 3 years assumes that users don't have cell phones already!

Anyone with sufficient reason would at most compare the price of the iPhone without a communications plan to that of iPods. THAT is a real comparison and not one to create a catchy headline.

Unknown said...

I'm not sure I see your point. iPhones are going to deliver revenue month after month. Apple dropped the price of the iPod touch, but iPods are the cash cow?

BnVested said...

actually Marcos. That is EXACTLY the point. Saint that someone won't buy a 200 dollar gizmo with no phone vs a 200 dollar gizmo with a phone and a 70 dollar reuting expense is ridiculous.

If I want an I pod I am going to search for prices on competing iPod like products that are the same to ME the buyer. What relevance does the price of adioferent (phone) subsidized price have to do with that?

Asdf.... iPods are the cash cow because they are a high margin item that helps to maintain Apples overall matin while they spend money introducing new products. I might have been clearer

Unknown said...

I think the iPhone has the higher margins, just not for this quarter. The way I understand the deal between Apple and ATT, ATT is subsidizing the price of the phone (so Apple takes in more than the retail price for every phone sold) plus they get a cut of the monthly cell phone plan. If Apple's not getting a cut of monthly cell plan, I don't think accounting rules allow them to defer revenue out over 24 months.

So, the accounting is tightening margins for the next couple of quarters, but that will increase in the future. Since in the future, they're taking in revenue for a product they've already produced and sold. The margins for a phone sold 24 months ago are going to be pretty close to 100%.