IPod Nano 100% Margin

By Justin Mann on September 23, 2005, 7:40 PM
Ipod Nanos, despite the low storage capacity, have taken off quite well, and have fit the mp3 price market quite well, with average retail being around $199. The actual cost of these little guys to manufacturer is estimated to be at around $100, with $70 of hardware. Although it seems the article in question is sort of looking down on the price, as if it could be sold cheaper, much like with the Intel cost of CPUs vs pricing I don't see this as a bad thing at all. When you take into consideration R&D, dead on arrival and initial deployment costs, there's a lot more that goes into the final product than just static costs. More than half of the hardware cost of the Nano alone is the storage, which is manufactured by Samsung. Flash is much cheaper than ever, but is still pricey. Nano may be expensive, but all high-end portable media players are. The Zen, for instances, is a fantastic device with a fantastic price.

User Comments: 5

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smtkr said:
Thank you for getting it right. I saw a ton of websites on the net calling this 50% instead of 100%. Apparently, they couldn't figure out that doubling something is 100%.
Nic said:
Actually, 50% is the correct value because profit margin is defined as a percentage of sales revenue. Following this logic we have...($100/$200)*100 = 50% I'd agree that it is confusing and very easy to arrive at a different result if you look at it from a different angle. However, that wouldn't be 'profit margin' but 'markup' that you would be quoting. For the iPod Nano the (profit) margin is 50%, but the markup is 100%. [url]http://www.moneychimp.com/glossary/profit_margin.htm[/u
l]Profit MarginEarnings expressed as a percentage of Revenue, ie the percentage of sales the company has left over as profit after paying all expenses."
smtkr said:
Ah, I was thinking about the price as a percentage of cost. Even using the proper business terms, it's probably still not the case, as we have to consider that ipods are not all sold direct from apple. The profit margin apple sees is likely much lower than the 50% you've mentioned (the same for the retailers).
Soul Harvester said:
numbers, numberseveryone hates em
RMAC said:
Gosh-O-Willikers!I had no idea that WalMart and CompUSA and all them guys were selling iPods for exactly what the they paid Apple for them! What a public service!Most manufacturers charge retailers LESS than retail.
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