Two views of iPhone margins

Techdirt did a post today which suggests that the tear downs of the iPhone by Portelligent and one other company are probably a bit off the mark. Business week and a couple of other sources suggested that the margins on the phone, based on parts costs, were in the range of 55%. Both of the companies purchased an iPhone and then broke it down to look at the components and then costed out the individual pieces. But as Techdirt commented those estimates may wildly out of kilter. They correctly point out that a good part of the cost of the phone at this point involves the development cost of the phone (all of the bells and whistles of the phone did not just magically appear when the components were assembled).

The second issue on margins came in an NYT article on the people who bought an iPhone thinking they would be able to arb the device for a healthy profit. With dancing profits in their heads several buyers got two phones or had a friend stand in line and then thought they would be able to sell the thing for a hefty markup. Some buyers of the Nintendo WII were able to secure the game box and then offer it on E-Bay or Craig's list for a healthy profit. The Times pointed out that Apple has done a pretty good job so far of managing supply (although it also points out that the AT&T stores have a pretty consistent shortage of product). The Times compared this product more to a Harry Potter book (great to be the first one on the block with a copy) than a WII. That conclusion depends on whether the supply chain gets bumpy in the coming weeks.

The proto-iPhonearbers have the added burden of carrying cost, which the WII arber does not have. When you sign up for the phone you also have to sign up for a service plan which might run $60 a month or more. A few months of holding that could cut seriously into your potential profits.

When the Newton was pulled from the market I was amazed at how quickly Apple pulled the device out of the supply channel. I had a friend in Mexico who lost his Newton two days before the public announcement of Apple's withdrawal and called me to see if I could find a replacement. I began a web search and could not find a new one on any of the normal electronic sources.