margins

We've all read those blogs that "reveal" the parts cost of a fill-in-the-blank, Kindle, iPod, or Palm Pre. If you ask me, this simplistic, by-the-numbers gambit overlooks most of the costs of bringing a product to market.

First and foremost, products, all products, are priced to what the market will pay. I don't care if it's a 16-ounce bottle of Poland Spring water, Coldplay concert tickets, or a Ferrari 599 GTB Fiorano, retail prices are determined by what the market will pay. And luxury products have higher profit margins than mass market stuff. Oh really?

But the mindless rash of blogs that purport to add up the parts costs, for example $39.51 for the display, $15.96 for 8 gigabytes of flash memory, $15.41 for components, and $12.39 for the 3-megapixel camera, to calculate the cost of anything are hugely misleading. The writer merely subtracts the parts cost from the retail price and concludes the difference is the "profit."

Does the writer assume the company's factory doesn't pay rent or for electricity or heating and air conditioning? And that the factory labor force works for free?

These articles completely ignore other costs, such as research and development and engineering expenses associated with creating say, a Kindle. Manufacturers also pay significant licensing fees for technology used in their products.

Shipping costs of large products such as flat-screen TVs must be factored in before determining the final cost to the consumer.

Oh, and what about the online or brick and mortar retailer? They have their own set of expenses for rent and employees. Some of whom might need health insurance. … Read more

17Lamp.net reports on one big feature that China's version of the Firefox browser has that the rest of the world still lacks: Live Margins.

What is the Live Margins feature? It's easier seen than explained, and can be viewed here. 17Lamp.net translates:

It's a new sidebar on the right, and apparently it is "a unique solution to the longstanding problem of tab browsing where only one tab is visible at any time." But it also gives "additional search results, relevant information, music, video, and much more." (It) is also localized, including … Read more

It's almost a truism that while Microsoft struggles to do anything right (in the media's eyes), Apple can pretty much do no wrong.

This is as true of Apple's cash position, which BusinessWeek recently noted may soon surpass that of Microsoft's, as it is of Apple's product portfolio and business strategy.

It's the cash that I find particularly surprising. Apple is swimming in cash, more than $20 billion of it. The company adds more than $1 billion in cash to its stockpile each quarter. Today we give Apple a free pass on its iTunes/iPod lock-in, which delivers much of the Apple profits, because we can still happily apply such adjectives as "cool" and "innovative" to Apple.

The U.S. Congress is fixated on taxing the oil and gas companies for their "windfall profits" today, while Apple's profit margins as a percentage of sales are actually higher than Exxon's and those of the other bogeymen of Congress.

There was a time that we said similar things about Microsoft and happily bought into the lock-in that we'd eventually come to mistrust and seek to escape. Few are saying this now of Microsoft. And its cash hoard of roughly $23.7 billion has simultaneously become a cause for envy and concern: what will the convicted monopolist do with that pile of money? Can it possibly be in our interest?… Read more

The last five days have been all about breaking down the iPhone 3G--how the big release went, how many phones have sold, how the device lives up to its promise.

Now, some more numbers to toss in the mix: iSuppli has completed its iPhone 3G teardown analysis and estimated that Apple cut more than $50 from manufacturing costs per unit since the first-generation phone made its debut last year. Profit margins for the new gadget, according to the market research firm, are measuring in the range of 55 percent.

Apple spent $174.33 for initial production costs for the … Read more