Info
iPod gets gut check
Research firms rip open new video-enabled player to reveal around $150 in materials.
When Apple Computer CEO Steve Jobs unveiled the iPod two weeks ago, his revelation that the new media player--sleeker, lighter, and with a 2.5-inch color screen that played video--would cost only $299, same as its predecessor, elicited oohs and ahhs from the assembled crowd.
But now two separate research reports indicate how Apple was able to add features and subtract girth without raising the price of the new iPod.
Wall Street firm Jefferies & Co. and market research firm iSuppli separately tore open the new iPod and documented its innards, revealing that the 30GB player's guts cost as much as $150 less than its retail price.
Jefferies & Co.'s report found that all of the iPod's ingredients cost about $143.50, giving Apple a remarkable 52 percent gross margin for every new iPod sold. iSuppli put the value slightly higher at $151. Neither estimate, which factors in bulk-order discounts that large companies like Apple negotiate from individual vendors, includes design, manufacturing, packaging, literature, and marketing costs, so Apple is by no means making $150 profit on every new video iPod it sells.
Both reports highlighted perhaps the biggest addition to the new iPod: a video decoder chip from Broadcom. That inclusion "opens the door for Broadcom to secure future design wins with Apple," the Jefferies report concludes, because Broadcom will likely improve its own chip to the point that longtime iPod chip supplier PortalPlayer's chip could be eliminated.
Both reports point out that PortalPlayer chips remain in the new iPod. That company reported today that third-quarter profit tripled to $10.3 million, but shares plummeted after it said it would sell 4.5 million shares to the public.
"We believe that the presence of Broadcom in [the new iPod] should begin to put fear into [PortalPlayer]," the Jefferies report noted.
In late September, iSuppli did a similar "teardown" of the pencil-thin iPod Nano, finding that the guts of the 2GB Nano cost $90.18, far below the retail price of $199.
Just added
