Dear Sheldon

You base your findings on a 75.00 profit on phone. The profit margin on these phones are said to be 55% More like 350.00 to 450.00 ea. They were taken apart and the inside components were surveyed. Those are the margins after the examination. What are your projections for these figures

Mike,
Thanks for your comments. You may be talking about gross margins, which are 28% to 29% currently (and might be higher for iPhone) but I am being generous assuming that the net margins will be 50% higher on this product in the first year.

Also while the phone might retail for $500, I do not beleive that is what Apples wholesale price to AT&T is. I will let my figures stand for now.

Mike,

Are you taking into account the costs of product R&D, marketing, shipping, etc? There are many more costs related to the product than simply manufacturing.

wow.

now the apple backlash includes saying the device will cause accidents (and presumably kill people?). Be interested to see if that line disappears soon...

swallow your ego and admit Apple knocked it out of the ballpark. nobody cares what you think about its functionality.

Sheldon,
If you are going to write for a living you better get your facts straight!
Apple will be making about $275-$325 profit per phone. We'll say $300. Also add on $10. a month on each 2 yr. contract = $240. for a total of $540. per phone. If Apple sells 20 million phones (your figure) that will total close to 11 BILLION dollars. not the 1.5 billion that you state. Quite a bit of difference from your figures........

wow adam.

now the apple frontlash includes responding to stupid petty comments and acting like they should be removed from the blog by the graces of your ingenuity.

Frank,
Like you said "if you are going to write"...Get some perspective, check your figures. By your figures $11 billion divided by the P/E of 30 you would have an Apple share price of $366 without any of it's other enterprises. I wish you all would understand the difference between gross and net margins before you make foolish comments. But I do appreciate people keeping me on my toes.

Mr. Liber

I have a quick question for you: How do you feel about China Life Insurance (LFC) stock, China Mobile (CHL) stock, and China Medical Technologies (CMED) stock? Due to the pharmaceutical industry beginning mass drug programs and "experiments" in this country, do you believe it is wise to invest in these stocks?

Horrible, horrible post. This is why you will not make money with AAPL like many have.

This site normally has some quality reads, but this was not one of them.

$75 per phone...LOL!!!! Why not short AAPL with your warped perspective.

Well I wanted to sell this stock years ago. However my daughter said no. I guess she believed in Steve. It was purchased at $37.o0. It's good to listen to your children once in awhile. I wish he would pay us a dividend.

As a follow-up to some of my critics I did the homework others have not.

"iSuppli said that the estimated manufacturing cost of an 8 GB iPhone is US$265.83, only 45 percent of the retail price. However, the cost does not cover royalty payments and logistics. "

So it is true Apple might earn in the neighborhood of 55% gross margins before royalties, logistics, marketing, R&D, and all it's huge overhead costs...and end up with 15% net profit which as stated credits the iPhone with a 50% better margin then the company is getting now across the board, including iPods and high margin iTunes.

hmrz2,
I will respond to your question in another post.

Thanks for your analisys. I've been weighting getting into this stock but value was there at $85/share few months ago.
I don't see iPhone as growth. I believe iPhone was a defensive move by Apple. Mobile phones will all converge into multimedia and multipurpose devices. If Apple wasn't proactive in this area, iPod business would get flanked. iPod business will quickly become secondary as the race to make the single device replace mobile phone, media player, wallet, PDA, and even laptop to some degree. So the point is that growth in this area could be offset by decline in area of media players.

Future firmware upgrades will make iPhone better and possibly provide new features such as MMS support, video capture etc. Even some of the phone related issues such as call quality could be improved using firmware update. It is just matter of time. So, people! go and get yourself an iPhone!

The iPhone is just sugar on top. It's the rest of their product line that's taking AAPL to 160-200/share in the next 12 months. Between the X-server (poised to blow HP out of the water), the MBP's, and the ultralight portable coming out, all this hype about the iPhone is at best more fodder for Apple's 'halo effect'.
And nobody is mentioning media distribution as Apple just quietly slips past Target to take #3 spot!
Buying AAPL on iPhone projects is like buying a Ferrari just for the color red. It's the style, and what's under the hood that preventing investors from making all the money to be had in Apple. This is, historically speaking...."the perfect tech storm" to invest in.

Names aren't very important. I've been writing about what the iPhone does since 1979, and of course not calling it that... http://paullevinson.blogspot.com/2007/06/iphone-arrives.html

Pretty fair analysis, even if most of the commenters don't get the numbers. The writer is referring to Apple's net margin, not gross margin. Apple's gross margins are typically about 29%, though quite a bit higher the last two quarters due to low DRAM prices. The net margins, are closer to 10%, though I think last quarter was about 12%+. So, the writer, was increasing that percentage to 15% and got $75. Fair enough. I think the share price does support the potential for about $160, given iPhone sales.

My only quibble, is that there is no detail on what the writer believes the phone weakness is of the iPhone. I find the phone part of the iPhone to be excellent. Conference calls have never been so easy. I can tap a phone number in a webpage and get it to dial. And, as far as reflections go, I'm not sure I've seen a better screen in sunlight. Does the author know of any better/brighter screens?

Sheldon,

You are a marvelous example of the kind of clown who sits in an office poring over charts instead of actually researching the companies he's gabbing about. iPhone is a breakout product, which has already topped a million units. It's far and away the most successful product launch in the history of consumer electronics.

-jcr

shagghie,

Growth prospects for the Mac are good, and the Mac as a whole is much more important than just the Xserve.

That being said, you couldn't be more further from the truth about the Xserve, it's not poised to blow HP out of the water. In Q1 2007 Apple sold 8,700 units worldwide according to an IDC report, cited by DigiTimes.

www.digitimes.com/systems/a20070604PD204.html

In Q1 2007 Hewlett-Packard retained its worldwide server shipment lead and sold 634,093 servers according to Gartner.

www.gartner.com/it/page.jsp?id=506336

Apple's on-quarter shipments growth of 73 percent looked promising at first glance but in fact it means that Xserve sales in the previous quarter were horrendous. Sales grew from about 5,000 in Q4 2006 to 8,700 units (+73%).

Way back in 2002 Apple was shipping 6,000 Xserves per quarter, and it was 5 yr ago! In Q1 2005 Apple sold 7,736 Xserves, there is no growth in the server segment for Apple. As I said, growth prospects for the Mac are good, and that's what's important, but it has nothing to do whatsoever with the Xserve.

www.macobserver.com/news/2003/20030115/q1conferencelive.shtml
www.itjungle.com/breaking/bn052505-story01.html

KenC,

Apple's net profit margin was 10.3% for FY2006 ended last September, net profit margin (trailing twelve month) is 12.93%, but it was over 14% for the last two quarters. Net income was 1,004 and 770 million and revenue 7,115 and 5,264 million respectively. I don't know if it's sustainable, though.

Sheldon, this is an interesting analysis, but the "iPhone will lead to more traffic accidents" canard is entirely out of place, and to be frank I think it betrays a certain level of anti-Apple bias that's unnecessary in a discussion of the upside potential of AAPL.

The statistical link between cellphone use and traffic accidents is not associated with DIALING the phones (which is where, I assume, you feel the iPhone has more challenges for the driver), but rather with the distractions due to an ongoing conversation. Obviously, whether held to the ear or used on a headset, the iPhone's behavior as a phone and effect on a driver's concentration during a phone call is in no way different from any other phone on the market.

Now, if you're saying that iPhone users are too stupid to know that driving while watching a movie or searching Google Maps on their iPhones is a bad idea... well, that's another theory.

Thanks for your (otherwise thought-provoking) post.

--Mike Rose, the unofficial apple weblog http://tuaw.com