The iPod Nano

From initial reviews, Apple’s new iPod Nano is another home run for Jobs & Co. The new device even got a big fat orange circle from Consumer Reports. And you know it’s a true sign of success when the BBC argues that the iPod’s design is really over 50 years old.

The iPod Nano was released just in time for the Christmas shopping season. Given iPod’s initial success, there’s an important question that Wall Street had: How big is Apple’s profit margin? One research firm had an idea. They bought an iPod Nano, broke it open, and tried to figure out the cost:

The verdict? It costs Apple $90.18 in materials to build the unit and $8 to assemble it, leaving a profit margin before marketing and distribution costs of about 50%. That’s consistent with the margins on earlier iPod versions and serves as a reminder of what a profit machine the iPod family of products has become for Apple since it was introduced in 2001.

Fifty percent! Wow. I’m running out of adjectives to describe the success of the iPod. It now represents one-quarter of all Apple’s business. The company has sold 21 million iPods, most of them in the first nine months of this year.

Now Apple’s competitors are desperately trying to catch up but Nokia says that its iPod phone won’t ship until 2006, after the important Christmas shopping season. Dell just launched its horribly named DJ Ditty.

Apple reports its next earnings on October 11, which is at the very beginning of earnings season. The current estimate is for 35 cents a share. This will be Apple’s fiscal fourth quarter. For the next fiscal year, Wall Street expects earnings of $1.42 a share, which means that Apple is going for a pricey 36 times expected earnings.

Posted by on September 22nd, 2005 at 1:13 pm


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