Why would they work so hard to get a product that will destroy them.

Hmmm, I wonder what that word "margin" means? It's the same thing as "net profit", right. That is why Exxon's low margins make it such a small company.



//I also wonder if they think they could have just not upgraded the data networks if there was no iPhone?

Apple doesn't give good volume discounts and requires so many to be purchased at a time. Therefore, yes, it does cost more in upfront costs. Plus, smartphones have been increasing in prices while subsidized prices that we pay are still at the 200-250 mark.

No matter what, as a consumer, we get screwed.

Geez, I thought the folks in China built those things for 35 cents an hour. Dang phone should be $29.95. Apple has close to $100B it doesn't know what to do with. How about dropping prices and giving everyone a break?

Pick: Geez, I thought the folks in China built those things for 35 cents an hour. Dang phone should be $29.95. Apple has close to $100B it doesn't know what to do with. How about dropping prices and giving everyone a break?

There's some articles around that estimate the manufacturing cost of an iPhone to be startlingly low. Of course, that doesn't account for the R&D, marketing, etc.

Babwa Wawa: You know what I love about this? Instead of reducing the $450 subsidy to Apple, or raising the price of the iPhone they sell, they're raising prices on their data plans.

So no matter what phone you buy, you're playing for an iPhone.

A one time charge isn't going to cover a recurring expense.

Meanwhile, I bought my prepaid Android phone for $110 and pay $35/month for a plan that includes voice, data, and texting with no contract.

Somehow I don't think an iPhone costs $400 more to make.

So the iPhone has knocked carriers' margins down to "only" about 42-44%. The horror.

With that said, thanks, iDrones, for giving Verizon justification to no longer provide an upgrade discount every 2 years.

Not sure why anyone still buys an Iphone. It's no better than the 10th best smartphone out there. Its time has come and gone.

Pick: Geez, I thought the folks in China built those things for 35 cents an hour. Dang phone should be $29.95. Apple has close to $100B it doesn't know what to do with. How about dropping prices and giving everyone a break?

Apple didn't get rich and smug by writing lots of checks.

TheGreatGazoo: Meanwhile, I bought my prepaid Android phone for $110 and pay $35/month for a plan that includes voice, data, and texting with no contract.

Somehow I don't think an iPhone costs $400 more to make.

I was thinking of doing this. Where did you get the prepaid plan through if I may ask?

mrmaster: Apple doesn't give good volume discounts and requires so many to be purchased at a time. Therefore, yes, it does cost more in upfront costs. Plus, smartphones have been increasing in prices while subsidized prices that we pay are still at the 200-250 mark.

No matter what, as a consumer, we get screwed.

You do know that a smart-phone is not a critical need, right? If you think you are getting screwed, don't buy one.

TheGreatGazoo: prepaid Android phone for $110 and pay $35/month for a plan that includes voice, data, and texting with no contract.

Would you be willing to provide more details on this $35/month plan and where I could get it?

mctwin2kman: TheGreatGazoo: Meanwhile, I bought my prepaid Android phone for $110 and pay $35/month for a plan that includes voice, data, and texting with no contract.

Somehow I don't think an iPhone costs $400 more to make.

I was thinking of doing this. Where did you get the prepaid plan through if I may ask?

Prepaid plans suck. And theres no plan out there for a droid phone plan for $35/month. None. And "data".... wtf is that? Low end $35 plans on non smart phones = no web surfing.

Let me get this straight, the margins are down to almost 40 points and they are CRYING????

I work in capitol equipment sales and we do jumps of joy when we drag a project in at more than 30 pnts of margin.

STFU and DIAF Verizon and AT&T.

TheGreatGazoo: Meanwhile, I bought my prepaid Android phone for $110 and pay $35/month for a plan that includes voice, data, and texting with no contract.

Somehow I don't think an iPhone costs $400 more to make.

I get 7G, unlimited voice and texting, and teleportation service for $4.99/mo and no contract. Phone was free, too.

Bazinga In My Pants: mctwin2kman: TheGreatGazoo: Meanwhile, I bought my prepaid Android phone for $110 and pay $35/month for a plan that includes voice, data, and texting with no contract.

Somehow I don't think an iPhone costs $400 more to make.

I was thinking of doing this. Where did you get the prepaid plan through if I may ask?

Prepaid plans suck. And theres no plan out there for a droid phone plan for $35/month. None. And "data".... wtf is that? Low end $35 plans on non smart phones = no web surfing.


I sit corrected. Virgin is selling android no contract phones. We looked into Virgin's no contract plans and found they weren't worth it (either for very limited coverage, high upcharge for web browsing, etc). Anyhow, buyer beware on prepaid phones.

Bazinga In My Pants: Prepaid plans suck.

If you're a heavy user maybe. I average about 100 sms,10 minutes of voice and 0 mb's of data a month on my phone. Even the lowest rate contract is a rip off for me.

Bazinga In My Pants: Bazinga In My Pants: mctwin2kman: TheGreatGazoo: Meanwhile, I bought my prepaid Android phone for $110 and pay $35/month for a plan that includes voice, data, and texting with no contract.

Somehow I don't think an iPhone costs $400 more to make.

I was thinking of doing this. Where did you get the prepaid plan through if I may ask?

Prepaid plans suck. And theres no plan out there for a droid phone plan for $35/month. None. And "data".... wtf is that? Low end $35 plans on non smart phones = no web surfing.


I sit corrected. Virgin is selling android no contract phones. We looked into Virgin's no contract plans and found they weren't worth it (either for very limited coverage, high upcharge for web browsing, etc). Anyhow, buyer beware on prepaid phones.

Well I have a company BB so I really do not need one. Just curious.

Bazinga In My Pants: Bazinga In My Pants: mctwin2kman: TheGreatGazoo: Meanwhile, I bought my prepaid Android phone for $110 and pay $35/month for a plan that includes voice, data, and texting with no contract.

Somehow I don't think an iPhone costs $400 more to make.

I was thinking of doing this. Where did you get the prepaid plan through if I may ask?

Prepaid plans suck. And theres no plan out there for a droid phone plan for $35/month. None. And "data".... wtf is that? Low end $35 plans on non smart phones = no web surfing.


I sit corrected. Virgin is selling android no contract phones. We looked into Virgin's no contract plans and found they weren't worth it (either for very limited coverage, high upcharge for web browsing, etc). Anyhow, buyer beware on prepaid phones.

I recently switched to Virgin from Verizon. Cut my monthly bill by more than half with pretty much the same plan, a nice new Droid, AND no contract. True, coverage is not as good but I don't travel much. I have great coverage at my house (in the boonies), at my work, and in between. For a savings of $50+/month, I'm more than happy.

the_geek: Pick: Geez, I thought the folks in China built those things for 35 cents an hour. Dang phone should be $29.95. Apple has close to $100B it doesn't know what to do with. How about dropping prices and giving everyone a break?

There's some articles around that estimate the manufacturing cost of an iPhone to be startlingly low. Of course, that doesn't account for the R&D, marketing, etc.

apple's R&D expenses are very low, only 2.2% of sales

Link (new window)

the only big tech company with a lower ratio is Dell.

Madbassist1: I'm open to suggestions. My BB is starting to annoy.

Samsung Nexus galaxy. You won't know how you ever lived without it.

GanjSmokr: I recently switched to Virgin from Verizon. Cut my monthly bill by more than half with pretty much the same plan, a nice new Droid, AND no contract. True, coverage is not as good but I don't travel much. I have great coverage at my house (in the boonies), at my work, and in between. For a savings of $50+/month, I'm more than happy

THIS

I bought a crappy Optimus V about a year ago -- even after running Cyanogen and installing a 16gig SD card, it still pales compared to my old iphone. But considering I'm saving $50/mo and it can do pretty much everything my iphone could (albeit less adroitly) it's totally worth it.

Babwa Wawa: they're raising prices on their data plans.

So no matter what phone you buy, you're playing for an iPhone.

What really sucks about the various carriers is that once your contract has been completed, and in theory the tariff has paid for the cost of the phone, the monthly rate for voice & data doesn't drop.

There should be a contract rate for subsidizing the cost of the phone, and a post-contract rate (or a bring-your-own-phone rate) that is significantly lower, since the carrier doesn't have to subsidize the cost of the hardware.

But the carriers don't do this, and their prepaid plans all universally suck.

Why Would I Read the Article: Madbassist1: I'm open to suggestions. My BB is starting to annoy.

Samsung Nexus galaxy. You won't know how you ever lived without it.

And it's only $99 on Amazon. I bought one and they had great customer service too.

mctwin2kman: TheGreatGazoo: Meanwhile, I bought my prepaid Android phone for $110 and pay $35/month for a plan that includes voice, data, and texting with no contract.

Somehow I don't think an iPhone costs $400 more to make.

I was thinking of doing this. Where did you get the prepaid plan through if I may ask?

Virgin Mobile. I got the phone off of Amazon.com. It is the Optimus V or something like that. It's old but it works other than Swype being fubared on it. 300 minutes. 2.5 GB of data, and unlimited texts.

Tax Boy: Babwa Wawa: they're raising prices on their data plans.

So no matter what phone you buy, you're playing for an iPhone.

What really sucks about the various carriers is that once your contract has been completed, and in theory the tariff has paid for the cost of the phone, the monthly rate for voice & data doesn't drop.

There should be a contract rate for subsidizing the cost of the phone, and a post-contract rate (or a bring-your-own-phone rate) that is significantly lower, since the carrier doesn't have to subsidize the cost of the hardware.

But the carriers don't do this, and their prepaid plans all universally suck.

T-Mobile Value Plan. Either bring your own unsubsidized phone, or you buy the phone for a down payment and 20 monthly payments (Droids vary between $10-$20/month) which altogether equal the retail price of the phone. Plans are dirt cheap, albeit still on a contract - $49.99 for unlimited text, night/weekends, 2 GB of 4G data (unlimited 2G data after that), and 500 anytime minutes. If you have 2 lines, it is $39.99 each for the same plan. Extremely affordable, considering Sprint/VZW/AT&T charge $79-$89 for the same plan setup.

I'm open to suggestions. My BB is starting to annoy.

Please look at a 7 series BB 9900. Spend 5-10 minutes with it. Be objective and don't listen to anecdotes.

Between 2009 and 2010, Verizon averaged EBITDA service margin of 46.4% per quarter. In the first quarter that the iPhone went on sale, that fell to 43.7%. Last quarter, when Verizon sold a record 4.2 million iPhones, its margin plunged to 42.2%.

I'm no economist, but is a profit margin drop from 46% to 42% accurately described as a "plunge"?

GameSprocket: Why would they work so hard to get a product that will destroy them.

Hmmm, I wonder what that word "margin" means? It's the same thing as "net profit", right. That is why Exxon's low margins make it such a small company.



//I also wonder if they think they could have just not upgraded the data networks if there was no iPhone?

It's a big FAIL to emphasize one line item at the expense of all others unless that item is net profit.

Its amazing what you can accomplish with some slick designs and hipsterism combined with Chinese slave labor.

cambie: The article is BS. They've been providing 400 dollar subsidies all along.

Since the iphone came along, yeah. But before that they werent giving phones away like they are now, if they were to sell the iphone for the price when it first came out it would have been in the $800 range, cell phone carriers didnt push devices like this in the past but since they had a bidding war for the device they agreed to the terms. Even though apple had no intention of going with verizon initially they used them to get att to agree to better terms and the shiat worked. This is one of the reasons why I see the cell phone companies wanting another device to come out and take over the iphone.....

the opposite of charity is justice: I'm no economist, but is a profit margin drop from 46% to 42% accurately described as a "plunge"?

A 4.2% loss in two quarters? Yeah I would say that is a reason to worry, verizon just started selling the phone so those are over a few months and that is alarming for share holders.

Tax Boy: Babwa Wawa: they're raising prices on their data plans.

So no matter what phone you buy, you're playing for an iPhone.

What really sucks about the various carriers is that once your contract has been completed, and in theory the tariff has paid for the cost of the phone, the monthly rate for voice & data doesn't drop.

There should be a contract rate for subsidizing the cost of the phone, and a post-contract rate (or a bring-your-own-phone rate) that is significantly lower, since the carrier doesn't have to subsidize the cost of the hardware.

But the carriers don't do this, and their prepaid plans all universally suck.

T-Mobil used to do this, do they stop?

Why Would I Read the Article: Madbassist1: I'm open to suggestions. My BB is starting to annoy.

Samsung Nexus galaxy. You won't know how you ever lived without it.

Galaxy s2 and I love it - but it is a battery hog

My tiny violin, let me play it for you.

Sprint lost money last quarter while gaining subs, all linked to carrying the iphone...so through Sprint into that headline too.

the opposite of charity is justice: I'm no economist, but is a profit margin drop from 46% to 42% accurately described as a "plunge"?

A 4.2% loss in two quarters? Yeah I would say that is a reason to worry, verizon just started selling the phone so those are over a few months and that is alarming for share holders.

Umm, it's not a 4.2% loss. It's a 4.2% decline in profit, which is still 42% profit for Verizon and almost 30% profit for AT&T. Those EBITDA profit numbers are for all sales, vs. all profit...not just for iPhones.

The article is BS. They've been providing 400 dollar subsidies all along.

AND they've been subsidizing all smartphones, not just the iPhone. They just have to subsidize the iPhone a hell of a lot more. FTA: "The cost of adding an iPhone customer is about 40% higher than the cost for the average non-iPhone customer, according to Sprint." Sweet.

There's no way in hell consumers would buy smartphones if they had to pay $400-$800 up front, but they'll happily spread that cost out over 2 years, so consumers really don't have any idea how much they're paying for their phone. This is a market strategy that will never change.

AT&T and Verizon are still laughing all the way to the bank, and so is Apple.

"A logical conclusion is that the iPhone is not good for wireless carriers," says Mike McCormack, an analyst at Nomura Securities. "When we look at the direct and indirect economics that Apple has managed to extract from the carriers, the carrier-level value destruction is quite evident." (Quoted from TFAFT)

What Apple does is pretty much good for nobody in the long run. For example, what they did to the music industry is going to have long-term effects, evening out the playing field so that most new musicians make a little money, popular musicians of yesteryear get smaller residuals as they lose out on classic album sales and only a few mega-marketed folks ever achieve a level of fame. Meanwhile, Apple gets 30% of the take for forcing everyone to sell their work cheaply. It's a short-term benefit, but in a few years, I'd wager the problems it causes will start to sink in.

But not to worry. Apple's anti-competitive behavior, its severe corporate culture, its reliance on near-slave labor abroad* and its reliance on market growth will come back to bite it soon enough - it's beholden to investors who are getting fat right now off the human misery the company causes, and it'll have a sudden plunge at some point in the future when it can't grow as much as investors like and consumers start to get bored with the brand.

*I should note that this is going to hurt a lot of electronics manufacturers, not just Apple. But they'll certainly get hurt as much as anyone since they are known for pushing the contract manufacturers to ramp up production for a product release.

This Looks Fun: TheGreatGazoo: prepaid Android phone for $110 and pay $35/month for a plan that includes voice, data, and texting with no contract.

Would you be willing to provide more details on this $35/month plan and where I could get it?

T-mobile (new window). $50 dollars but still unlimited.

and I bought a factory unlocked 3GS with all latest software direct from Apple for $345 plus tax. The ones on Craigslist still have ATT software on them affecting upgrades and reception.

I dislike Apple but hate verizon and At&t more so I'm cool with this.

secularsage: What Apple does is pretty much good for nobody in the long run. For example, what they did to the music industry is going to have long-term effects, evening out the playing field so that most new musicians make a little money, popular musicians of yesteryear get smaller residuals as they lose out on classic album sales and only a few mega-marketed folks ever achieve a level of fame. Meanwhile, Apple gets 30% of the take for forcing everyone to sell their work cheaply. It's a short-term benefit, but in a few years, I'd wager the problems it causes will start to sink in.

Um, no. Not even close.

The music industry had been trying for years to get people to pay for music online. iTunes was the first time that really happened; previous efforts (such as Rhapsody) had been failures.

Do artists make less with iTunes than CDs? Who cares? That's a completely irrelevant comparison because nobody buys CDs anymore. The only real competition iTunes has is BitTorrent. Some money is more than zero, is it not?

Now as for "all that money" Apple makes from iTunes, it's not much either. The cost of running the service eats into the profits. The point of iTunes is to get you hooked into the Apple ecosphere of hardware products, not to make money on music.