Whether you're a fan of Apple's recently unveiled iPad or not (and judging by the reader comments, many of your are not), you were probably expecting the tablet to cost much more -- maybe even twice as much -- than the entry-level unit's $499 price tag. As it turns out, Apple stands to make $208 on every $499 iPad sold, giving the company headroom to drop the price if the market (and competition) dictates.
That's according to a bill of materials (BOM) analysis by Brian Marshall of BroadPoint AmTech. According to Marshall, individual parts inside Apple's 16GB Wi-Fi-only iPad adds up to $270.50, which includes a $10 line item attributed to manufacturing. Factor in another $20 for warranty service, and the bottom line comes to $290.50, leaving $208.50, or a nearly 43 percent profit margin.
"If [Marshall] is right, this shows that there's room going forward for Apple to reduce the price of the iPad," said Ezra Gottheil, an analyst with Technology Business Research. "I think the $499 price point is very aggressive, but if they dropped [the price] it would really put the iPad in the netbook range. At a lower price, consumers will have to decide waht they want for a portable work and play device, a netbook or get an iPad."
The profit margin's even wider on the 16GB iPad with Wi-Fi and 3G, which Marshall estimates runs the company $306.50 to produce but will sell for $629. The end result is a 52 percent profit, a number videogame console makers can only dream of.