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OPINIONS

Apple Surpasses Microsoft`s Earnings...Finally!
By: Joe Eitel
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  • Rating: 3 stars3 stars3 stars3 stars3 stars / 4
    2008-12-08

    Table of Contents:
  • Apple Surpasses Microsoft`s Earnings...Finally!
  • Five iPhone Revenue Engines
  • Retail Profits
  • Media and Software Sales

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    Apple Surpasses Microsoft`s Earnings...Finally! - Five iPhone Revenue Engines


    (Page 2 of 4 )

    Apple hasfive significant revenue engineswhen it comes to the iPhone, including manufacturing profits, retail profits, mobile service provider revenue sharing, accessories sales, and media and software sales. Mobile hardware manufacturers will not be able to compete against Apple.

    One of the hindrances that mobile phone manufacturers have is that they entered into partnerships with mobile phone service providers that restrict them as far as not only how much profit they can earn in the market, but what they can do.

    Manufacturing Profits

    One of the ways that mobile phone manufacturers can make profits is their ability to incorporate software and hardware parts. These two pieces cost more than the sum of the components. However, these mobile phone manufacturers cannot make a large profit off of these parts because they have to design and customize their phones to what the mobile phone providers want, instead of what the customers want.

    The business model for mobile phone providers is that the phone hardware is treated as a commodity. Mobile phone providers lure customers to purchase their services and sign long-term contracts by either advertising the phone for free or promoting an inexpensive phone. As a result, mobile phone manufacturers canít make much profit off of their phones. The phone hardware has little or no value.

    Apple, on the other hand, is not bound by these restrictions. Instead, Apple can sell the iPhone directly to customers. Apple not only has the power to set its hardware price, which produces a significant profit, but it can develop and incorporate features into the iPhone that you wonít find in other phones that mobile providers sell.

    For example, youíll find WiFi for direct network access. You can also get free desktop-style email that includes photo attachments. However, you wonít acquire the fees to use these features that you will find in other mobile phone providersí plans. Mobile phone providers, such as AT&T, do sell the iPhone. Apple, however, calls the shots rather than AT&T.

    Apple also took the offensive and defined the mobile phone market so that it can generate profits from its hardware. The company also created its own business model, which other mobile phone manufacturers and mobile providers cannot replicate.

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