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iPod shuffle, consistent profits for Apple

According to IdaRose Sylvester, senior analyst at Idc, an iPod shuffle has a profit margin on the hardware of about 35-40%. The calculation, which obviously excludes all logistics, management, communication and other ancillary expenses, based on the average prices of the digital music player components.

The most expensive component, taking to analyze the 512 MB model, the flash memory, produced by the Korean Samsung. The cost of about $ 37.50 a piece, two thirds of the total estimated cost for Apple in about 50 dollars (the figures are expressed with the American currency given that the currency used to make the purchases of the components).

"Apple's shuffle margins – says Sylvester – are really very good: based on our analysis of costs related to production prices in the last quarter of 2004, that is when Apple purchased the supplies in preparation for production. Given the volumes, the next supply will surely take place at even lower prices ?.

According to the analyst, in fact, the cost of 512 MB memories will soon fall to $ 31.25, increasing Apple's margin even further. The second most expensive component is the SigmaTel chip that oversees the decoding of Mp3 or Aac files. According to Sylvester, among other things, the chip (number STMP3550) also supports the decoding of Microsoft's Wma format.

It is interesting to note from the analysis that, in addition to the functions implemented by the components (digital-analog converter, USB 2.0 controller, Sdram and headphone amplifier, there is also an analog-digital converter (for recording audio on the shuffle memory), a Lcd screen drivers and a driver for an Fm radio tuner.

One last note from the analyst: Sylvester points out that, although the market of Apple seems apparently similar to that of video game consoles for example, there is a substantial difference in favor of Apple. Usually gadgets in this price range are sold below cost and the profit margins come from the subsequent sale of content (for example, titles for game consoles). Instead, Apple not only earns from the sale of each song, but even has a substantial margin on the price of the device. "A masterfully executed strategy," comments the IDC analyst.

To be noted, given that the cost in Europe and in the US formally aligned (99 dollars and 99 euros), even if faced with a series of additional costs due to the different structuring, autonomy and size of the Old Continent network, Apple's margins are still greater by around 35%.