NEW YORK – Apple Inc.'s (AAPL) iPhone could deliver a profit margin of more than 55 percent after hardware and manufacturing costs, research firm iSuppli said on Tuesday, sending shares in the company up nearly 5 percent.
The iSuppli report provided a glimpse into the financial model of the iPhone, which hit U.S. stores on Friday, and gave a new boost to Apple. Some analysts had predicted the company's shares would grind to a halt or even drop after gaining more than 30 percent in the run-up to the iPhone launch.
Based on an examination of the iPhone's components, iSuppli estimated that its hardware and manufacturing cost was $265.83, or almost 45 percent of a $600 retail price for its more expensive model with eight gigabytes of storage.
That leaves a profit margin of more than 55 percent, but does not include costs such as royalties or logistics.
In comparison, iSuppli said, average gross profit margins range from 20 percent to 30 percent for advanced phones from cell phone rivals such as Nokia (NOK), Motorola Inc. (MOT) and Samsung Electronics Co Ltd.
Other analysts have estimated that traditional cell phone makers tend to achieve gross margins of 40 percent to 45 percent for their high-end phones.
The report cheered investors who have bet the iPhone, which combines a phone, Web browsing and a media player, will become a major part of Apple's business alongside its Mac computers and iPod digital media players. ISuppli has estimated the iPod's gross margins run at 40 percent to 50 percent.
A CUT OF THE BUSINESS
Apple and AT&T (T), the iPhone's exclusive U.S. service provider for the next two years, have kept details of their business partnership under wraps.
Some industry experts say that AT&T may reap a portion of the retail price for iPhones sold in its stores.
On the flip side, other analysts say Apple could pocket anywhere from $5 to $9 of monthly service charges levied on iPhone customers by AT&T. The minimum required two-year wireless service contracts for the iPhone cost $60 per month.
Apple was not immediately available for comment on the iSuppli estimates.
ISuppli also shed light on the companies providing parts for the iPhone. The phone's display, a much lauded feature for the device, costs $27 or about 10.8 percent of its hardware costs. The display was supplied by Germany's Balda AG , iSuppli said.
The phone's core communications chips, from Infineon Technologies AG, represent $15.25 or 6.1 percent of the cost.
Estimates for iPhone sales in its first two days on the market ranged from 312,000 to 500,000, analysts contacted by Reuters said. AT&T said that iPhone sales for the weekend were the strongest for any device in the company's history.
Apple shares were up $5.91 or 4.9 percent to $127.17 on Nasdaq. Shares of AT&T were down 35 cents at $41.50 on the New York Stock Exchange.