Apple’s (AAPL) cost to build its new iPad is extraordinarily low compared to what the firm charges consumers. iSuppli, a research firm which analyzes hardware expense of goods, estimates the total cost to build an iPad is $259.60.
iSuppli reports that the cost of the touchscreen for the iPad is $95 and the processor expense is $28.60 according to an analysis of the data done by Bloomberg.
The $259.60 estimate from iSuppli is for the $499 version of the iPad. The $699 version has a cost of goods of $348.10.
The information shows how profitable the new product could be for Apple. Some analysts expect the consumer electronics company to sell 10 million of the tablets of the next year. That would bring Apple $5 billion in revenue and $2.5 billion in gross income. In its last fiscal year, Apple had revenue of $39.6 billion and a gross operating profit of $13.8 billion. Those numbers mean that the iPad could have a substantial effect on Apple’s earnings by early next year
If the growth of the iPad is on a trajectory that is anything close to the iPhone, the device could meaningfully alter Apple’s earnings improvement over the next three years.
No wonder the market has given Apple a $217 billion market cap. It is growing like a weed.
Douglas A. McIntyre
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