Tuesday, November 6, 2012

Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT) tablets are the most profitable

When it comes to profit margins on their tablet PCs Microsoft Corporation (NASDAQ:MSFT)  and Apple Inc. (NASDAQ:AAPL) are at the top of the heap followed by Google and Amazon, according to a research done by IHS.

Both Amazon and Google have priced their tablets at fairly low rates with the intention of making them more affordable. However Apple and now Microsoft have always priced their tablets at the premium end.

According to the IHS analysis, Microsoft's first tablet, the Surface, manufactured by it, costs about $267 in parts and labour.

It is priced at $499 for the 32 GB model, for a profit margin of around 46 percent. Surface comes with a 10.6-inch screen and can access the Internet only through Wi-Fi.

Apple's third-generation iPad, with WiFi-only capability with, 32GB of storage and a 9.7-inch screen cost an estimated $333 and retailed for $599, for a 44 percent profit margin. The 16GB base model cost $316 and was priced at $499, for a profit margin of 37 percent.

This means that Microsoft's gets more profit out of its Surface tablet compared to what Apple gets with its older iPads.

The fourth-generation iPad, which comes with a faster processor and went on sale Friday, costs about $305 in parts and labor for the 32GB Wi-Fi-only model, for a 49 percent margin, according to the IHS analysis. The 16GB base model costs about $295 and sells for $499 a unit.

Marketing and sales expenses have been excluded for the purposes of this analysis. Only the cost of the components has been taken into account.

Apple's iPad Mini which retails at $329 for the 16 GB model and costs $198 for parts and labour has a profit margin of 40 percent.

Goggle's Nexus 7 that costs $159 for its 8GB model and sells for $199, according to IHS has a profit margin of 20 percent. Google makes a little more on its 16GB model, which costs about $167 to make but sells for $249, for a 33 percent margin.

Amazon spends about $174 to make its 7-inch Kindle Fire HD with 16GB of memory and sells it for $199, for a profit margin of 13 percent.

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