Tablet wars: Apple, Microsoft winning

2012-11-06 08:38

Los Angeles - Microsoft and Apple are garnering the highest profit margins for their tablets, followed by Google and then Amazon, according to research firm IHS.

Microsoft's first self-made tablet, the Surface, costs about $267 in parts and labor when excluding its optional keyboard cover. It went on sale October 26 priced at $499, for a profit margin of around 46%. Surface comes with a 10.6-inch screen measured diagonally, and can access the Internet only through Wi-Fi. The price is for its base model with 32 gigabytes of memory.

With a similar configuration, the Surface bakes in slightly more profit for Microsoft than Apple. did when it released its third-generation iPad in March.

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

A preliminary analysis of 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% margin, estimates IHS analyst Andrew Rassweiler. The 16GB base model costs about $295 and sells for $499, he says.

IHS' analysis excludes costs for marketing, sales or operating system-software, which Microsoft has been touting with its device. The research firm obtains the devices independently and breaks them apart to estimate the cost of the components.

The analysis suggests Microsoft is imputing a cost for its latest operating system, the slimmed-down Windows RT, which debuted last month. It also needs to price its flagship tablet high enough so that manufacturing partners like Dell and Lenovo can compete even after paying Microsoft for the operating system.

Apple is maintaining premium pricing as the market leader.

Among smaller-sized tablets, the iPad Mini that went on sale on Friday boasts a 7.9-inch screen measured diagonally and costs $198 for parts and labor. This 16GB model has a retail price tag of $329, for a profit margin of 40%.

The 7-inch offering from Google, the Nexus 7, costs $159 for its 8GB model and sells for $199, according to IHS. That's a profit margin of 20%. Google makes a little more on its 16GB model, which costs about $167 to make but sells for $249, for a 33% margin. 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%. That's better than the original Kindle Fire, a money-loser that, on launch, cost Amazon about $202 for every $199 it collected on a sale.

Google is aiming to both make a profit and broaden the reach of its Android operating system, while Amazon is looking to make up the profit gap when customers buy movies, books and magazines from its store.

"Amazon and Google want to put tablets in consumers' hands - even if it means doing so at a minimal hardware profit," Rassweiler said in a statement.


  • freddie.miff - 2012-11-06 09:13

    What a useless article. Amazon makes its money selling books, so it can sell the hardware at minimal markup. Profit margins alone does not make a product a winner, what are the sales volumes, and revenue on related products and services such as apps and ebooks?

      adrian.dewinter.7 - 2012-11-06 16:22

      Useless doesn't describe this article... How is having the largest profit margin on a product "winning" ? Can the person who wrote this article please go take a business lesson, or at least understand the concept of where a profit margin fits in. All this article is actually saying is that Microsoft puts the highest markup on their tablets and as pointed out, probably due to the new operating systems costs. When it comes to ACTUAL SALES, by NO MEANS is Microsoft winning any tablet war. Sensationalist or uninformed headlines just makes the author look stupid.

  • stirrer.stirrer - 2012-11-06 09:24

    Go Android! The rest are a rip-off, this article proves it in hard numbers. - 2012-11-07 07:49

      Lets leave Amazon aside because their model is different. Amazon buyers dont care what OS is on the device. They are buying the Amazon content model. Its true Amazon dont care about margin on devices for content reasons. Google dont care either as long as their devices are bought AND used because Google doesnt make tablets (aside from Motorola which is not cheap anyway). However the device manufacturers do care and they are not doing great in the tablet space. Samsung are doing well in handsets (and the premium ones aint cheap) but along with Apple they are the only 2 players in town. Companies need to make profit. In the mobile hardware space, Samsung are. So are Apple. Non Amazon Tablets? - the good ones (and their are good ones) are not cheap. Galaxy Tab 10.1 etc. - The cheap ones arent very good. - the premium ones havent sold that well well. - in 'usage' terms the iPad kills them all. The iPad consumes more internet than any of the others by far. What do we conclude? Are people buying the cheap Androids and not using them? So what have you proved by your comment? I like Apple. I like Android. They are both good. They suit different types of people. But the conclusions the 'iHaters' draw are just stupid.

  • aspruyt - 2012-11-06 09:49

    Surface FTW.

  • petrivoges - 2012-11-06 09:57

    So Microsoft is overcharging?

      stirrer.stirrer - 2012-11-06 12:15

      And Apple.

      mzakes.matabata - 2012-11-06 13:44

      they all are, but i would really love to have the surface.

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