Apple squeezes more profit out of hard drive-based iPods

October 21, 2007: 3:19 PM ET
iPod classic
Apple's cost to build the iPod classic is 11 percent lower than the previous verison, iSuppli estimates. Photo: Apple

Apple's (AAPL) redesign of the iPod classic has allowed the company to make better profits while also offering more storage, an analysis from researcher iSuppli has found.

The iSuppli numbers (below) help shed light on how Apple continues to make money off of its iPod line even as certain versions mature. iSuppli estimates that the components in the iPod cost $127 for the 80-gigabyte version and $190 for the 160GB version. Apple sells them for $249 and $349. (iSuppli's figures don't factor in costs for manufacturing, software development, marketing, packaging and shipping. They also don't factor in some volume discounts Apple receives.)

According to iSuppli, the 80GB iPod costs 11 percent less to build than the previous 30GB version. Apple makes even better margins on the 160GB version.

Increasingly, though, the hard drive-based iPod classic seems to be a niche product. The iPod nano, a sleeker flash memory-based product with less storage capacity, has consistently outsold the classic. And now, based on one month of sales, it seems Apple's new iPod touch, the flash-based iPhone look-alike, might outsell the classic as well.

Apple's new iPod lineup: An analysis (Photos 1/5)

One has to imagine this is what CEO Steve Jobs and the marketing crew at Apple expected. When Jobs first renamed the device the "classic" at the iPod update event in September, it seemed to be an acknowledgment that its design is past its prime. (While Apple clearly sees value in having hard drive-based options in its lineup, it seems to be transitioning the overall iPod line to a touch-screen interface that runs on Mac OS X.)

iSuppli iPod classic teardown
iSuppli estimated the cost of the components Apple uses to build the hard drive-based iPod classic.
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