Apple 2.0

Covering the business that Steve Jobs built

iPhone profits: Apple cleared estimated $330 million in three days

July 16, 2008: 11:26 AM ET

That first weekend of iPhone 3G sales was a very profitable one for Apple (AAPL), based on some quick back-of-the envelope analysis.

We know from Apple that the company sold at least 1 million iPhones in those first three days. We know from a teardown published by iSuppli Monday roughly how much the phones cost to build. We know their retail price and have some pretty good estimates of how much that retail price was subsidized by AT&T (T) and the other carriers. Finally, we have a Piper Jaffray survey that suggests how many customers chose the more expensive 16 GB model over the entry level 8GB.

Here are the numbers:

  • At least 1 million iPhones sold over the first weekend (Apple)
  • Cost to Apple: $174.33 parts plus $50 royalties for 8GB model; $16 more for 16GB model (iSuppli)
  • Cost to consumers: $199 (8GB), $299 (16GB) (Apple)
  • Cost to carriers: conservatively, $499 (8GB), $599 (16GB) (iSuppli)
  • Profit per phone: $274.67 (8GB) and $358.67 (16GB)
  • Models sold: 33% (8GB), 66% (16GB) (Piper Jaffray survey)

Bottom line:

  • 333,333 8GB iPhones @ $274.67 profit each = $91,556,000
  • 666,666 16GB iPhones @ $358.67 each = $239,113,000
  • Total profit to Apple: $330,669,000.

There are other costs Apple incurred that aren't accounted for here: software development, shipping and distribution, packaging and miscellaneous accessories included with each phone -- the little black cloth for cleaning the screen, for example.

Still, it's probably a conservative number because it's based on iSuppli's estimated subsidy of $300 per phone. Other analysts put that figure at $350 (see, for example, here). That would add $50 million to Apple's bottom line.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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