And re-sold it to consumers for billions more than it paid, according to Toni Sacconaghi
The only difference between a 16 GB iPhone 4S and the 32 GB model is 16 GB of NAND flash memory, for which Apple (AAPL) charges customers $100.
But according to Bernstein Research's Toni Sacconaghi, Apple buys that memory for a heavily discounted price of $0.67 per gigabyte, or a total $10.72.
That's a pretty sweet mark-up. And an extraordinarily profitable strategy, Sacconaghi writes in a note to clients entitled "Apple: The NAND Gravy Train."
It's such a sweet deal, he can't understand why Apple's competitors aren't doing the same. I quote:
Apple earned an estimated $2.2B+ in operating profits in CQ411 – at 78% gross margins – purely from upselling consumers to products with more NAND storage beyond Apple's base configuration models. Moreover, a majority of these profits came from iPhones yet no other handset OEM has emulated this strategy...
Ironically, Apple earns nearly twice as much from reselling NAND than all the NAND suppliers combined, with NAND resale responsible for 20% of Apple's total operating profits last quarter, at an annual run-rate of $10B+.
By comparison, Google (GOOG) Android phones such as the Samsung Galaxy S2 come with a single pre-specified amount of internal storage (32GB in this case) and offer users the option to add an external SD card. Good for users, not so good for Samsung's bottom line.
Below: One of Sacconaghi's spreadsheets.
Bernstein's top Apple analyst joins the chorus questioning the stock's dismal valuation
Click to enlarge.
Last week, Morgan Stanley's Katy Huberty noted that Apple's (AAPL) current stock price suggests that the market is expecting the company's earnings to grow minus 2% in perpetuity. (See here.)
In the first of a two-part series, Bernstein's Toni Sacconaghi on Monday drilled a little deeper into that -2% growth rate and found a series of what MORE
Philip Elmer-DeWitt - Dec 13, 2011 7:58 AM ET
CapEx spending is up 9 fold in 3 years, the bulk on equipment for a few key suppliers
Data: Company reports via Bernstein. Chart: PED
When Apple (AAPL) reports an uptick in its cash and marketable securities holdings -- up $5.4 billion to $81.6 billion last quarter -- Bernstein's Toni Sacconaghi can usually be counted on to call for the company to return some of that cash to the shareholders (70% MORE
Philip Elmer-DeWitt - Nov 15, 2011 8:12 AM ET
Sanford Bernstein's top Apple analyst is dubious about Steve Jobs' television dreams
Sacconaghi's vision of Apple TV 3.0. Click to enlarge.
Analysts have been arguing for ages about whether Apple (AAPL) is ever going to enter the $118 billion/year flat-screen TV market. But two things have changed in the past month:
1. Walter Isaacson's biography of Steve Jobs quotes him as saying he's "finally cracked" the problem of controlling an integrated MORE
Philip Elmer-DeWitt - Nov 4, 2011 12:18 PM ET
The payoff should Apple prevail in the patent wars: an estimated $30 billion
"Apple ships a much higher value of smartphones than any other player"
In a note to clients issued Thursday, Bernstein's Toni Sacconaghi takes a hard look at the flurry of patent lawsuits Apple (AAPL) has launched against the manufacturers of Google (GOOG) Android phones.
All in all, he likes Apple's chances. The two key bullet points (we quote):
We anticipate MORE
Philip Elmer-DeWitt - Jul 28, 2011 12:50 PM ET
An analyst imagines everything it might be when -- and if -- it opens this spring
Photo: Bill Wagenseller via Bernstein Research
Among the people who follow Apple (AAPL) closely, the massive server farm the company is constructing in Maiden, N.C., has achieved near mythic status. It has become the answer to every unanswered question about Apple's troubled online strategy, from what Steve Jobs was thinking when he green-lighted Ping to MORE
Philip Elmer-DeWitt - Mar 23, 2011 6:13 AM ET
An analyst offers four reasons nobody has managed to match Apple's iPad
Apple Inc.
"Undercutting Apple on pricing has been the de facto strategy for competitors. Surprisingly then, no competitor has yet matched Apple on tablet pricing, which begs the question of why."
So begins a note to clients issued Wednesday morning by Bernstein Research's Toni Sacconaghi, who estimates that Apple (AAPL) may have a 750 to 975 basis point (7.5% to MORE
Philip Elmer-DeWitt - Mar 2, 2011 11:22 AM ET
An analyst asks whether it can keep outperforming the market without paying a dividend
Click to enlarge. Source: Bernstein Research
Toni Sacconaghi just won't give up.
For more than two years, Bernstein Research's top Apple (AAPL) analyst been after Steve Jobs to spend some of the company's growing cash hoard ($51 billion as of September), preferably on a stock buyback or cash dividend.
"Shareholder frustration," he wrote in an open letter to the MORE
Philip Elmer-DeWitt - Dec 8, 2010 11:54 AM ET
He will ignore the latest call for Apple to share its huge cash hoard as he ignores them all
Apple's growing stash. Source: asymco from company reports.
Most of the arguments for and against the open letter to Apple's (AAPL) board of directors issued Thursday by Bernstein Research's Toni Sacconaghi have already been made. (See here and here.)
Sacconaghi's polemics against Apple's policy of holding on to its profits -- rather than MORE
Philip Elmer-DeWitt - Aug 13, 2010 8:48 AM ET
Mark Hurd's departure is mired in muck, but C-suite headhunters are sure to focus less on the rumors than on the possibilities.
Yes, I know. The focus is supposed to be on who will be the next CEO of Hewlett-Packard (HPQ). Quite right. The company is nuts to suggest it won't skip a beat with Mark Hurd's resignation last week. A new CEO will shake up the senior-management ranks, and the MORE
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| Company | Price | Change | % Change |
|---|---|---|---|
| Bank of America Corp... | 7.95 | -0.16 | -1.97% |
| Microsoft Corp | 31.27 | -0.17 | -0.54% |
| Ford Motor Co | 12.28 | -0.25 | -2.00% |
| General Electric Co | 19.39 | 0.17 | 0.88% |
| Citigroup Inc | 32.36 | -1.00 | -3.00% |
| Index | Last | Change | % Change |
|---|---|---|---|
| Dow | 12,938.67 | -27.02 | -0.21% |
| Nasdaq | 2,933.17 | -15.40 | -0.52% |
| S&P 500 | 1,357.66 | -4.55 | -0.33% |
| Treasuries | 2.00 | -0.04 | -1.96% |
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