Kyusaku in our forums points us to some new info. The research company iSuppli has pegged the cost of manufacturing the Pre at $138 per unit, according to this story at BusinessWeek. They expect that Palm will be charging Sprint $300 per unit, who will then put the price of the Pre at $200 after subsidy. We'd been hearing rumors of a $150 price point (and even less, if you can believe it), but $199 definitely seems more likely.
iSuppli guesses the Palm is looking at $11 for the TI OMAP processor, $39.51 for the screen, $15.96 for the RAM, $15.41 for the wireless radio bits from Qualcomm, $12.39 for the camera, and so on. Toss in $22.61 for software licensing and patent licenses and the cost apparently goes up. They're also not taking R&D costs into account.
Now the thing is, iSuppli doesn't have any actual knowledge of cost -- they're making some educated guesses. Variables like whether they're pegging the parts correctly, whether they're pegging costs correctly (especially considering that Palm might be doing some wheeling and dealing), and so on all come into play and all add margins of error to iSuppli's estimate.
Even if iSuppli is spot-on, it's not really the sort of indicator that could help you guess where Sprint is going to price it. Palm will make a profit when they sell it to Sprint, Sprint will make a profit on those Simply Everything Plans you'll need to sign up for. As Mike noted in Monday's podcast, the actual price of the Pre itself isn't a deal-breaker for Sprint - they make far more money on the monthly plans over the life of your contract. So Sprint's decision (with a bit of input from Palm) between $150 or $199 or $249 is as much about marketing as it is about profit. What iSuppli thinks it costs Palm to manufacture the thing in the first place doesn't enter into it.
Anyhow, it's de rigueur for iSuppli to toss these sorts of numbers out there when a phone gets released and it's de rigueur for blogs like us to report on them, then remind you that they don't really mean as much as they seem to. So here we are, letting you know. Theoretically, this sort of information bears on investors interested in Palm's potential profit margins (which have been abymsal because the Centro is so inexpensive), but we're thinking that you're better off waiting for Palm's next quarterly statement to hear about that rather than listen to iSuppli's variable-ridden estimates.
Comments
Palm's next quarterly statement is not likely to be very rosy based on Palm's previous statements. Also actual sales will just be starting by the end of June. Another factor is the 2 year accounting window for a Pre sale.
Considering these things, I expect the current quarter to be poor.
The good news is that Palm's guidance is likely to be very positive going forward.
You can't take OS licensing into consideration, because Palm developed WebOS so it owns it. But you could definitely factor in patent licensing, to ward off Apple encroachment.
Dieter did not say OS licensing, he said "software licensing and patent licenses." You most certainly can take software licensing into account. That is all the software on the phone that is not written by Palm but by other companies from which Palm licenses the software to come integrated on the phone when it's shipped. For example the Amazon MP3 Store or the Java software.
I wouldn't be surprised if the Amazon MP3 store was free to Palm. Amazon is all about getting rewards for zero investment. If they were to develop the software themselves, or outsource it then there is risk to them. If the let palm write the software they can rake in the sales without risk of the device bombing. In turn for using the Amazon name, Palm just doesn't make links to other music purchase options.
This could be true of other software on the device as well.
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