True Cost of the iPhone 6s

Source: Re/code

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  1. par1 commented on Sep 15

    What I don’t get about Apple’s upgrade plan is (i) after one year they’ve only recovered ~ 50% of the expected selling price, (ii) they then “sell” you another one on the same lease program, but what happens to the first one – isn’t a flood of one-year old phones going to depress prices and demand all-round when changes from one year to the next are mostly marginal?

    And what is the accounting for the first transaction when they can’t be expected to receive the full list sales price? They don’t have these issues when the financing transaction is on the carriers’ books, but now they’re bringing it on their own books.

    All I hear is how this is going to cement Apple’s relationship with the consumer, but aren’t there deeper financial implications? Genuinely confused and curious…

  2. bear_in_mind commented on Sep 15

    @par1: This is a total win-win-win for Apple. They can maximize their capital investments by helping ensure demand for each new iPhone model every 12 months; they bundle AppleCare+ into the price which benefits both buyer and Apple (on margins at time of sale, and quality of handset at trade-in, ensuring high resale value); and it provides a new inventory and revenue stream to resell “certified pre-owned” iPhones (i.e. borrowing from BMW’s business model) into global markets where many folks can’t afford brand-new iPhones. Oh, and Apple doesn’t have to share purchase revenues with the Telcos, further boosting their profit margins. Given that iPhones tend to be pretty durable, it’s a good bet this will be another boon to their bottom-line.

    As for consumers, they’ll have access to the newest, fastest and most feature-laden iPhones at a relatively affordable premium. If you’re using the phone for business purposes and can write-off the expense of the handset and cellular plan, this is a no-brainer. For the techies and gotta-have the latest status symbol baubles, same thing. For the rest of us, you can sit tight until you want to upgrade or step-up annually. Here’s a pretty good companion article with more details:

    Here’s the Skinny on Apple’s iPhone Upgrade Program

  3. howardoark commented on Sep 16

    I have a 5s. My wife has a 6. I’d like a 6 or 6s to get Apple Pay. But I’m cheap and won’t get a new phone until next February when my 24 months with the 5s are up. For some reason my company will let me upgrade after 24 months even though I have perfectly useable phone. It has to be worth something to me to be able to upgrade every 12 months rather than every 24 months. Don’t know what that is though.

    I remember some financial pundit saying that it was worth billions to figure out when the average person would refinance their mortgage. It’s probably worth more to figure out how much the average person will pay to have the latest Android or IOS phone in their pocket.

  4. par1 commented on Sep 16

    I get the Apple spin as to why this is so great, but with all respect you didn’t answer my question about how this affects the accounting for the initial sale. For now, when Apple sells a phone to ATT/VZ/TMO etc, they record the whole sales price as revenue (and I don’t believe there was much margin in it for the carriers, Apple isn’t into sharing). Under the new program, can they still record the full price as revenue? – I don’t think so.

    As for reselling the pre-owned phones, sure, there’s a market for that even now. But the volumes are going to soar under this new plan. And remember, Apple still sells the prior year’s model now, so they are going to be competing with themselves in selling the used phones.

    Just questions.…

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