You're comparing revenue and profit. The profits from mobile ads + apps + media purchases, coupled with a boom in market share of the hardware, would be massive. And hardware profits need not drop to zero to accomplish this.
Skimming off the top of iPhone revenue while keeping all other expenses the same *is* giving up pure gross profit and pure operating profit. Apple would make $200 less per iPhone in profit (before tax). There would still profit left after your proposed 30% price cut, but even if unit sales doubled, profits would drop. Maybe you think sales would triple, to 480m units a year?
As for ancillary revenue, I'd like to see your math. "Massive" describes the bird Apple already has in hand, pretty much the greatest cash cow history has ever known. From what I can tell, the "2 in the bush" you imagine Apple should chase by destroying it would be trading hardware dollars for advertising dimes. Google probably makes no more than $10/ mobile user per year, all told, I'm guessing. Let's say Apple partnered with Google for a 50-50 split. Across Apple's current iPhone base, that's $2.5B (mostly profit). After taxes, $2 eps an Apple share. Am I wrong with these numbers? I suspect you are thinking that advertising growth is your answer. If so, educate me-- where is the growth coming from and where is it going? Show your math. Is revenue per mobile user going to $100? Is this a $200 billion revenue opportunity for Google? |
