How Much Money Apple Inc Make Over IPad

3rd April 2010 was a historical day for gadget world, more importantly from Future Money view point it is a historical day for business. The great titan of computer and electronic gadget Apple Inc release their latest gadget – IPad. More than hundred of people queued up out side the New York city Apple store before it even started business, some people camped out side the store since more than 24 hours prior to the day. So what is this IPad? It is a 9.7 inch multi-touch tablet that has the capability of browsing internet website, watching movie, reading e-book, games, etc. To put it simple, it is the large version of Ipod touch or IPhone excluding phone capabilities. The price range is $499, $599 and $699 for 16, 32, and 64 Gig respectively, and all has WIFI capability. I’m not going to do a review about the device as there are probably hundreds of web site already did that.

By 9:30 in the morning of Saturday, a few researchers have already had the device stripped bare from its casing and studied on the components and parts. They came out with the cost break down on the IPad. Guess what, the estimated total cost of IPad is only cost no more than $260 and $280 for 16 and 32 Gig models. The most expensive part of the IPad – around $95, is the unique multi touch display screen. Flash memory and processor are the second and third most expensive parts. Selling price of $499 and $599 will give Apple 48% and 53% of gross profit margin for the models.

On the first two days of sales, Apple has already sold around 300,000 units. While as of writing this article, Wednesday night, the number grows up to 500,000, a whopping 100,000 per days (500,000 / 5 days) and velocity around 4166 units per hour! To translate these into revenue, we are looking at $274.5 millions over the 5 days ([ 499 + 599 ]/2 x 500,000) and velocity of roughly $2.29 million per hour. Analysts estimated different number of unit sales over the next 12 months. Some says 5 millions while optimistic ones are confident that the sales could easily hit 7 millions. The estimation done by analysts is base on historical sales of IPhone, although not similar product, but that’s what they have at the moment as IPad opens a whole new exciting market. For 6 millions of unit sales ( [ 7 + 5 ] / 2 ), Apple will collect roughly up to $3.294 Billions of revenue by next April. With average gross margin of 53%, their gross income is about $1.75 Billions (Now you still wonder how those business titans make several billions a year?). This calculation is still consider as conservative as I only averaged on two of the cheapest models, if Apple is able to up sale more of their 64Gig model, which is around $300 cost price (57% gross profit margin), the bottom line could be readjust higher.

Of course, all these calculations did not take into consideration of operation overheads, expense, fright cost, distributions, employees’ salaries, R&D and so on. But don’t forgot there are recurring sales of laptops, computers, IPod and especially IPhone, which is still going strong especially in Asian countries where Telco like Digi in Malaysia has just recently started selling and also many phone users are looking to switch to a more exciting phone brand. More over, Apple has a large economic of scale, consider demands and popularity of Apple product in America, Europe, and several other countries, I’m sure the cost of product could be lower significantly by then.

As of concluding this article, the Apple Inc stock price stands at $240 per share. Is it a good business? From sales potential stand point, definitely!