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  1.    #1  
    i thought this article on the cost of making the Palm pre and how much profit palm makes was interesting.

    http://finance.yahoo.com/family-home...teardowns.html




    Palm Pre



    Date: June 6, 2009
    Retail Price: $199.99 after $100 mail-in rebate
    Projected Cost of Components: $137.83

    Palm needs a winner in the Pre, and it's up against some formidable competition in a smart phone field that includes Apple and its iPhone and Research In Motion, maker of the BlackBerry. Boasting a completely new operating system called WebOS, the Pre bears little resemblance to the Treo line of smart phones that Palm has sold for years. Like the iPhone, the Pre sports a so-called multi-touch display that lets the screen react to more than one finger touch at a time. In an analysis of the probably cost of Pre components, iSuppli estimates the display alone runs $39.51, or almost one-fourth the total hardware expense. Add in $15.96 for eight gigabytes of flash memory, $15.41 for wireless components, and $12.39 for the 3-megapixel camera, and you've accounted for more than half of the Pre's estimated hardware cost.


    The cost to make the palm pre is $137.83 and the pre retails for $199.99 so that is a pretty good profit palm is making on each pre sold compared to the iphone or other mobile devices out there.
  2. eddieck's Avatar
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    #2  
    Keep in mind, the $199.99 price is subsidized. The actual retail price is $549.99. Palm probably makes at least $400 per phone.
  3. #3  
    Quote Originally Posted by eddieck View Post
    Keep in mind, the $199.99 price is subsidized. The actual retail price is $549.99. Palm probably makes at least $400 per phone.
    Going the other way: realize two more things:
    1) I doubt Palm sells the device to carriers at the retail price.
    2) The article referenced components costs, but not assembly, research, logistics, and support costs. The R&D costs have to be substantial (even painful in this case), but those costs have already been borne for this phone (but not for future ones). The support costs for a new phone are probably higher than average. I'd guess that Palm probably gets about half of the $550 retail price. Palm is probably trying to break even on the Sprint Pre, and learn what they need to do in order to make money on other carriers.
    I'm both super! ... and a doer!
  4. #4  
    So some medications cost $1 per pill but sell for $15-$20 per pill. Those crazy pharmaceuticals! Take into account the first pill cost the company perhaps over a billion dollars to make, and each additional pill only costs $1. We're kind of looking at the same thing here.

    Besides, this is America, companies are allowed to make any profit margin they want. I don't care if the Pre cost Palm $5 to make, I'd still buy one for $200.
  5. #5  
    Palm is using cheap components. Even a 1st gen iPod touch costs more to make and yet retails for $250 less. The other phones listed cost much more to build. No wonder these things are such low quality.
  6. #6  
    Keep in mind that the cost of the parts are only a fraction of the actual cost of the device. Most of the cost is in Hardware R&D, Software R&D, labor, marketing, shipping packaging and so on. On a device like this the cost of the parts is much less than half of the real cost of the device.
    Pilot 1000 -> Pilot 5000 ->Palm Pilot Professional -> HP 620LX -> TRG Pro -> Palm V -> Palm Vx -> Palm M505 -> Palm i705 -> Palm Tungsten|T -> Samsung i500 -> Treo 600->Treo 650 -> Treo 600-> Treo 700p ->Centro ->Treo 800w + Redfly C8n -> Palm Pre -> HP Touchpad
    R.I.P Palm 1996-2011
  7. eddieck's Avatar
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    #7  
    I also doubt Sprint pays $550 for the device; I'm going to guess at least $300-$400 though.

    I'm also happy with my Pre - and I don't think it's low quality. You know, the same thing happened with the iPhone and iPhone 3G (and the 3GS maybe? I haven't been reading iPhone-related stuff lately). People kept returning them because of different small issues like light leakage. I'll agree that some Pre issues are not exactly "small" (phone restarting after the slider is pulled out) but I will say my Pre has a VERY tight battery, and I haven't seen that issue.
  8. #8  
    Quote Originally Posted by rc46 View Post
    Keep in mind that the cost of the parts are only a fraction of the actual cost of the device. Most of the cost is in Hardware R&D, Software R&D, labor, marketing, shipping packaging and so on. On a device like this the cost of the parts is much less than half of the real cost of the device.
    So you're saying that RIM and Apple don't have to pay for R&D and marketing too? If not then what's your point?
  9. #9  
    Quote Originally Posted by clipcarl View Post
    Palm is using cheap components. Even a 1st gen iPod touch costs more to make and yet retails for $250 less. The other phones listed cost much more to build. No wonder these things are such low quality.
    Really? The iPhone 3Gs' larger screen costs less than the Pre's, the camera costs less than the Pre's, among other components... Thats evaluted by the same company(iSuppli).

    http://www.crn.com/mobile/218101207;...RSKHSCJUNN2JVN
  10. #10  
    Quote Originally Posted by clipcarl View Post
    Palm is using cheap components. Even a 1st gen iPod touch costs more to make and yet retails for $250 less. The other phones listed cost much more to build. No wonder these things are such low quality.
    This has already been discussed numerous times. The Pre contains top notch components: Screen is Sony, CPU is TI, etc. It's the finishing touches on the hardware that leave something to be desired such as the slider mechanism.
  11. #11  
    Quote Originally Posted by Elysian893 View Post
    Really? The iPhone 3Gs' larger screen costs less than the Pre's, the camera costs less than the Pre's, among other components... Thats evaluted by the same company(iSuppli).

    http://www.crn.com/mobile/218101207;...RSKHSCJUNN2JVN
    And yet the total cost to build the iPhone is significantly more than the Pre's. You are proving my point.
  12. #12  
    Quote Originally Posted by ronlongo View Post
    This has already been discussed numerous times. The Pre contains top notch components: Screen is Sony, CPU is TI, etc. It's the finishing touches on the hardware that leave something to be desired such as the slider mechanism.
    I hear you, Ron, but I think there might be a connection between the Pre's build quality and the fact that they spend so much less to build it than other phone manufacturers.
  13. Clack's Avatar
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    #13  
    Quote Originally Posted by d0llarm3nu View Post
    The cost to make the palm pre is $137.83 and the pre retails for $199.99 so that is a pretty good profit palm is making on each pre sold compared to the iphone or other mobile devices out there.
    Yeah, they are smoking crack. Cost by a reliable analyst is $170.02 per unit:

    Palm Pre Aims at the iPhone, iSuppli Preliminary Cost Analysis Reveals €” iSuppli Corporation

    The above includes a spread sheet of component by component cost.
    "We must not contradict, but instruct him that contradicts us; for a madman is not cured by another running mad also." - Dr. An Wang
  14. Clack's Avatar
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    #14  
    Quote Originally Posted by ronlongo View Post
    This has already been discussed numerous times. The Pre contains top notch components: Screen is Sony, CPU is TI, etc. It's the finishing touches on the hardware that leave something to be desired such as the slider mechanism.
    I thought you considered the phone perfect and didn't have any of the problems others are having??

    Also, you can purchase all the Porsche parts you want. However, it is the final assembly that counts.
    "We must not contradict, but instruct him that contradicts us; for a madman is not cured by another running mad also." - Dr. An Wang
  15. #15  
    And no one who knows is going to say anything about what the real cost per phone is for Palm (including inventory, packaging, transportation, amortized R&D and manufacturing, etc.). And no one who knows is saying anything about what Sprint pays palm for the Pre. Anybody who guesses at those numbers is doing just that: guessing.

    Frankly, who cares? I care how well a phone works for me, and how much it costs me. Whether Palm makes $50 per phone or $500 per phone doesn't really matter all that much. Ditto whether Sprint pays palm $50 per phone or $500 per phone.

    Yes, I understand that both companies need to make a profit to stay in business, but that's not really my concern, nor something I have any influence over.
    Bob Meyer
    I'm out of my mind. But feel free to leave a message.
  16. #16  
    Quote Originally Posted by clipcarl View Post
    And yet the total cost to build the iPhone is significantly more than the Pre's.
    clipcarl, Which iPhone (3G or the 3GS) would most closely correspond to the Pre? (I really don't know.) The Pre component costs seem to be in-between the two iPhone models (with the Pre being closer to the earlier model).

    $129.16 ($179.16 - $53) vs $137.83
    I'm both super! ... and a doer!
  17. #17  
    Quote Originally Posted by Clack View Post
    Yeah, they are smoking crack. Cost by a reliable analyst is $170.02 per unit:

    Palm Pre Aims at the iPhone, iSuppli Preliminary Cost Analysis Reveals €” iSuppli Corporation

    The above includes a spread sheet of component by component cost.
    The figure you are quoting are from months before the phone came out when people were just guessing based on speculation. This new figure is apparently a recently revised cost estimate (from the same organization) now that people can actually get a Pre to take apart and see what's inside.

    Clearly, Palm used much cheaper components than had been anticipated (and it shows).
  18. #18  
    Quote Originally Posted by bclancy View Post
    clipcarl, Which iPhone (3G or the 3GS) would most closely correspond to the Pre? (I really don't know.) The Pre component costs seem to be in-between the two iPhone models (with the Pre being closer to the earlier model).

    $129.16 ($179.16 - $53) vs $137.83
    Where do you see an estimate that it only costs Apple $129.16 to make the 3G? I find it very hard to believe that the iPhone 3G costs less to make than a 1st generation iPod Touch. In fact, I recently read that the iPhone 3G cost $174 to make which would make a lot more sense, don't you think? Perhaps you are mistaken?

    Oh, I see, you are mistaken. You read this line
    The iPhone 3G, released in July 2008, cost $53 less to build than the original iPhone, released in 2007
    and failed the math. I'll spell it out for you:

    iPhone 2G: $227
    iPhone 3G: $174
    iPhone 3GS: $179
    Last edited by clipcarl; 07/05/2009 at 11:05 PM.
  19. eddieck's Avatar
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    Keep this in mind: the Pre is a CDMA2000 device, while the iPhone is a GSM/UMTS device. The Pre is dual-band, while the iPhone is quad-band. Also, before anyone starts talking about how Palm was too cheap to build a quad-band device, know that Sprint's network is entirely (or mostly?) on the 1900 MHz frequency and the 850 MHz frequency can be used for roaming on other carriers.
  20. #20  
    Quote Originally Posted by clipcarl View Post
    The figure you are quoting are from months before the phone came out when people were just guessing based on speculation. ...
    Yes, but the article you are quoting from dates the lower cost estimate you are using around this same timeframe (apparently a week earlier). Based on your argument that earlier estimates are less accurate, I'd be more inclined to believe the higher cost from the same source.

    Personally, I don't think we have enough data here to be drawing conclusions either way.
    I'm both super! ... and a doer!
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