Apple Watch Becoming More Profitable

Posted by Kirhat | Sunday, May 10, 2015 | | 0 comments »

Apple Watch Flagship
Everyone is aware that the flagship product of Apple is iPhone. The company had made ungodly sums of money from the smartphone, which has traditionally been its most profitable product.

However, the launch of the Apple Watch may be about to give Apple an even more lucrative cash cow. 9to5Mac points us to a new research note from Think Big Analytics principal analyst Carl Howe, who believes that the Apple Watch is on track to be the most profitable Apple product ever with average gross margins of more than 60 percent.

The major driver for this high profitability is unsurprisingly the Apple Watch Edition, which Howe notes really doesn’t cost Apple that much more money to make than other versions of the device despite its enormous US$ 10,000 price tag.

“[The electronics] in the expensive models are the same ones used in the Sport models, and they just don’t cost that much," Howe writes. "And while adding Gold cases and designer bands add cost to the bill of materials, the costs are small compared to the price premiums paid for these products. Unlike in the consumer electronics business, I see no pressure for prices to fall and if anything manufacturing costs will, resulting in a very profitable business."

Howe estimates that Apple has sold approximately 40,000 Apple Watch Edition models so far. While that isn’t a huge number, we should remember that every single Apple Watch Edition sold is basically pure profit for Apple so even if Apple only sold 5,000 of them, it would still give the company US$ 50 million in revenue, the vast majority of which would be pure profit.


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