[jklio]

While I have sympathy with your point, I haven't seen evidence is that Google is subsidizing (as I think Amazon is) rather than just selling at cost. The reason this is an important distinction is that it highlights how much the other handset makers, especially Apple, have been gouging their customers.

Google's disconnect from the hardware also shows how you actually can have performance on older hardware - apparently the new real-time Google Voice is on older iOS devices that Apple said couldn't handle Siri - if you don't have an interest in the upgrade cycle.

[netcan]

I wince a little at calling it price gouging. It's true that over the long term prices should be near marginal cost of production. But these are short term products. They need to cover their R&D costs. Costs that come with a risk that needs to be covered too. I feel a little milked when I buy a mac and kind of annoyed because I don't feel like I have an alternative (This is obviously an illusion. I don't like Windows or Linux personally, but they are both very reasonable alternatives). But macs are much older and they are still getting better (but not cheaper aargh!) ever year.

On tablets and phone, these high profits have been driving wonderful innovation bringing us better devices at lower prices every year. It's not like we're getting overcharged for stagnant products. This December's devices would have been an incredible last year.

Price gouging implies overcharging on essential items because the consumer has no choice. The only power Apple have over their consumers is that they really really want the stuff Apple makes, right now.

[ghshephard]

Any time Google (or any other major corporation) sells hardware at under a 20% margin, they are subsidizing their sales with revenue profit from other divisions, or the future potential of profit. It's important to note that you need to cover R&D, G&A, Marketing, etc... beyond that marginal cost. The exception would be in situations where you could make up the lost margin in huge volume (commodity sales, wholesaling, retailing other people's product). Google's average margin from other units of their business is 30%+, so it would make sense for them to invest in those business lines, unless their are some strategic reasons to focus on the tablet market - which, I'm sure, we all recognize there is.

To put it more clearly - Google is not selling tablets to make a profit on hardware. They are selling tablets so they can profit from search/advertising through those tablets.

Re: Google Voice on older IOS equipment. I installed it on my iPhone 4 today - it runs significantly faster than Siri on an iPhone 4S. Search results are instant, as well. Completely agree with you that this is an example of where the disconnect from hardware greatly benefits the consumer.

[nicholassmith]

Apple and the others no more price gouge their customers than Ferrari or Porsche do.