[ycaspirant]

I used to track AAPL when I was interning at a financial services firm last summer, and I can assure you that their profit margin is around 20%. Since AAPL is publicly traded, this information is publicly available so anyone can verify it. I'm not sure where you get the idea that their profit margin is 70%.

According to Yahoo Finance (which is a pretty good resource for non-professionals), the profit margin is currently 21%.

http://finance.yahoo.com/q/ks?s=AAPL+Key+Statistics

[aetherson]

You guys are talking about different things. He's talking about unit margin on each phone. You're talking about overall profits.

[podperson]

Well, the GP is talking about Apple's overall margins and the 70% figure is simply wrong. (Retail price - cost of goods is not margin.)

[ycaspirant]

How could those two things be different? Profit per unit = total profit / number of units

[aetherson]

Unit margin is the marginal profit for selling one more unit. It doesn't include the (large) fixed costs of, for example, your personnel or your office real estate costs or R&D or legal. It's basically the bill of materials for your item plus the costs for transporting the item from where you made it/bought it to where you hand it off to the customer, any taxes on that particular item (like import duties), etc.

Unit margin is an important number to account for and work to maximize, basically because you assume that as the number of units you sell increase, your fixed costs become less and less relevant to your overall company profit. But unit margin is always higher than overall company profit margin.

EDIT: Also, obviously, unit margin varies by sku. The iPhone 5s and the iPad Air are probably the highest-margin items that Apple sells (some of their Macs may compete). Things like iPods and iPhone 5cs are likely lower-margin.

[ycaspirant]

Thanks for the clarification. I had actually never heard of this concept of ``unit margin,'' but it makes sense now. It's funny that I managed to go through an entire internship at a financial services firm (which included working with valuation models of AAPL) without ever encountering this concept. I guess it's no surprise that I didn't get offered a job at the end of the internship!