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Google Makes More on Nexus One Hardware than Apple Gets from iPhone [UPDATE]

There's an interesting bit of news: iSuppli did a teardown of the Nexus One from Google (GOOG) and estimated it at just over $174. But some previous analysis suggest that not only is Google getting a lot of attention, but making hardware margins that even Apple (AAPL) has had to forgo.

Back in June I wrote about Apple's defensive pricing on the iPhone. At that point, Portelligent pegged the iPhone 3G at about $173 in cost. Later that month, iSuppli tore down an iPhone 3GS and came up with a combination of bill of materials and manufacturing cost of $178.96.

Apple's own prices for iPhones range from $99 to $299, depending on the model. (Interestingly, this suggests that unless the cost of building an iPhone 3G has plummeted by about half in the last seven months, which seems unlikely, then Apple is selling it at a loss with profit buoyed by the portion of service revenue it gets from carriers.)

Then we have Google selling the Nexus One for about $530 directly to consumers, with a gross margin of almost $356. You can't make a complete comparison between what the two companies make because of the service portion, but, golly, that's a lot of money. And in context, it shines a light of irony on the statement of Google engineering VP Andy Rubin: "There is an opportunity to make some margin on the unit sales, but that's not the objective here. Our primary business is advertising." Good thing the company was only after some margin. After all, when you've got as many customers as ticked off in as short a time as Google has managed, having them think that you're raking in the bucks from their dissatisfaction is maybe not the wisest PR move in the world.

[UPDATE: After a discussion with some readers in the comments, I realized that some of the margin will go to HTC, which is actually the manufacturer. However, it's still major margin, no matter how you disperse it. Also, some people have brought up the point that Apple gets part of AT&T's (T) service revenue. I specifically mentioned above that I'm talking strictly hardware, because we don't know how much Google is getting from T-Mobile, though I'd bet it's something. I still think that the Nexus One was the equivalent of a concept car, not an attempt to break into the hardware business. We'll see where else this goes and whether Google eventually damages its relationships with other business partners, who probably thought that the company would not go into competition with them.]

[UPDATE 2: A number of readers are insisting that I don't know my assets from a hole in the ground and that Apple makes far more than I think from hardware. Not true, at least if you look at Apple's financials and not to analysts or pontificating bloggers. According to the company's 10-K for FY 2009, which ended in September, total net sales for "iPhone and related products and services" were $6.754 billion, while iPhone unit sales were 20,731,000, for a total of $325.79 per unit. Deduct the roughly $173 in product cost and you're left with about $153 in margin per unit.

This gets tricky, because that's still dealing with subscription revenue: "iPhone revenue includes the portion of handset revenue recognized in the relevant period in accordance with subscription accounting over the product's currently estimated 24-month economic life, as well as revenue from sales of iPhone accessories and carrier agreements." Because this was under the old US accounting rule for treating subscription revenue, it's very hard to determine exactly what accounts for portions of the revenue. However, for revenue postponed, there is also past revenue being finally recognized. Given that we're not privy to the details of Apple's deals with carriers, we're a bit stuck and can only look at these gross numbers.]

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