We often run into heated arguments within our office - some say Microsoft rules , other say Apple is the future. I try to refrain from the temptation. But, here is what I actually think:

The first chapter in economics that I read, told me that Businesses makes good and services which is consumed by families, for which they have to pay businesses some money. On the other hand, families supply the resources (capital, labor) which is used businesses in return for which it has to pay interest and wages. This symbiotic relationship has existed from centuries.

An extension of this logic suggests that Microsoft as an organization wants to be a company which decides how business makes money , whereas Apple wants to be a company that decides how people spend it. Thats the end of the story - The sooner we get it the better!

iPod has given the greatest branding to Apple which is a consumer product whereas Windows & MsOffice (Arguably!) made MS into what it is today. I dont think Apple ever said they wanted to improve productivity or Microsoft ever said that they want to make fashionable gizmos for teens.

The problem is that with excess cash and surplus managers, both of these companies sometime venture into each other domain which causes all the confusions.

There is a lot of discussion around the internet where people are speculating that Apple has already sold 700, 000 iPhone within the 1st week of its launch. I find it very easy to digest but what is difficult to believe is that they have already made $200 - $266 million dollars in profit.

Here is what a recent post in TechCrunch said:

Based on the cost of manufacturing an iPhone (see post July 2), Apple would have made a profit of between $200million and $266 million in 3 days (not including marketing costs), on sales somewhere between $350million and $420million, significantly more than earlier estimates of Apple having a $300million weekend

Here is what one of the commenters had to say in response:

Anyone with any business sense applies all costs to determine a break-even point for a product before counting profits. Apple executives indicated that the iPhone was in development for 3 years. Apple’s R&D budget is on average 1.5B/year. Lets say a third of that budget was expended each year for the iPhone, iPod+itunes, and Mac (the three lines) - not counting Apple TV which is basically a torn down mac mini - we are talking about at least 1.5B in R&D spend over three years on the iPhone. A lot of iPhone advertising was Viral and blogs (aka FREE) but they did have a massive TV campaign which probably cost at least $25-$50M. Total Parts cost is a little more than 2 bills ($250) per iPhone, and manufacturing costs, Import costs, packaging, shipping and duties, based on my experience, should be around $75-$100 per handset.

Lets assume there is NO retail markup since the iPhone is being sold ONLY in Apple Stores (ZERO Margin paid to self!) and ATT Stores (Assume zero margin to retail partner). Since 95% of models sold are the 8GB (based on surveys), we will ignore the lower price point ($499) for this exercise.

The total GROSS profit per phone is about $275 (Revenue - Cost of Goods).

Figuring in R&D Spend plus marketing, you’re looking at a break even point of 5.6 Million (5,600,000) iPhones! We’ve only sold a Tenth of that. When Jobs estimates 10 million iPhones in 18 months, he HAS to sell that many to recoup the massive investment put forth over the last several years.

Lets start making business sense rather than writing a horribly inaccurate post that shows no sense of what “profit” means in GAAP

I think that hits the problem right on its head. Another point that I would add is , sooner or later it will make no sense for people to buy an apple device for listening to music and another apple device to make calls. There is an integration required and when that happens any other differentiation apart from glitzy design will be lost ! 

Thus it will be interesting to watch how the growth momentum for both iPhone and iPod continue.