Thursday, August 9, 2012

Apple Maps, Siri, and a new way to look at cost of goods sold (COGS)

In the age of free online services that accompany hardware devices, the cost of a device cannot be and should not be calculated using only the hardware cost of the device [materials, assembly, etc.]. Look at Apple - it recently launched Siri and Maps as free services for its iOS 6 devices. Does Apple make [or plan to make] money on these services? If not, the cost to build and run these services must be included in the cost of the devices that Apple sells [including the expected future costs], in order to correctly calculate the profitability of these devices. An iPhone or an iPad isn't merely the hardware, it's also the services that come with the device - App Store, iTunes, Maps, Siri, etc.

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