Google Might Not Be Losing Money On The Nexus 7 After All

There has been plenty of speculation about how much money Google is making — or losing — on its snazzy new Nexus 7. The analysts at IHS iSuppli tore it down, added up the cost of its components, and determined it's cheaper than originally suspected.

AllThingsD reports that IHS iSuppli calculated a pretty healthy margin: the $US200 ($250) 8GB Nexus costs $US151.75 to build and the $US250 ($299) 16GB model costs $US159.25 to build.

The IHS iSuppli estimate is lower than others that have surfaced since the tablet was announced last month — some reports indicated that Google might actually be losing money on the tablet in order to gain market share. Google's mobile chief Andy Rubin even admitted that the tablet was a break-even product, indicative that the marketing and development costs are and will continue to be very high.

Indeed, this estimate doesn't take into account these costs, but even so it's very possible that Google could make money, especially on the 16GB Nexus 7. (Funny how Google spends an extra eight bucks and charges you $50 more, huh?) Losing money is a losing strategy, so it's nice to hear that Google might be paying more attention to the bottom line than we originally expected. [AllThingsD]


Comments

    Pay TV operators have always done it. Do you have any idea what a set-top box costs them? When I was working for OptusTV, they were looking at using the PS2, which was still the current model at the time, as a set-top box because they were cheaper for them to buy in bulk than the set-top boxes they were sourcing. When SingTel bought Optus they canned the project but it gives you some idea how much Foxtel lose by giving you a set-top box for nothing. And every Telco does it when they give you a free phone on a 24 month contract, so there are plenty of precedents for losing money on the hardware up-front to make it back on services on the back end.

      But they make money from you over the course of the contract, since you are buying a subscription on contract (TV/phone) and with the possibility that you will buy more (more channels or out-of-cap calls) and then many people don't change anything when they fall out of contract. Look at the "minimum cost" fine print: you can see that you are committed to paying much more than the hardware cost.

      i work for a telco and trust me telco's and pay tv operators don't lose money on the hardware they supply for free. ever wonder why you only get the free stuff as a part of a contract? you think maybe over the term of that contract the telco might end up in front?

    Vodafone just upgraded me with a free galaxy s3, 6 months before the end of my contract, so they happily lost some bones to make sure I stayed with them. Losing money to guarantee future sales is not unprecedented.

    "Funny how Google spends an extra eight bucks and charges you $50 more, huh?"
    Unlike Apple and Lenovo and Toshiba and every other seller of tablets and smartphones

    No business exist to provide a service for the good of mankind. They all operate at a profit. Maybe less than they would like, but at a profit. Also take into account that if a business is making $10M profit in the previous year a profit of $9M in the following year is considered a $1M loss.

    "Funny how Google spends an extra eight bucks and charges you $50 more, huh?"

    This is par for the course for every device from every manufacturer. Look at the price hikes between iPad models, it's significantly more than $50.

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