It was early summer in 2007. Apple stock could be bought for $17.50 per share split adjusted. The first iPhone hit the market for $499 for the 4-gigabyte model.
This week, Apple is widely expected to release the eighth iteration of its smartphone. Storage is 128 times larger, the price of the phone has doubled and the share price is up over 800 percent. Apple doesn’t play Amazon’s game of low prices and high volume. Instead, its widely successful formula has been building a great product and demanding a high price. And getting it.
Apple can lay claim to the largest and most profitable smartphone seller in the world. It sold more than 41 million iPhones between April and June. That’s typically a slow time especially considering the company has been prepping its newest iPhone model that will be unveiled on Tuesday. Those phones generated $25 billion in sales.
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For every dollar of profit on smartphone worldwide last year Apple swallowed 79 cents, according to research firm Strategy Analytics. The iPhone is Apple.
So after a decade of dominance, what can Apple do to maintain its margins for shareholders? Apple isn’t necessarily the innovator in the smartphone space. Instead it often iterates the work others. The MP3 player became the iPod. The newest iPhones reportedly will feature wireless charging, something Android users have enjoyed for a while. Siri started as a project within the super-secret world of military research before Apple bought it.
Apple has such a hold on iPhone buyers that it removed the headphone jack and didn’t suffer financially.
Expectations always are high for a new iPhone. If the past decade is any guide, iPhone buyers will continue to pay top dollar.
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.