AT&T, RIM Are Bold in Pricing
Page 1 of 1
Research in Motion (RIM) and AT&T have high hopes for brisk sales of the BlackBerry Bold when it debuts on Tuesday.
Rim's newest handset, which arrives Election Day with a $299 pricetag for AT&T data services subscribers, costs just about $170 to make, according to a detailed report from iSuppli, a research and advisory firm known for detailed "teardown" analysis of product cost.
The report provides a window into how much components in smartphone devices cost these days. This one lists out costs on 15 components, including processor (the highest-priced device part at $34.34), keypad assembly (the cheapest piece at $1.85), camera ($9.90) and display ($16).
iSupplis research reveals a direct bill of materials (BOM) cost of $158.16 and a manufacturing cost of $11.25 for a total of $169.41. Marketing, research and development and other product development lifecycle costs are not included in the report figures.
With consumers pulling back on spending in a slowing economy, smartphone makers are getting more aggressive on pricing to entice, and looking for areas where they can reduce pricing.
Handset makers typically partner with carriers for device sales, with carriers paying a fee for each unit sold. For example AT&T, which sells the new iPhone 3G for $199 with a two-year data plan subscription, pays Apple (NASDAQ: AAPL) $300 for every iPhone 3G it sells.
RIM told InternetNews.com that its carrier partners set BlackBerry product pricing, and declined to comment on the fees it is receiving on handsets sold by carriers.
While a carrier's device subsidy plays into financials, the gained revenue tied to mobile data services and other network services traditionally more than compensate for the handset fee, according to experts.
"We have seen carriers being clever with their subsidy and subsidizing more those handsets that offer them a good ROI as far as data revenue," Carolina Milanesi, research director for mobile devices at Gartner, told InternetNews.com.
"I think we will see more of this going forward as well as more pressure on handsets vendors to lower prices," she added.
iSuppli believes RIM (NASDAQ: RIMM) is receiving "a healthy margin on the Bold," based on the current Canadian sales program. Wireless operator Rogers Communications sells the Bold for $399 Canadian dollars, about $337 in U.S. currency. AT&T did not return inquiries by about handset fees paid to RIM or its subsidy costs.
An iSuppli report earlier this year noted that the new iPhone 3G, that sells for $199 through AT&T, costs about $173 to make.
The iPhone 3G partnership is benefiting AT&T as devices sales are blooming. While the subsidy cost impacted AT&T's bottom line in the third quarter, it was more than offsetby data service revenue which saw a 50 percent jump in the third quarter. AT&T reported 2.4 million iPhone 3G account activations during the quarter, 40 percent of which were new subscribers.
The Bold, which RIM first announced six months ago, was delayed past its initial October release date due to reported network testing and certification glitches.
While BlackBerry products are the leading enterprise smartphone, RIM has been pushing hard this year to grab lucrative consumer market share from devices like Apple's iPhone while protecting its lead in the workplace. In the past few months RIM has pushed out other devices ahead, including the Storm 9730, the Curve and the Pearl Flip 8220.
In its Bold cost report iSuppli described the smartphone as "the fullest-featured" and "most refined" BlackBerry to date. Andrew Rassweiler, teardown services manager and principal analyst for iSuppli, stated in a release that the display, high-speed data connection and large quantify of onboard memory make the Bold" as media savvy as any smart phone on the market today.