Apple Inc (AAPL.O: Quote, Profile, Research) has prepared plans to nearly double its iPhone production in the fourth quarter, financial news Web site TheStreet.com reported, citing people familiar with the company.
The plan calls for making 2.7 million iPhones next quarter, up from the 1.54 million originally targeted, the report said. Apple's plans now call for 4.8 million iPhones to be produced this year, up from the 3.6 million previously targeted, the report said.
Earlier this month, Apple said it sold its one-millionth iPhone a few weeks ahead of schedule.
Apple officials were not immediately
Apple's IPhone Sells for Double Costs, ISuppli Says (Update5)
July 3 (Bloomberg) -- Apple Inc. sells the new iPhone at more than double production costs, suggesting the new handset may be more profitable than rivals from Motorola Inc. and Nokia Oyj. The shares rose the most in six months to a record.
The most-expensive $599 model has component and manufacturing costs of $265.83, which translates into margins of more than 55 percent, according to iSuppli Corp. The research firm tore open an iPhone to identify the components in the device. Jill Tan, a spokeswoman for Apple in Hong Kong, declined to comment on the iSuppli report.
The iPhone sold out at most stores less than a week after its debut in a market led by Nokia and Motorola, the two largest handset makers. The $599 version, which costs three times as much as Motorola's Q did upon its debut, may have helped the device earn as much as $186.1 million in its opening weekend, based on estimates from Goldman Sachs Group Inc. and iSuppli.
``It had a very good start,'' said Bill Choi, an analyst with Jefferies & Co. in New York. ``They're selling it for a lot of money. On a gross margin basis, it is very profitable.''
Shares of Cupertino, California-based Apple rose $5.91, or 4.9 percent, to $127.17 at 1 p.m. New York time in Nasdaq Stock Market trading. They have jumped 50 percent this year. U.S. stock markets ended trading at 1 p.m. New York time today, and are closed tomorrow for the Independence Day holiday.
While the 55 percent figure is higher than the gross margin of some of Apple's competitors, that alone doesn't determine how profitable a product is, Choi said. Companies also have costs from marketing and research and development, and Apple still needs to sell a ``critical mass'' of iPhones to cover development costs, he said.
Goldman Sachs said shoppers bought as many as 700,000 iPhones in the weekend after the June 29 debut in the U.S., double the brokerage's earlier projections. Piper Jaffray & Co.'s Gene Munster pegged sales at about 500,000, more than twice his original 200,000 estimate.
Research In Motion Ltd., maker of the BlackBerry, reported a gross margin of 51.8 percent in the most recent quarter. Palm Inc., maker of the Treo, had a gross margin of 38.2 percent. Motorola's mobile phones have a gross margin of less than 30 percent, Choi said.
``The margins for the iPhone are much higher than the typical handset that we've been looking at,'' iSuppli analyst Eric Pratt said in an interview today.
Apple ran out of iPhones, a combination iPod and mobile phone that offers Web and e-mail, at more than half its 164 stores yesterday. AT&T Inc., which is offering wireless service for the device, sold out of the phone in almost all its 1,800 stores, with ``just a handful'' of locations keeping the handset in stock, spokesman Mark Siegel said in an interview today.
ISuppli's estimate excludes costs for logistics and royalties, the El Segundo, California-based researcher said. That differs from gross margin, which is the percentage of sales minus production costs such as labor.
South Korea's Samsung Electronics Co. is the biggest supplier, accounting for 30.5 percent of component costs, by making the memory chips and processors, according to iSuppli. Infineon Technologies AG, Wolfson Microelectronics Plc, Balda AG and National Semiconductor Corp. also make parts, iSuppli said.
Apple will probably sell 4.5 million iPhones this year and more than 30 million units by 2011, according to iSuppli. Chief Executive Officer Steve Jobs said in January that the company will sell 10 million iPhones in 2008, capturing 1 percent of total handset sales worldwide.
By comparison, Nokia, the world's largest mobile-phone maker, said in April it shipped 91.1 million units in the first quarter.