I would re-think the gross margin that Apple gets from Consumer Electronics retailers. A number of years back I was talking to a owner of a large Chain of big box electronics and when he mentioned his average gross margin I had to ask to clarify it for me three times. It was 3%. It may be more but ask yourself when you see competitors advertise price on the same product how much variance there is. Sure MAP has proven itself legal, but that still wouldn't stop them from doing things like "put it in your cart to see the real price" or big box stores telling customers, we can make that lower just don't tell anyone ...wink wink.

I asked the owner how in the h*** he could make money at those margins. Volume plus selling extended warranties , accessories, grey products, off brands, warranty service and repair. It may not be as prevalent now, but the last time I went in to spend what for me was a large sum of money, the salesman almost acted disinterested in what brand or model I picked. I might as well have been on my own. Once I had picked it through then the salesman came alive when it came to selling the extended warranty because he doesn't make a dime off the product , only the extended warranty.

As I sold Music Products to music retailers , some dabbled in consumer electronics and were just horrified at the margins. So my guess is Apple may give dealers a 5% -7% discount. It's just as important for retailers to use them to get people in the store as it is Apple to help spread the word. Apple retail stores are completely different. They probably have to "buy" iPads but the margins are much deeper. The $270.00 gross margin sounds close but only because Apple is willing to commit to massive quantities of parts. Rumor had it on their very first run of iPads they bought 10 Million LCD screens. In consumer electronics, volume is everything at every level.

That's why you don't see mom and pop stores selling consumer electronics and very few stores of that size that selling computers unless they are custom built or white boxes. On the other hand the Music Business still has thousands of mom and pops surviving against a veritable blitzkrieg of Big Box stores, Music Chains, Online sales , catalog sales and even telemarketers to the homes of the customers. They can survive because the margins are more generous, they sell many services like lessons, used instrument consignment sales ( not as much with eBay around), repair and most importantly, musical instruments have what the printer business calls "consumables". A regular customer who comes in for lessons, new guitar strings which can go dead in days, violin strings, mouthpieces for Horns, parts that break off, replacement instruments when they are stolen, drum heads, drum sticks, drum accessories on and on. One intangible is that customers considering a major instrument purchase has to test it by playing it in most cases. How many people will by a $10,000 Martin guitar sight unseen? That gives the dealer at least an opportuntiy to sell the instrument and that's better than the bookstores or other free standing stores that sell product that people don't need to feel or touch to buy. The dealer may make very little as they will discount it by 40% in a second. But once a musician spends that kind of money at a local store smart retailers will give them ongoing red carpet treatment which they won't get from Amazon/Musician's friend.

Big name lines are used for what they their true value is no matter what kind of retailer one is: getting people in the store. Most of them have online stores too. Then it's up to retailer to be a wise merchandiser with competent sales help to make each sale profitable. Probably the best example of this is Sweetwater Music in Fort Wayne Indiana. Operates a single location yet is responsible for a measurable cut of annual retail sales for the entire industry because the owner is a very smart businessman as he has successfully integrated all methods of selling product all the way to very well trained telemarketers. He also invests in his people which one can see by going to the website. It will show a stark difference compared to say a Best Buy.

The iPad may be profitable for a big box if they sell a full line of accessories. In fact they probably don't care if they sell that many iPads as long as it gets the customer in the door to buy related products. The notion that Apple would accept a 5-10% margin to sell to Big Box stores is as ridiculous as a Car company selling their high price luxury cars to their dealers at 5-10% over cost.

The major reason none of these companies can match price is that they are following the trail burned by the deaths of 100s of PC Clone makers. They essentially are retailers for the Chip and the OS maker. They can't and won't order huge quantities of parts and there is the difference. They have to differentiate themselves so the product may have a different shapes and sizes , parts etc. The purchase is treated as an individual purchase by the parts makers where here they can make a serious profit because they are essentially selling the same parts to a few dozen manufacturers who order in lots that may be a fractional percentage point of what Apple orders. The fact that they have to sell through Big Box stores, Online stores and carrier stores is almost meaningless when people are looking for products priced 30-40% under Apple's with twice the features and performance.

Apple doesn't need to get a huge premium on each sale anymore as they have reoccurring revenue from iPads and iPhones at the carrier level , the content level and the Apps level. They also dominate the markets which wasn't the case in computers. According to Apple they don't make much money, if any, selling content. That will change as the dominant means to view or listen to that content become smart gadgets..

Meanwhile, Google has yet to monetize the O/S in any meaningful way, or see much profit flow from their app store ( which will change) the OEM /Retailers will never get the critical mass to have their own content or app stores that will produce a profit that registers on their profit meter.

The carriers like it because they don't have to subsidize the sale of the phone as much as they do with the iPhone or the even the iPad. Initially it was internet knowledge that AT&T didn't start making money on a iPhone until the 17th month of the 24 month contract. Yet it was important for them to get these customers . If their network had actually worked it would have been a good strategy. The fact that four years after release AT&T still has problems is monumentally stupid but not surprising from a company that still operates like it's a monopoly. If Apple could get around the anti-trust people, I can see them either starting a carrier with fresh technology or paying cash for one of the better existing ones that aren't tied down to legacy customers.

Finally, I think most people will be surprised in a few years when enterprise sales dominate the annual unit sales of tablet computers. Consumer sales will still be important but it may be less than 50% of total sales in a much shorter time frame than anyone is predicting right now. There Apple's gross margin may slip if a Fortune 500 company orders 100s of thousands a year. That also may give a Samsung or a Research in Motion the necessary critical mass to to at least match Apple yet with a much smaller gross margin. But they could also underprice Apple (maybe ) in the retail space.

Personally, if Apple does a little ego mod and puts the logo of the company on the iPad and allows the company to name it with nomenclature that delineates it's product and or service as part of the name, with their logo at a good size, plus a designed and manufactured by Apple Computer, they will own that market. They have put two well thought of brand names on one product. If the Fortune 500 company gives the product to its business customers to be on the same page for ordering on-site repairs and maintenance, inventory checks and ordering plus provide all the users the consumer features that people like, it will be seen as a major sales closer. I'm thinking there is major behind the scene push to be the first to capture the largest Fortune 500 companies. Once they get good press from them, corporations of that size tend to move in herds. There are also monster corporations all over the world that would use them too. The opportunity is so mind boggling, I won't even put it on a spreadsheet.

Anyway, revaluate your gross margin commentary. Part of it may be correct but it's my firm belief you couldn't be any further away on other areas.