Termination Fee being whittled down?

[xjman349]

Can someone explain something to me? I saw a story the other day and it makes me wonder how they can get away with raising the ETF on these "advance devices", especially the Droid, to $350. The logic they use is "we subsidize these phones so customers dont have to pay $500-600+ for them so we have to raise the ETF or else we could lose money."

The story I referred to was the teardown price of the parts for the Droid. Parts total just under $180. I bet most of us paid $200 or more for the Droid (I bought 2 at $200) so how is it we are getting a subsidized device again??? Maybe there is an angle to this Im not understanding. But if the device only cost $180 to manufacture and we are paying $200 or more to buy it, how can they use the above argument about raising the EFT?

Motorola Droid Parts Worth More Than iPhone 3GS or Nexus One's, At $179.11 - Motorola droid teardown - Gizmodo

Because motorola has to make money too. They are selling the phones to Verizon a lot higher than it costs to make them. Thats how motorola makes money. So Verizon wants to make sure they get some return on the devices hence raising the ETF.

 

[voodoodaddy]

Because motorola has to make money too. They are selling the phones to Verizon a lot higher than it costs to make them. Thats how motorola makes money. So Verizon wants to make sure they get some return on the devices hence raising the ETF.

But Motorola surely isnt selling the device to VZW for much over the manufacturing cost.

 

[Lafond]

But Motorola surely isnt selling the device to VZW for much over the manufacturing cost.

It's been reported that the raw manufacturing cost is around the $180 mark. To remain profitable, they must sell it for more than a stitch over that. Though I'm sure they have some pretty hefty R&D/cap-ex to ammortize per phone that is not included in those reported costs.

 

[pc747]

Because motorola has to make money too. They are selling the phones to Verizon a lot higher than it costs to make them. Thats how motorola makes money. So Verizon wants to make sure they get some return on the devices hence raising the ETF.

But Motorola surely isnt selling the device to VZW for much over the manufacturing cost.

Like said earlier, verizon pays the retail price for the device, actually cell phone companies in general. Whether its the iphone, bberry, android, or windows....when you put the phone on the counter Motorola, apple, blackberry, htc, etc... is getting the retail value for the phone. As a consumer you can either buy outright or subsidized with a contract. Thats why i understand why verizon has a high eft.

 

[crspang]

$180 is for materials only, it does not include labor, software development costs, freight, etc. Moto would not be in business very long if they only sold the Droid for $200 or so.

 

[bossrogue]

Because motorola has to make money too. They are selling the phones to Verizon a lot higher than it costs to make them. Thats how motorola makes money. So Verizon wants to make sure they get some return on the devices hence raising the ETF.

But Motorola surely isnt selling the device to VZW for much over the manufacturing cost.

Like said earlier, verizon pays the retail price for the device, actually cell phone companies in general. Whether its the iphone, bberry, android, or windows....when you put the phone on the counter Motorola, apple, blackberry, htc, etc... is getting the retail value for the phone. As a consumer you can either buy outright or subsidized with a contract. Thats why i understand why verizon has a high eft.

Exactly, everyone is in it to make money.