If a laptop with built-in 3G or WiMAX is used, there's some form of services revenue stream that can go towards offsetting the upfront cost of the modem. Whether it's a subsidy, a revenue-share, a bounty paid by the operator, or an extra amount forked over by the user at the time of purchase is largely immaterial.
The service is used, a modem is needed, money is paid by the subscriber (or a 3rd party) for the broadband. There's cash coming in, so in theory at least, everyone should be happy, with a bit of decent negotiation among all the parties.
Now consider another scenario.
A laptop is bought from a retailer or online, with a built in module. But the end user either has no intention of using mobile broadband, or perhaps will just try the free trial period included at the time of purchase. So no money is spent on broadband access.
But someone's had to pay for the module. Either an operator, the OEM, or the end user themselves. And whoever it is (or a combination of them) has wasted perhaps $50-100. The user is unlikely to be wearing the cost directly, especially if they've shopped around for competitively-priced laptops, or configured it online. That cash would go on a higher-spec machine, or stayed in their pocket.
If it's bought through a non-operator channel as a "vanilla" embedded PC, there's no clear way for a particular operator to be involved, as the user could put a choice of SIMs in it. There might be a small payment for a "trial" SIM to be in the box, much like AOL used to put a CD in with PC's back in the 1990s. But I can't see an operator paying for the full cost of the module for the privilege of marketing in this fashion.
Which means that for the modules included in "default" notebook configurations, sold through ordinary channels, the OEM is essentially footing the bill, if it never gets used.
Now according to this piece of research, the gross margin on a high-end notebook ($1300) is about 30%. But Dell's overall gross margin is currently 19%, and references to higher-margin products in the mix in its earnings call referred to things like storage and services rather than notebooks. And Asus has been making 20% gross margins on eeePCs, but they are thought to be falling to 15% - and it has now warned that shipments may be lower than expected.
So for the sake of argument, lets say gross margin is 20% for notebooks. Probably lower on an ultracompetitive netbook, and certainly higher on an Apple Macbook Air.
So on a netbook, the gross margin on the wholesale price is, perhaps, $50. And on a mid-range corporate or consumer notebook, $150.
I'm really not convinced that putting in an extra $50-100 cost of an unwanted, unvalued, unused 3G module is going to make those numbers look very pretty, from a CEO's or investor's eyes. Frankly, even if the wasted cost is $30 it's still not going to make people shrug in indifference.
Now, I wonder why Apple hasn't put any WWAN modules in Macs yet, given their continued targetting of an average 30%+ gross margin?
This is one of the reasons why I'm predicting slow uptake of built-in 3G (and WiMAX) in my new report on Mobile Broadband Computing.
Thursday, 11 December 2008
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