Apple is due to make so much money from the iPhone the expensive price doesn't matter. They're making a profit on the subsidized price of the phone, plus they get a residual over the lifetime of the contract.
These monthly residuals (usually payed during year 2) are $300 total for a high end voice plan and even more for profitable add-ons options like data. I'm sure Cingular is paying even higher than the normal residuals to secure the iPhone contract. Even if the iPhone isn't flying off the shelfs, it's going to be a solidly profitable item for Apple for a very long time.
About half of your monthly self phone bill is paying commissions to various people -- the regional sales rep, the local sales rep, the individual sales agents, and the owner of the store.
Apple makes even more from the iPhone because they're going to sell a lot in the Apple stores.
There's a truth in SteveB words. Nokia is currently the #1 mobile vendor because they sell very (VERY) cheap mobile phone in Asia (especially Hong Kong and South East Asia countries).
Those countries have billions citizens compare to North America and I'm almost sure iPhone would be unreachable (in terms of cost) there.
iPod is a different "thing". iPod is a market maker (I know other companies have come up with MP3 players before but none of them made a SPLASH).
Sometime it is useful to have business or economy skill than just plain programming/coding skill :)
There was a "leak" a while back on macrumors that showed a Cingular flyer supposedly advertising $299/$399 price points with 2yr contract. Probably photoshopped though...
These monthly residuals (usually payed during year 2) are $300 total for a high end voice plan and even more for profitable add-ons options like data. I'm sure Cingular is paying even higher than the normal residuals to secure the iPhone contract. Even if the iPhone isn't flying off the shelfs, it's going to be a solidly profitable item for Apple for a very long time.
About half of your monthly self phone bill is paying commissions to various people -- the regional sales rep, the local sales rep, the individual sales agents, and the owner of the store.
Apple makes even more from the iPhone because they're going to sell a lot in the Apple stores.