TI Graphing Calculator: Profit Margins

The TI Graphing Calculator: A dominantly stable, profitable product.

In 2009 the Wall Street Journal ran an article which describes that approximately 80% of the graphing calculators sold in the USA were made by Texas Instruments (TI). By contrast, competitor Hewlett-Packard (HP) had less than a 5% stake in the graphing calculator market. The story also reported that overall sales of calculators in 2007 generated $526 million in revenues and $208 million in profits for TI, representing about 5% of TI’s annual profits.

A Small but Profitable Segment

Since 2008 it is harder to ascertain financial data specific to TI calculator sales, because that was the last year that the company reported the results of its calculator sales as a separate and distinct line item in SEC documents and annual reports. Instead they now include those sales under a large miscellaneous category called “Other.” In its latest annual report TI describes this “Other” segment in this way:

“Although there are some differences in the various business models that comprise this segment, in general, most of these products have a profit contribution that is attractive but where our investments are minimal and growth expectations are lower.”

The relatively small category was responsible for $2.6 billion in revenues in 2013, representing 21 percent of total revenue. That is a huge contribution to the bottom line of TI, particularly considering how little the company invests in that segment.

No Need to Innovate

Many wonder, of course, why TI has not kept up with the times and made its graphing calculators more high-tech. The experience that the company had when it introduced its TI-Nspire graphing calculator a few years ago may provide an obvious answer. The product was intended as an improvement over the traditional graphing calculator, with a higher price tag and new features like the ability to create spreadsheets.

But its platform was more like a computer than a traditional handheld calculator, and many consumers complained that it was too complicated and too expensive. Some also said that the Nspire platform restricted user ability to write the kinds of programs they were accustomed to designing and sharing. People who buy graphing calculators expressed their preference for the traditional versions and kept purchasing them, while sales of the Nspire were less than inspiring.

Maintaining the Status Quo

One explanation for this continued consumer loyalty is that the TI-83 and TI-84 models are still an ideal product  for the high school classroom. Teachers prefer to have all students use the same basic kind of calculator because it makes teaching easier, and most standardized tests prohibit the use of more powerful calculators.

There are inexpensive smart phone apps  and free online calculators that perform graphing calculator functions, including one from TI rival Hewlett-Packard. But wireless devices are usually banned during exams and smart phone use is normally prohibited in high school classrooms, which effectively limits practical access to those applications.

For those reasons it seems that TI has little incentive to alter the basic design and functionality of its popular graphing calculator products. At the same time, there is no financial pressure to lower the prices of its unchanged and rather low-tech graphing calculators since consumers are happy to keep buying them.








Posted in graphing, Online, TI Calculators