Apple iPod Essentials   Tracking the Pulse of iPod

Analysts estimate that Apple makes a 40 percent profit margin on each device.

"If it had a screen, it would no longer be a Shuffle. Apple is getting a lot of marketing mileage out of clever slogans about shuffling."
     - IdaRose Sylvester, a senior semiconductor research analyst at IDC

Analysts at IDC took apart an iPod Shuffle to come up with an estimate of how much each one costs Apple Computer to manufacture. the flash memory was deemed the most expensive component, followed by the digital music decoder. Sylvester estimates that Apple is making about $40 profit on each unit.

The article had no mention of the fact that Apple doesn't receive $99 per shuffle. There are channel discounts, marketing expenses, etc. So the article at best is just an estimate of manufacturing costs and really can't be interpreted as estimating Apple's margin on the diminuitive Poddie.