Apple sees more profit per OS user than Microsoft
By releasing operating system upgrades at a more frequently and stable pace, Apple Computer is able to gain more profitability per user from its OS software than Microsoft, an analyst's study has found.
PiperJaffray analyst Gene Munster recently compared Apple's Mac OS X and Microsoft's Windows pricing schemes and found that although Apple prices its OS software at a lower average selling price (ASP), it costs Mac users more per year to have the latest OS.
According to Munster's analysis, Apple releases a new version of Mac OS X about once a year for $129 (or an average of $107 per year to keep current), whereas Microsoft releases new versions of Windows about every 2.25 years for an average cost of $114 a year (or $48 per year to keep current).
"Despite Mac OS X's lower ASP, Windows users pay less per year (by $16) for full versions and significantly less per year for upgrade copies (by $59), in order to have the latest OS for their computer," Munster told his clients in a synopsis of the study. "Apple users therefore pay a premium on an annual basis for more frequent upgrades to Mac OS X, resulting in higher profitability per user for Apple."
The analyst believes Apple's OS pricing strategy is in line with the company's overall strategy, which is that Apple users are willing to pay a premium for hardware and software built for the Apple platform, enabling Apple to expand profit margins.
Credit: PiperJaffray Investment Research
"Given Apple's ability to drive greater revenue per customer versus its competitors through sales of peripherals and frequent OS updates, Mac market share gains will mean more to the company than simply increasing Mac revenue," he said. "Most analyses of the impact of Mac market share gains exclude the positive potential impact on the company's peripherals and software segments, which account for 12 percent of revenue."
The analyst said that it is important to keep this added benefit in mind, as a growing number of Macs in consumer's hands will lift these segments as well.
Munster maintains an "Outperform" rating on shares of Apple Computer with a price target of $99.
PiperJaffray analyst Gene Munster recently compared Apple's Mac OS X and Microsoft's Windows pricing schemes and found that although Apple prices its OS software at a lower average selling price (ASP), it costs Mac users more per year to have the latest OS.
According to Munster's analysis, Apple releases a new version of Mac OS X about once a year for $129 (or an average of $107 per year to keep current), whereas Microsoft releases new versions of Windows about every 2.25 years for an average cost of $114 a year (or $48 per year to keep current).
"Despite Mac OS X's lower ASP, Windows users pay less per year (by $16) for full versions and significantly less per year for upgrade copies (by $59), in order to have the latest OS for their computer," Munster told his clients in a synopsis of the study. "Apple users therefore pay a premium on an annual basis for more frequent upgrades to Mac OS X, resulting in higher profitability per user for Apple."
The analyst believes Apple's OS pricing strategy is in line with the company's overall strategy, which is that Apple users are willing to pay a premium for hardware and software built for the Apple platform, enabling Apple to expand profit margins.
Credit: PiperJaffray Investment Research
"Given Apple's ability to drive greater revenue per customer versus its competitors through sales of peripherals and frequent OS updates, Mac market share gains will mean more to the company than simply increasing Mac revenue," he said. "Most analyses of the impact of Mac market share gains exclude the positive potential impact on the company's peripherals and software segments, which account for 12 percent of revenue."
The analyst said that it is important to keep this added benefit in mind, as a growing number of Macs in consumer's hands will lift these segments as well.
Munster maintains an "Outperform" rating on shares of Apple Computer with a price target of $99.
Comments
That's the true cost of ownership.
If you don't like being offered 2.25 times as many upgrades then just ignore them and upgrade once every 2.25 years instead. Interestingly, the upgrade costs are then almost equal ( $48 x 2.25 = $108 )!
If you don't want/need them, don't upgrade. Additionally, Apple has better multi-license deals. $199 gets you 5 licenses for your family. Which is great if you have 2 computers and your sister has 1, and your parents have 1.
1. Amazon has offered OS X for under US$99 for years--even when a new version comes out. (Students and educators get it for $69, and families with multiple machines get a discounted pack that Amazon has even discounted further.)
2. You don't HAVE to buy every OS X update. Buy every other one, cut your cost in half, STILL have newer technology than Windows, and Apple will STILL give you free security updates and your existing software will STILL run great. (But I do like having the choice to get new OS features more often than that.)
3. Apple's paid OS X release schedule is NOT once every 12 months and never, ever has been:
10.0 Cheeta (original paid version - public beta owners received a credit)
...17 months (included free 10.1 Puma after 6 months)...
10.2 Jaguar (first paid upgrade)
...14 months...
10.3 Panther (second paid upgrade)
...18 months...
10.4 Tiger (third paid upgrade)
...23 months if ships the first day of Spring...
10.5 Leopard (will be the fourth paid upgrade)
So Apple has NEVER released a paid OS X version in less than 14 months, and the average is 1.5 years--or longer if Leopard appears later in the Spring.
In addition, as you can see, the rate of releases IS steadily slowing (6 - 11 - 14 - 18 - 23) as would be expected with a new OS like OS X.
(And people are right to note total cost of ownership--lower for a Mac.)
EDIT, even if you take Leopard off the list and count only the first three paid updates to OS X, and average those times, and pay full $129 price, I get under $95 per year. (I won't try to factor in the time between OS 9 and the original OS X purchase since that was a unique case.)
Or if you DO include Leopard, and buy EVERY update at Amazon's price, your annual cost is about $66. Skip every other? $33.
EDIT 2: FYI, if Leopard appears early, at MWSF06, that's still 21 months and the average then is about 17.5 months. (Not once a year by any stretch.)
Didn't Apple say that the OS updates would be coming less frequently now? I seem to remember that. They've been coming quickly because OSX was new and had so much room for obvious improvement.
I sure hope so.
Sometimes being a college student has it's perks. Although anybody could order off of the education site, I don't even think they ask what school you go to.
I buy my OS upgrades for $69.
Sometimes being a college student has it's perks. Although anybody could order off of the education site, I don't even think they ask what school you go to.
They do but I don't think they do any sort of verification.
PS: graduate from college knowing the difference between "its" and "it's" for me, alright?
They do but I don't think they do any sort of verification.
PS: graduate from college knowing the difference between "its" and "it's" for me, alright?
ha ha, oops. 10.5 is going to have a grammar check, right?
os x is free with new computer purchases.....
Windows XP is free with new computer purchases?
os x is free with new computer purchases.....
Or at least, it's part of the purchase price of the computer--which is true when you buy a Windows machine as well.
Windows XP is free with new computer purchases?
The PC I bought came with Lindows
I buy my OS upgrades for $69.
Sometimes being a college student has it's perks. Although anybody could order off of the education site, I don't even think they ask what school you go to.
I just walk into the college and buy my updates for that price. Never card or ask or anything.
The real reason why Windows is "cheaper" is Vista is just taking so damn long.
Oy.
How often do PC users buy a new machine compared to Mac users? I've read of many people buying new computers when the old one is too bogged down by spyware and adware to be usable.
How about the software that comes with a new Mac? Even with the Mac there would be at least one hardware upgrade in that time period. Okay, maybe this could be left out.
Also you have to factor in that Microsoft originally wanted to release Longhorn, now Vista, a very long time ago. The massive long time between XP and Vista is having a temporary effect on the overall price of owning Windows (at the cost of having an out of date OS and needing third party software to get new features than appeared in Mac OS X), in the same time Mac OS X's update schedule is slowing down from when it was new, so Mac OS X is being penalised for being new and having updates more often.
The study is meaningless in terms of future costs of owning the OS. Assuming Mac OS X settles out to a bi-yearly upgrade, and Windows every 3 years, and that Windows starts including more software to reduce the need for third party additions to keep the computer safe and clean ... the cost will probably end up being fairly similar.
1. Virus protection software. While they have it for both platforms, it isn't required with Windows. The cost? One has to add that in.
2. Cost of dealing with Virus attacks.
3. Another way of calculating this for people. If one buys an Apple every year, it comes with the latest OS, the old system can be sold to recoup the outlay because a year old Apple has more resale value than a year old PC.
4. Apple has more built applications that people can actually use. If one buys a DVD authoring product to compete with iDVD, etc., etc. it costs more on a PC, plus more addtional setup time.
Bottom line. Munster's assessment is telling the whole truth, just his basic spin on it.