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Apple's Mac OS X, iOS now fueling 3.5 times the profits of Microsoft Windows

post #1 of 32
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Apple's dramatic growth in hardware sales has reversed the longstanding notion that software licensing is the best way to make money in the tech industry.

A revenue comparison published by Asymco blogger Horace Dediu demonstrates that Apple's hardware-centric business model is now enabling the company to generate 3.5 times the profits earned by Microsoft licensing Windows to third party PC makers.

While both companies have long developed rival desktop and mobile operating systems, Apple has almost exclusively used its software to drive hardware sales, while Microsoft has derived almost all of its Windows-based revenue by licensing its software to others.

During the 1990s however, Microsoft quickly outpaced Apple's growth in both revenues and profits by bringing DOS and then Windows to a much wider audience, prompting observers to insist that Apple needed to mimic the same business model to remain relevant.

Apple eventually began licensing both its Mac OS and its Newton OS, but neither effort resulted in success. After founder Steve Jobs returned to Apple in 1997, the company terminated both of its operating system licensing programs and began focusing on using its software assets to sell the company's own hardware instead.

While other companies that attempted to copy Microsoft's licensing-centric business model also failed (including Palm and Be, Inc), there was not much optimism held out for Apple to be able to significantly expand its Mac hardware sales as a proprietary platform.

However, Apple has not only dramatically increased its Mac sales over the past half decade four fold, but has also added a huge new influx of mobile devices running iOS. Over the same period, Microsoft has struggled to replicate its Windows-like licensing business among mobile devices.

The result, as noted by Dediu, is that Apple is now generating $9.8 billion in profits from its operating systems through hardware sales, while Microsoft reported sales of $4.445 billion and profits of $2.764 billion from its Windows licensing.

While Mac market share is hovering around 9 percent of all PCs sold, Mac OS X itself generates half the profits of Windows for Apple. Separately, iOS generates 2.3 times the profits of Windows.

Dediu contrasts Apple's growth with the overall PC industry, "which has seen both volume and sales decline while prices have eroded along with profitability. On top of that, growth has nearly evaporated."
post #2 of 32
If you buy a Mac.... Apple gets money from both the hardware sale as well as the software.

When you buy a Dell... only Dell gets the hardware sale... while Microsoft gets a small license fee for the software.

I'm not sure how this is news... but OK
post #3 of 32
Quote:
Originally Posted by Michael Scrip View Post

If you buy a Mac.... Apple gets money from both the hardware sale as well as the software.

When you buy a Dell... only Dell gets the hardware sale... while Microsoft gets a small license fee for the software.

I'm not sure how this is news... but OK

Still, Apple is more profitable than both combined. Dell only made $927 million last quarter.
post #4 of 32
Dan wrote an article without using the words "frantic" or "desperate". I'm kind of impressed.
post #5 of 32
I still maintain Microsoft's shoddy approach to OS design has cost people and businesses untold billions of dollars in lost productivity. I'm so happy I went Apple 20+ years ago!

Best
post #6 of 32
Quote:
Originally Posted by christopher126 View Post

I still maintain Microsoft's shoddy approach to OS design has cost people and businesses untold billions of dollars in lost productivity. I'm so happy I went Apple 20+ years ago!

Best

There is certainly an argument to that, but there is also an argument to had for Windows-based machines being considerably cheaper per unit than Apples simple Mac solution which could have saved them billions more over the years.
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post #7 of 32
Didn't we have this story last week? Apple makes more profit selling hardware/software than Microsoft do selling just software.

I'm wondering now how many ways this can be written
post #8 of 32
Quote:
Originally Posted by solipsism View Post

There is certainly an argument to that, but there is also an argument to had for Windows-based machines being considerably cheaper per unit than Apples simple Mac solution which could have saved them billions more over the years.

Devil's Advocate strikes again!
post #9 of 32
Quote:
Originally Posted by solipsism View Post

There is certainly an argument to that, but there is also an argument to had for Windows-based machines being considerably cheaper per unit than Apples simple Mac solution which could have saved them billions more over the years.

But then there's the total cost of ownership. Companies that had near-exclusive Windows installations employed many more IT professionals than did firms who went with Macs. I worked at one Mac outfit where the highest guy in the IT department was also an upper-level R&D guy - splitting his time between managing the IT people and some hardware engineers. And the IT people were fully-trained telephone people who took care of the PBX and the rest of the phone system in addition to their Mac support jobs. And those Macs were like Timex watches - just kept working.
post #10 of 32
Quote:
Originally Posted by Ecphorizer View Post

But then there's the total cost of ownership. Companies that had near-exclusive Windows installations employed many more IT professionals than did firms who went with Macs. I worked at one Mac outfit where the highest guy in the IT department was also an upper-level R&D guy - splitting his time between managing the IT people and some hardware engineers. And the IT people were fully-trained telephone people who took care of the PBX and the rest of the phone system in addition to their Mac support jobs. And those Macs were like Timex watches - just kept working.

TCO can be a powerful motivator but you'll usually find that quarerly budgetary constraints subspesed that, not to mention Apple's business model makes it impossible for businesses to shop for the best HW options and prices for a given OS.

Without a major change to this philosophy Apple will never own rgmmte enterprise proper. It's not because they can't, it's because they choose not to.
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post #11 of 32
It sounds like Apple (under Steve Jobs) figured out how to make NOT licensing the OS work for them. I clearly remember the prevailing sentiment during the 90s was for Apple to license Mac OS 7 to those clone makers. To do it the Microsoft way.

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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post #12 of 32
Quote:
Originally Posted by shadash View Post

Still, Apple is more profitable than both combined. Dell only made $927 million last quarter.

I wish I only made $927 million last quarter.
post #13 of 32
Quote:
Originally Posted by Ecphorizer View Post

But then there's the total cost of ownership. Companies that had near-exclusive Windows installations employed many more IT professionals than did firms who went with Macs. I worked at one Mac outfit where the highest guy in the IT department was also an upper-level R&D guy - splitting his time between managing the IT people and some hardware engineers. And the IT people were fully-trained telephone people who took care of the PBX and the rest of the phone system in addition to their Mac support jobs. And those Macs were like Timex watches - just kept working.

And Windows PCs become obsolete after 1 or two years, while the Power Mac I bought in 2001 just lost support under OS-X late last year with Snow Leopard. Still running Leopard thought. Try running Windows 7 or even Vista on on of the Pentium processors that was out back then
post #14 of 32
Quote:
Originally Posted by solipsism View Post

TCO can be a powerful motivator but you'll usually find that quarerly budgetary constraints subspesed that, not to mention Apple's business model makes it impossible for businesses to shop for the best HW options and prices for a given OS.

Without a major change to this philosophy Apple will never own rgmmte enterprise proper. It's not because they can't, it's because they choose not to.

Um, Soli, what is "supspesed" and "rgmmte?" Is your keyboard on the fritz?
post #15 of 32
That is at first, truly amazing ... then the more I think about it, it makes sense. Windows is on borrowed time and has been for a quite a while.
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post #16 of 32
Quote:
Originally Posted by digitalclips View Post

That is at first, truly amazing ... then the more I think about it, it makes sense. Windows is on borrowed time and has been for a quite a while.

I find it amazing how diverse Microsoft's portfolio is considering the "common knowledge" that they are a one trick pony.

Windows licenses generated 27% of Microsoft's revenue and 48% of their profits. For Apple 88% of their profit comes from iOS and OSX, 75% from iOS alone.
post #17 of 32
Quote:
Originally Posted by shadash View Post

Still, Apple is more profitable than both combined. Dell only made $927 million last quarter.

Oh yeah.... I know that

I was just saying that Microsoft sells a software license... while Apple sells the whole kit-n-kaboodle.

It's really no shock that Apple makes tons of money.
post #18 of 32
Quote:
Originally Posted by Michael Scrip View Post

If you buy a Mac.... Apple gets money from both the hardware sale as well as the software.

When you buy a Dell... only Dell gets the hardware sale... while Microsoft gets a small license fee for the software.

I'm not sure how this is news... but OK

I'm taking it that you never actually purchased a retail copy of Microsoft Windows. Rather than sending you out for a copy, I'll just tell you now. The retail price of Windows is considerably higher than MacOS X. In fact, OpenSTEP was considerable more expensive than MacOS X. There is absolutely no reason to believe that MacOS X is less expensive to produce than Windows. One can make the argument that MacOS X is cheaper than OpenSTEP because its higher volumes make a lower unit price possible. However, that makes it difficult to explain the order of magnitude lower price for MacOS X.

MacOS X is cheaper because hardware subsidizes the software. Apple may receive money from both hardware and software. However, the money comes from the same source and ends up at the same destination. Think of the Mac and MacOS X as a single unit. However, MacOS X has the ability to continue the cash flow between customer and Apple. Apple distributing this aftermarket revenue flow to addition streams. First came .mac/MobileMe. Now comes the Mac App Store.

The Dell example is even more intriguing. Your assertion that Microsoft gets a small license fee for software could not be more false. The most expensive component of a Windows PC is Microsoft Windows. Dell, like just about every other Windows PC manufacturer, loses money on every hardware sale. Windows PC manufacturers earn their money just like The New York Times and Seventeen magazine. It is called advertising. However, it is a special kind of advertising. The crapware that Dell ships preinstalled on your new computer pays for your computer. The last time I read the numbers, it was $70 per Desktop icon. Like any other advertiser-supported business, Dell's crappy computers are not its products. Its crappy computers are a product delivery system. Dell's products are you, the people who use its crappy computers. Dell's customers are the advertisers, the people who produce that crapware.
post #19 of 32
Quote:
Originally Posted by christopher126 View Post

I still maintain Microsoft's shoddy approach to OS design has cost people and businesses untold billions of dollars in lost productivity. I'm so happy I went Apple 20+ years ago!

Best

Hmmm...I love the Mac and all things Apple (iMac and Macbook) but I wouldn't call Microsoft's OS shoddy. Windows 7 is pretty good as is their Windows 2008 R2 server offering. OS7 to OS9 were bad as compared to Windows95 through XP. Conflict Catcher anyone? The old Mac OS did not have a modern kernel and suffered for that even though its user interface was more well thought out.

OSX is not superior to Windows 7 nor vice versa. They are both mature operating systems and both have great strengths and weaknesses. The mistake Microsoft made and didn't see coming like the rest of the industry was the flexibility of the kernel underlying OSX. You can be guaranteed to know that Windows 8 will attempt to mimic OSX in that respect. However, by then it will be too late as Android and iOS will be heavily entrenched.

When Windows 8 comes out OSX will be retired and iOS will be the single OS that Apple will use across its products from Macs to iDevices. Windows 8 will be a great OS but won't be enough to turn the tide away from Apple. Microsoft may have to embrace Apple as clients to their server offerings where they really shine, but there too is under attack by cloud computing efforts. iCloud anyone?

post #20 of 32
MSFT is trying to find the Dells and HPs of the mobile world in Nokia and RIM.
post #21 of 32
Quote:
Originally Posted by MacTel View Post

When Windows 8 comes out OSX will be retired and iOS will be the single OS that Apple will use across its products from Macs to iDevices. Windows 8 will be a great OS but won't be enough to turn the tide away from Apple. Microsoft may have to embrace Apple as clients to their server offerings where they really shine, but there too is under attack by cloud computing efforts. iCloud anyone?


The emoticon is appropriate, as you must be smoking hallucinogenics to think iOS and the cloud will replace OS X.
post #22 of 32
Quote:
Originally Posted by MacTel View Post

When Windows 8 comes out OSX will be retired and iOS will be the single OS that Apple will use across its products from Macs to iDevices.

And exactly what operating system will iOS developers use to develop iOS applications? iOS?

I know what you mean. Maybe the name OS-X will be retired but in truth OS-X and iOS will have to merge (in function if not in codebase) if Apple is to go to a single OS for all its machines and devices.
post #23 of 32
Quote:
Originally Posted by Mr. Me View Post

The Dell example is even more intriguing. Your assertion that Microsoft gets a small license fee for software could not be more false. The most expensive component of a Windows PC is Microsoft Windows. Dell, like just about every other Windows PC manufacturer, loses money on every hardware sale. Windows PC manufacturers earn their money just like The New York Times and Seventeen magazine. It is called advertising. However, it is a special kind of advertising. The crapware that Dell ships preinstalled on your new computer pays for your computer. The last time I read the numbers, it was $70 per Desktop icon. Like any other advertiser-supported business, Dell's crappy computers are not its products. Its crappy computers are a product delivery system. Dell's products are you, the people who use its crappy computers. Dell's customers are the advertisers, the people who produce that crapware.

Uhm, sounds **cough Google** familiar...
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post #24 of 32
Not really a fair comparison - profits for an all inclusive system to a software product.

What is more intersting is the increased market share that apple is getting in total sales in pcs and laptops.

24 months ago, the only apple products my friends owned were iPod and iPhone. These days, most of them have at least one macbook. While they mostly also have a couple of windows systems, they seem to use the macbook the most and will probably replace the microsoft systems with apples when they break down.

I am still trying to get them to switch to linux but with not much success.
post #25 of 32
Quote:
Originally Posted by Mr. Me View Post

The Dell example is even more intriguing. Your assertion that Microsoft gets a small license fee for software could not be more false.

What are you smoking, this is actually the case.

Quote:
The most expensive component of a Windows PC is Microsoft Windows. Dell, like just about every other Windows PC manufacturer, loses money on every hardware sale.

Now, I know you're smoking really hard.

Quote:
Windows PC manufacturers earn their money just like The New York Times and Seventeen magazine. It is called advertising. However, it is a special kind of advertising. The crapware that Dell ships preinstalled on your new computer pays for your computer. The last time I read the numbers, it was $70 per Desktop icon.

70 bucks per pc per icon? What kind of nutty business is that? Do you think that every PC buyer is worthy 70 bucks for the advertiser? To (most probably not) buy a software that is priced at 30 bucks? What kind of weed are you fucking smoking man? You're so wrong by orders of magnitude it isn't funny.

Quote:
Like any other advertiser-supported business, Dell's crappy computers are not its products. Its crappy computers are a product delivery system. Dell's products are you, the people who use its crappy computers. Dell's customers are the advertisers, the people who produce that crapware.

Man, you should quit the drugs. Seriously.
post #26 of 32
Quote:
Originally Posted by Suddenly Newton View Post

... I clearly remember the prevailing sentiment during the 90s was for Apple to license Mac OS 7 to those clone makers. To do it the Microsoft way.

Ah, more John C. Dvorak memories.

Quote:
Power Computing, based in Milpitas, Calif., plans to begin shipping mail-order Macintosh Power PC clone computers for as little as $1,000 each in March or April of next year, far sooner than anyone, including Apple, had expected.

"Apple is not going to know what hit them," said John C. Dvorak, a computer columnist at MacUser magazine.



http://www.nytimes.com/1994/12/29/bu...mpetition.html
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post #27 of 32
Quote:
Originally Posted by anwaar32007 View Post

MSFT is trying to find the Dells and HPs of the mobile world in Nokia and RIM.

Perhaps, since it's consistent with their traditional business model. The fact it's an old, rapidly dying business model is no surprise.

MSFT made ludicrous amounts of money from licensing its OS to anyone who built a PC from the cheapest garbage components available (Dell's business model). As I recall it was on the order of $50 per machine (but might have been as much as $199).

As long as Android is an option no handset maker will ever be able to bear any significant costs for its OS.
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post #28 of 32
Quote:
Originally Posted by ranReloaded View Post

Uhm, sounds **cough Google** familiar...

There is a huge difference between Google and Dell--at least in my experience. Google does not have a cover price. Also nothing from Google [that I use] falls apart under ordinary use while sitting on a table.
post #29 of 32
Quote:
Originally Posted by MacTel View Post

Hmmm...I love the Mac and all things Apple (iMac and Macbook) but I wouldn't call Microsoft's OS shoddy. Windows 7 is pretty good as is their Windows 2008 R2 server offering. OS7 to OS9 were bad as compared to Windows95 through XP. Conflict Catcher anyone? The old Mac OS did not have a modern kernel and suffered for that even though its user interface was more well thought out.

OSX is not superior to Windows 7 nor vice versa. They are both mature operating systems and both have great strengths and weaknesses. The mistake Microsoft made and didn't see coming like the rest of the industry was the flexibility of the kernel underlying OSX. You can be guaranteed to know that Windows 8 will attempt to mimic OSX in that respect. However, by then it will be too late as Android and iOS will be heavily entrenched.

When Windows 8 comes out OSX will be retired and iOS will be the single OS that Apple will use across its products from Macs to iDevices. Windows 8 will be a great OS but won't be enough to turn the tide away from Apple. Microsoft may have to embrace Apple as clients to their server offerings where they really shine, but there too is under attack by cloud computing efforts. iCloud anyone?


While I will support your assertion that Win7 is a well-developed OS, it is still running the embedded NT structures that hamper it. It runs them better than any of it's predecessors, but it is a far cry from the alternative that was Longhorn. Microsoft has a developmental Achille's heel in that it depends so heavily on its corporate market - which slows down its ability to innovate on its OS. So instead of an aggressive rewrite, they must do these incremental updates that slowly pull in the various strengths of Longhorn instead of a major rewrite (that was MacOS X for example). Whether they can switch kernels to use the Longhorn kernel remains to be seen. Longhorn would be the right path and was, more than five years ago when they first introduced it.

Apple will continue to drive as much convergence as they can over time between iOS and MacOS. And I would disagree that MacOS and Win7 are equivalent. The core elements are widely differentiated and the MacOS is an order of magnitude more scalable and flexible than Win7.
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post #30 of 32
Quote:
Originally Posted by fecklesstechguy View Post

While I will support your assertion that Win7 is a well-developed OS, it is still running the embedded NT structures that hamper it. It runs them better than any of it's predecessors, but it is a far cry from the alternative that was Longhorn. Microsoft has a developmental Achille's heel in that it depends so heavily on its corporate market - which slows down its ability to innovate on its OS. So instead of an aggressive rewrite, they must do these incremental updates that slowly pull in the various strengths of Longhorn instead of a major rewrite (that was MacOS X for example). Whether they can switch kernels to use the Longhorn kernel remains to be seen. Longhorn would be the right path and was, more than five years ago when they first introduced it.

Apple will continue to drive as much convergence as they can over time between iOS and MacOS. And I would disagree that MacOS and Win7 are equivalent. The core elements are widely differentiated and the MacOS is an order of magnitude more scalable and flexible than Win7.

Can you quantify by what you mean "hamper it"? The last thing MS would do is rewriting the NT kernel because it makes no sense whatsoever. Rewriting a kernel is an attempt in suicide. They have updated the NT kernel, removed dependences and made it much more modularized with Windows 7 as part of the MinWin efforts. The NT kernel in Longhorn IS part of the updated Windows Vista and Windows 7.

Exactly what makes Mac OS X more scalable and flexible? By what criteria do you make that assertions? Since Windows run on thousands and thousands of whatever PC configurations you can throw at it and including Mac computers, does that not make Windows more scalable and flexible?
post #31 of 32
Quote:
Originally Posted by KevinN206 View Post

Can you quantify by what you mean "hamper it"? The last thing MS would do is rewriting the NT kernel because it makes no sense whatsoever. Rewriting a kernel is an attempt in suicide. They have updated the NT kernel, removed dependences and made it much more modularized with Windows 7 as part of the MinWin efforts. The NT kernel in Longhorn IS part of the updated Windows Vista and Windows 7.

Exactly what makes Mac OS X more scalable and flexible? By what criteria do you make that assertions? Since Windows run on thousands and thousands of whatever PC configurations you can throw at it and including Mac computers, does that not make Windows more scalable and flexible?

I just love it when Microsoft fanboys shout "We have that, too!" whenever the features of MacOS X are pointed out to them. Microsoft should have done what Apple did. Chuck the old and replace it with a Unix-based kernel. Microsoft has had Unix since the 1970's. It has Unix now. Only its fear of admitting the defeat of its current strategy prevents it from doing the restart that it sorely needs. Ditch NT and the Linux and MacOS X/UNIX community will howl in laughter and glee.

What Microsoft does not understand is it still has some goodwill and a huge installed base. If it made the switch to a Unix-based OS, then its ardent supporters would adapt. I can see them shouting down critics with assertions that Microsoft Unix is the best Unix there ever was. However, its insistence on adding modernity to its creaking software only postpones the inevitable. In the meantime, Apple has zoomed past Microsoft in terms of market capitalization. Apple is working from a script that has it watch Microsoft fade in its rearview mirrors. As it loses influence, Microsoft also faces the prospect of direct plays for its bread and butter from the likes of Google with its Chrome OS.

Windows Vista? Windows 7? Windows 8? Nobody but the fanboys care anymore. Judging by the number of fanboys like you on this and other Mac forums, the time is coming when Microsoft will no longer be able to count on even them.
post #32 of 32
Mr me that didn't really answer any question of how windows's kernal is hampering it. I like Win7 and OS X fairly equally and when I use them on my iMac it would be hard to say that one was better than the other. Neither is faster and neither has any real superior features (although I'm a big fan of snap in win7). So personally I don't understand why they need to change the kernal. Can anyone give an actual serious answer?
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