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Apple may make more profit selling one Mac than HP does from 7 PCs

post #1 of 188
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Apple has a tall order ahead of it if the company ever plans to challenge some of its larger rivals in personal computer market in terms of volume shipments, but the profit the Mac maker currently takes home from the sale of each system may already be enough to spook its competition.

In a blog post titled "A Consequence of Losing the PC Wars," high school student and amateur tech journalist Matt Richman performed basic number crunching in comparing Apple's profit margin from the sale of Macs to that of Hewlett-Packard PCs.

The results are striking.

Richman recalled that Apple amassed $4.976 billion in revenue from the sale of 3.76 million Macs during its previous quarter, yielding an average selling price of $1,323.40 per Mac. He then multiplied that figure by a 28% gross margin estimate for Mac sales from Jefferies & Co. -- which is still several hundred basis points below the company's reported average -- to arrive at a profit of $370.55 per Mac sold.

By comparison, HPs Personal Systems Group brought in $9.415 billion in revenue and turned a profit of $533 million last quarter. The PC maker's operating margin, which doesnt factor in overhead costs, came in at 5.66%.

"If we assume they spent 1% of their $9.415 billion in revenue $94.15 million on operations, then their profit margin was 6.66%," Richman wrote. "But lets give them the benefit of the doubt and make it 8%."

Given that the average selling price of Macs increase 5.71% over the previous two quarters, he applied growth rate to data published by market research firm NPD, which identified the average selling price of PCs in November as $615, to reach a current average selling price of $650.12.



With an average selling price of $650 and a generously-calculated profit margin of 8 percent, HP would be making approximately $52 on the sale of each PC, meaning "Apple makes more money from the sale of one Mac than HP does from selling seven PCs."

"Numbers like these have to scare the hell out of Apples competition," wrote the Loop's Jim Dalrymple, who was first to draw attention to Richman's revelation.
post #2 of 188
This only shows how Apple makes their products too expensive.
post #3 of 188
Quote:
Originally Posted by ClemyNX View Post

This only shows how Apple makes their products too expensive.

Yes. Apple sells more and more of them EVERY. FREAKING. QUARTER., so they're OBVIOUSLY too expensive.

It couldn't possibly be because of their higher quality, better software, and ease of use. No, they sell a lot of them (and they sell MORE lots-of-them every year) because they're "too expensive".

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post #4 of 188
Oh, no, there's no Apple tax, is there? This is great for shareholders and the fan base, but it stinks for people who want to simply by the machines and use them.
post #5 of 188
Quote:
Originally Posted by Tallest Skil View Post

Yes. Apple sells more and more of them EVERY. FREAKING. QUARTER., so they're OBVIOUSLY too expensive.

It couldn't possibly be because of their higher quality, better software, and ease of use. No, they sell a lot of them (and they sell MORE lots-of-them every year) because they're "too expensive".

Just because they sell these things (with like a 9% market share) does not mean they are fairly priced. They are expensive, and that is reflected in the market share.
post #6 of 188
post #7 of 188
Since HP sells a lot more computers, this isn't really a fair comparison. The question we can't answer from the public data is if you take the most profitable N computers HP sold, where N is the number of computer Apple sold, how does the profitability compare? Apple can't scale well because they put so much effort into their unibody aluminum case construction, etc., while HP can shovel thousands of plastic hunks to businesses.
post #8 of 188
What about the operating systems? I am sure that HP is having to pay for Windows where as Apple is including the operating system for free.
post #9 of 188
Quote:
Originally Posted by AppleInsider View Post

[...] "Apple makes more money from the sale of one Mac than HP does from selling seven PCs." [...]

Apple is the world's 4th largest personal computer maker by sales volume, and I think they're happy with that. Especially since they are the #1 personal computer maker by profit share.

http://www.businessinsider.com/apple-pc-share-2011-4


And although I have zero inside information, I'm pretty sure everybody at Apple is tickled pink by the fact that Mac sales have increased much faster than the personal computer market overall. Despite the global recession.

http://tech.fortune.cnn.com/2011/05/...ng-everywhere/

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post #10 of 188
Quote:
Originally Posted by xSamplex View Post

Oh, no, there's no Apple tax, is there? This is great for shareholders and the fan base, but it stinks for people who want to simply by the machines and use them.

That explains why Apple customers are so unhappy.
post #11 of 188
Quote:
Originally Posted by ClemyNX View Post

This only shows how Apple makes their products too expensive.

You get what you pay for. I'd rather pay a premium for a quality product than go the cheap route in the short term but pay for it in the long run (virus, software, time lost, upkeep, etc.)
post #12 of 188
HP is giving away computers so it can get its profit from selling services, accessories, software, and inks and toners.

Apple get high margin from hardware but gives out free software and services like iCloud for free or at minimum cost.
post #13 of 188
There is an old saying in business :

Turnover and Marketshare is Vanity, Profit is Sanity.

all you goshites who complain about the price, please go over to the BMW and Ferrari forums and complain bitterly that you cant afford their products either. Like, why dont ferrari sell their cars for £40,000, because I want one?

Muppets Muppets Muppets.

Envy is a terrible Monster
post #14 of 188
Apples revenue streams are not only on computers alone so I take that article with a grain of salt since they are also into telephone communications (mobile), TV, iPads and online stores and software.
post #15 of 188
Quote:
Originally Posted by Tallest Skil View Post

Yes. Apple sells more and more of them EVERY. FREAKING. QUARTER., so they're OBVIOUSLY too expensive.

It couldn't possibly be because of their higher quality, better software, and ease of use. No, they sell a lot of them (and they sell MORE lots-of-them every year) because they're "too expensive".

Please don't try to reason with these people. They have absolutely no concept of supply and demand. They will never understand the math that says that Apple has doubled its market share over the last 10 years and continues to sell more computers on a percentage basis than a) the industry average and b) any other computer manufacturer.

The people you are arguing with have no concept of running a business. They prove over and over again that they would rather work twice as many hours for the same amount of money as what another person receives for offering a superior service.

How can you ever hope to get through to them.
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post #16 of 188
Quote:
Originally Posted by xSamplex View Post

Just because they sell these things (with like a 9% market share) does not mean they are fairly priced. They are expensive, and that is reflected in the market share.

Actually it means exactly that. The only judgement of whether something is priced fairly is whether a buyer and a seller agree on the transaction. Macs are too expensive for much of the market, but fairly priced for another part of the market.

BMWs are fairly priced, Hondas are fairly priced, scooters are fairly priced. They are all means of conveyance, priced very differently, but all fair.
post #17 of 188
Not sure what to make of this observation.
Porsche makes more profit from the sale of each vehicle than Ford makes from the sale of each one of theirs, and? The respective companies, computer and automotive, occupy different market niches.
post #18 of 188
Quote:
Originally Posted by xSamplex View Post

Just because they sell these things (with like a 9% market share) does not mean they are fairly priced. They are expensive, and that is reflected in the market share.

So the only way to fairly price a product is so you are selling it at margins where the company is better off simply selling the division away? (IBM, and their Thinkpads).

This analysis is incomplete. The reason HP has such lower margins are the following:

1) No differentiation. Dell, and a range of cheap Chinese manufacturers sell the exact same product HP does. HP can ONLY compete on price, leading to a race to the bottom. A consequence is 0 to no ability to innovate, or invest in R&D.
2) Apple does NOT sell low priced computers. If you only compare margins of HPs $1000+ laptops/desktops vs margins of Apple's computers, they will be similar. HP's margins are dragged down because the majority of computers they sell are the cheap <$500 ones, which literally have no margins. A market in which Apple does not compete.

The obvious rejoinder is the Mac Mini, but I will agree that the Mini is overpriced. The Mini is essentially Apple's way of offering Mac OS X at a cheap price point (intended largely for enthusiasts, small scale servers, and developers). IOW, the Mini is intended to be a niche device, and niche devices almost always more expensive than mass consumption devices.
post #19 of 188
Quote:
Originally Posted by xSamplex View Post

Just because they sell these things (with like a 9% market share) does not mean they are fairly priced. They are expensive, and that is reflected in the market share.

It's very simple: Apple sells Macs at the "price the market will bear". They're not too expensive for me so I buy them and I don't bitch about how I consider HP's products to be shoddy. If Macs are too expensive for you, buy something else and be happy about it! There's nobody forcing you to spend your hard-earned money on Macs, right?
post #20 of 188
macs may be expensive, but they are not overpriced. apple is only in the business of making premium computers so you cannot compare a mac to an entry level hp, or dell, or any other oem. if you compare a mac to another premium computer you will find that they are fairly priced. anyhow i would rather pay a little extra for a mac knowing the profit apple makes off me will go to research in innovation and new products whereas hp will just pocket your money and continue to put out crap
post #21 of 188
What profit margin does MS make on the OS?
post #22 of 188
... and you have to pay a big stinking fee to Microsoft every time you need to upgrade Windows. Not nearly so expensive with MacOSX. Not to mention the outrageous costs for upgrading mainline programs such as Office on Windows.

To me, I will gladly plunk down some extra money --it's not that much when you look at the overall costs. In fact to me it is a much better bargain, not to mention a much more friendly and intuitive environment. Plus I know I am fueling Apple's R&D for more and better stuff all the time.
post #23 of 188
Quote:
Originally Posted by ClemyNX View Post

This only shows how Apple makes their products too expensive.

http://en.wikipedia.org/wiki/Invisible_hand

Which is why some people don't buy. It's also why Apple's doing so well as a profitable business. Every product is 'too expensive' for some, and 'just right' for others. It's a pretty basic business decision of optimizing the price point to maximize profits between the 'too expensives' and the 'just rights'. Doing otherwise would make little business sense.

It helps to imagine what you would do if you were the owner of a business and wanted to be financially successful. Once the optimal price point is found, the business' job is then to find ways to do things like cut costs, make new or better products (innovate), etc.

/economics101

You did not come into the world to fail. You came into the world to succeed.

- Gordon Hinckley

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You did not come into the world to fail. You came into the world to succeed.

- Gordon Hinckley

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post #24 of 188
Quote:
Originally Posted by delreyjones View Post

It's very simple: Apple sells Macs at the "price the market will bear". They're not too expensive for me so I buy them and I don't bitch about how I consider HP's products to be shoddy. If Macs are too expensive for you, buy something else and be happy about it! There's nobody forcing you to spend your hard-earned money on Macs, right?

ah - beat me to it!

You did not come into the world to fail. You came into the world to succeed.

- Gordon Hinckley

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You did not come into the world to fail. You came into the world to succeed.

- Gordon Hinckley

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post #25 of 188
Quote:
Originally Posted by winstein2010 View Post

HP is giving away computers so it can get its profit from selling services, accessories, software, and inks and toners.

If that's HP's brilliant "strategy" in the PC market, they'd better hope Apple doesn't get into the "accessories, software, inks and toners" business. Because if they do, HP is pretty much toast outside of the corporate infrastructure sector, where they face heavy competition from IBM and Oracle.
post #26 of 188
Quote:
Originally Posted by Journojulz View Post

What profit margin does MS make on the OS?

We don't know exactly because MS don't break out margins from OS as separate from applications, but their gross margin is about 65%.
post #27 of 188
That "blog post" was written by a 15 year old.

It compares Apple to a single Windows PC vendor. Compare it to all of them and see if volume ends up making more money?

Writing a blog post off of another blog post written by a 15 year old makes the "AI staff" look like a collection of Morons.
post #28 of 188
Quote:
Originally Posted by island hermit View Post

How can you ever hope to get through to them.

Because not trying at all is a failure on my part. Trying but failing to get through to them is a failure on THEIR part.

Quote:
Originally Posted by bettieblue View Post

That "blog post" was written by a 15 year old.

It compares Apple to a single Windows PC vendor. Compare it to all of them and see if volume ends up making more money?

I'm not surprised you didn't hear the WHOOSH of this article going over your head; set to appropriate scale, it's flying up around Jupiter's Trojan asteroids.

Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
Reply

Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
Reply
post #29 of 188
Quote:
Originally Posted by bettieblue View Post

It compares Apple to a single Windows PC vendor.

HP is the biggest PC vendor in the US - with 30% of the market. So if Apple is making more money than HP in the computer business then yes, that's pretty significant.



We can expect Apple to be doing even better in 2011 since it has outgrown the industry in each quarter since 2009, and the Air has most likely resulted in an increase in margins.
post #30 of 188
Quote:
Originally Posted by shovelheadrider72 View Post

What about the operating systems? I am sure that HP is having to pay for Windows where as Apple is including the operating system for free.

Irrelevant.

Apple's R&D expenses (which would include the cost to develop OS X) are deducted from the gross margin before you get net income. R&D is a line item in their quarterly SEC filings.
post #31 of 188
6.66% - The profit margin of the beast ?
post #32 of 188
Huh? Apple is including their OS as part of the cost of the computer, and they don't get that OS for free - they are paying millions and millions in R&D costs to continue developing MacOS every year.



Quote:
Originally Posted by shovelheadrider72 View Post

What about the operating systems? I am sure that HP is having to pay for Windows where as Apple is including the operating system for free.
post #33 of 188
Quote:
Originally Posted by bettieblue View Post

That "blog post" was written by a 15 year old.

It compares Apple to a single Windows PC vendor. Compare it to all of them and see if volume ends up making more money?

Writing a blog post off of another blog post written by a 15 year old makes the "AI staff" look like a collection of Morons.

Definitely
post #34 of 188
Fair is what the market will support. I have Macs that are 10yrs old and still running without an issue. I have sold Macs that are 10yrs old and they have no issues. The only reason I updated to intel was due to my business, and most of the apps I use will now run only on Intel. As long as I continue to receive this type of performance from Mac, I will continue to purchase.

In real dollars for me, Macs have gotten cheaper. I used to have run a Dual G5 for my business, now, because of the new iMacs, are all I need. This has easily saved me 1k on just one computer. The G5 at this time is functioning as a media server, but can handle so much more.

It is my experience that pound for pound, dollar for dollar, Macs are more than fair value.
post #35 of 188
Quote:
Originally Posted by bettieblue View Post

That "blog post" was written by a 15 year old.

It compares Apple to a single Windows PC vendor. Compare it to all of them and see if volume ends up making more money?

Writing a blog post off of another blog post written by a 15 year old makes the "AI staff" look like a collection of Morons.

If you read and comprehended the article, you would understand the folly of your post. HP is likely the next most profitable PC maker, add in Dell and Acer and the ratio would go up...
post #36 of 188
Quote:
Originally Posted by Setanta View Post

6.66% - The profit margin of the beast ?



Retail Price "of the Beast".

Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
Reply

Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
Reply
post #37 of 188
Quote:
Originally Posted by island hermit View Post

Please don't try to reason with these people. They have absolutely no concept of supply and demand. They will never understand the math that says that Apple has doubled its market share over the last 10 years and continues to sell more computers on a percentage basis than a) the industry average and b) any other computer manufacturer.

The people you are arguing with have no concept of running a business. They prove over and over again that they would rather work twice as many hours for the same amount of money as what another person receives for offering a superior service.

How can you ever hope to get through to them.

Correct.

A certain percentage of readers here have zero understanding of the fundamentals of running a business, and will conveniently suspend the laws of physics in order to promote something they wish.

They don't understand that it's the overall marketplace that Apple looks at and how to address it, not just their individual usage case which is statistically irrelevant.
post #38 of 188
There is an obvious solution to HP's problem. All they have to do is raise their prices. Certainly, all of their loyal customers, (clients) will be happy to pay Apple prices for those fine HP products.
Apple has no competition. Every commercial product which competes directly with an Apple product gives the distinct impression that, Where it is original, it is not good, and where it is good, it...
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Apple has no competition. Every commercial product which competes directly with an Apple product gives the distinct impression that, Where it is original, it is not good, and where it is good, it...
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post #39 of 188
Quote:
Originally Posted by Tallest Skil View Post


Retail Price "of the Beast".

That logo tells me that making computers wasn't the only thing that the two Steves were doing in that garage ...
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post #40 of 188
Apple tax? I'm pretty sure Microsoft makes more selling each copy of Windows than Apple does with their OS. C'mon.
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