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Apple sees more profit per OS user than Microsoft

post #1 of 63
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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.
post #2 of 63
Wow, Munster is a great analyst. I would never have figured this out! Hail Munster!
post #3 of 63
Of course, add in the costs on each platform to keep the machine *running*, much less *current*.

That's the true cost of ownership.
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post #4 of 63
What is this idiot doing! Mr. Munster is trying desperately to keep the myth strong that Apple is Way more expensive than PCs. And that the tremendous delays in Microsoft's ability to release a working OS, is actually because M$ are a bunch of good guys looking out for our spending concerns! WoW! This makes Shaw WU look like a genius! I wonder how much M$ paid Munster to say that useless crap. Or they just told him they would "make him go away" if he did not comply.
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post #5 of 63
Mr. Munster writes "an average of $107 per year to keep current" as compared to "$48 per year", but the release rate from Apple is 2.25 times that of MS. Are you stupid or...?
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 )!
post #6 of 63
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.
post #7 of 63
I wonder where they get there 2.25 yr upgrade cycle for Windows. Since 2000, there have been two updates, making that three years average between updates. Also not accounted for is how many do upgrade their OS. I have several Windows 2000 computers and only one Windows XP computer because that's what they came with. XP has some advantages over 2000, but they are generally slight enough to avoid if there is no software that requires XP to operate.
post #8 of 63
One can safely avoid every other 10.x update. Someone on 10.3.9 right now isn't losing all that much. The only reasons to upgrade are programs using the latest APIs (CoreEverything), and the newer features (Spotlight, Dashboard, etc.).

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.
post #9 of 63
Notes:

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.)
post #10 of 63
Quote:
Originally Posted by Carson O'Genic

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.
post #11 of 63
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.
post #12 of 63
os x is free with new computer purchases.....
post #13 of 63
Quote:
Originally Posted by mariofreak85

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?
post #14 of 63
Quote:
Originally Posted by Placebo

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?
post #15 of 63
Quote:
Originally Posted by jonnyboy

os x is free with new computer purchases.....

Windows XP is free with new computer purchases
post #16 of 63
Quote:
Originally Posted by jonnyboy

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.
post #17 of 63
Quote:
Originally Posted by Chucker

Windows XP is free with new computer purchases


The PC I bought came with Lindows
post #18 of 63
Quote:
Originally Posted by mariofreak85

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.
post #19 of 63
Also... this guy's an analyst, and he doesn't know the difference between revenue and profit?

Oy.
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post #20 of 63
So what about the cost of anti-virus, firewall, ...

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.
post #21 of 63
What Munster left out.

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.
post #22 of 63
Oops. Macs don't require virus protection... My mistake....
post #23 of 63
If they're going to include all versions of OS-X, they need to include Windows 2000 as well. The other thing they aren't doing is using the cost of the Professional versions of the Windows OSes, which are more comparable to the OS-X releases than the "Home" versions they use in their analysis.

And they never actually talk about true profit, only revenue... so the headline is misleading.
post #24 of 63
What about the Windows Vista pricing? They are going to raise the pricing, has anyone seen their pricing model? It is ridiculous.
post #25 of 63
Quote:
Originally Posted by drblank

Oops. Macs don't require virus protection... My mistake....


Windows doesn't require it either. On any windows machine I have ever owned I never put anti-virus software on there, and I've never had a problem with a virus, but then again I'm not an idiot who opens up all those odd email attachments. I find it easier to create a restore CD and just wipe my computer clean every few moths. Windows tends to get bogged down pretty quickly with spyware and things.
post #26 of 63
Quote:
Originally Posted by mariofreak85

The PC I bought came with Lindows

My most sincere condolences.
post #27 of 63
Quote:
Originally Posted by Chucker

My most sincere condolences.


Ha ha, no worries, it was SUPER cheap and and just erased it and put a copy of windows on it.

The only reason I bought it was so I didn't have to deal with the slowness of virtual PC
post #28 of 63
Quote:
Originally Posted by mariofreak85

Windows doesn't require it either. On any windows machine I have ever owned I never put anti-virus software on there, and I've never had a problem with a virus, but then again I'm not an idiot who opens up all those odd email attachments. I find it easier to create a restore CD and just wipe my computer clean every few moths. Windows tends to get bogged down pretty quickly with spyware and things.

We're talking about an average home user here. Not you or I. And Joe Schmoe needs a yearly anti-virus and anti-spyware subscription. Otherwise he's paying some pro $100 every 6 months to clean off the computer.
post #29 of 63
.... to take a deep breathe, instead of "saying his clients" that Apple costs to a user much more than Microsoft per year.

Poor Mr. Munster's clients, I sincerely hope they know some math rudiments ("update once a year".... ) and they have the gift of sight so they can read about astonishing M$ delays, M$ vulnerabilities etc. etc. .

Or, maybe he's right! Actually, with a sooooo-low cost per year, a M$ user HAS to suffer incredible diseases with his PC. Maybe it's written in a little part of the Windows' EULA...
(I can still remember when, 2-3 years ago, a W2000 user like me couldn't reach the Windows Update site to download the patch for that damned threat that was infecting ANY PC not provided with a firewall protection.....).
Luca
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post #30 of 63
Quote:
Originally Posted by ZachPruckowski

We're talking about an average home user here. Not you or I. And Joe Schmoe needs a yearly anti-virus and anti-spyware subscription. Otherwise he's paying some pro $100 every 6 months to clean off the computer.


true dat. I've gone to fix some of my friends computers and they take about 20 minutes to start up because of all the $h!t that they "accidentally" install. I keep telling them to read the message BEFORE they click the OK button that installs the spyware, but they never listen.
post #31 of 63
Apple does make more money per user than MS in the OS market simply because they periodically come out with a major new version that has sufficient features for Mac users to reach for their credit card. (I get the family pack and will upgrade to Leopard when it's available.) MS, on the other hand has two real problems.

The first is that they cannot get a major new version out the door often enough new, exciting features to come close to Apple in consumer upgrades. The other is that too many users don't worry about the new version. If 95, 98 or XP Home works OK for them they'll stay with that. Good thing too, as most of these older (2 years old or so) and cheaper PCs won't run Vista very well.

Now throw in the huge percentage of business users who are not going to jump at Vista. They'll take a long time to review it and then will probably stick with what they have for a few years or so.

Basically new versions of Windows gets "market share" by consumers purchasing new computers that have it installed. I just don't see long lines waiting to buy Vista when it went on sale at midnight, like they did for 95. Those days are over.

Not a good situation for MS.
Ken
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post #32 of 63
i've never seen a dumber and more pointless observation EVER!!!
post #33 of 63
Quote:
Originally Posted by Elixir

i've never seen a dumber and more pointless observation EVER!!!

The sky is blue. But it has white clouds. And it's red at night. Therefore, the sky is pro-American. And since God decides the color of the sky, He likes the USA best. So vote Republican!!1!!eleven!1!

(Do I win?)
post #34 of 63
Quote:
Originally Posted by dacloo

Wow, Munster is a great analyst. I would never have figured this out! Hail Munster!

Interesting, how did what he stated seemed obvious?. Gravity is obvious but not until Newton pointed it out. The earth is round is pretty obvious to us unless you were living in 12th century BC. Lots of things are obvious when someone already has done the thinking for you. Heck, that fact that 2 squared = 4 is pretty obvious too (ask the stoneage people). The fact that modern mathematics would not exist without 0 is obvious.. why those damn arabians invented it is a mystery. They should have just not invented 0, after all, it was an obvious thing already.

It always amuses me when apple fans get upset cause the ownership cost of apple computers is higher. SO WHAT?. What's the problem?..

To others in the thread.

The analyst was not stating the ownership cost for every macosX owner.. or even for a typical mac owner. He merely pointed out that apple revenue per user is higher cause they have more upgrades and every upgrade, someone purchases them. The statement is true. Regardless of whether you or anyone do not upgrade as often is irrelevant. Apple revenue per user is still higher (therotically.. i don't believe he actually predicted or even stated apple realized revenue due to their os). You can't have your cake and eat it too..
when apple comes out with an upgrade, the community crows about how successfull it is.. "look at the number of people upgrading" they say.. then when somoeone points out that all those people upgrading implies the cost of mac osX is greater, we all smugly state "Well, you don't have to upgrade every time".. Sure you don't. Then just be prepared to see articles that state "Apple upgrade process not going smoothly.. users tired of paying for upgrades yearly, apple revenue falls, apple stock rating underperform. Advise client to hold or sell". I wonder what then if that headline came out.. Wow, you are happy when everyone upgrades and the rosy news of apple revenue comes out.. but pissed when someone points out that implies that apple makes more per user than windows.. hmmmm.
post #35 of 63
Quote:
Originally Posted by Elixir

i've never seen a dumber and more pointless observation EVER!!!

Maybe because PiperJaffray's Munster made a pointless (numerically wrong, too) analysis?

And, for those who say that Mac users get angry when the "Microsoft-is-cheaper-that-Apple" flag is raised to the wind, I simply say that I prefer to pay "such" a price and obtain a product like Mac OS X, than have something like... ehm.... Vista?

The last word: well, I'd prefer that even a LITTLE PART of those Apple's extra earnings would go to a much intense and deeper analysis of the upcoming products, to avoid the last annoying troubles of the Rev.A hardware that we all know.

This would be a GREAT target to reach, for Apple.

Bye!
Luca
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post #36 of 63
Quote:
Originally Posted by wnurse

It always amuses me when apple fans get upset cause the ownership cost of apple computers is higher. SO WHAT?. What's the problem?..

The problem is that it isn't true. It always amuses me that people are so blind that they can't see that paying someone to fix your computer *IS* part of the ownership cost, just as paying an auto repair shop to keep a piece of crap running *IS* part of the ownership cost. What's that you say? You don't pay anyone, you do it yourself? I'm sorry to hear your time is worthless.

Factor in the total cost of ownership, and Macs have been ahead of the game damned near their entire existence... but no, some yahoo points at the price tag and conveniently forgets about the costs down the road that they're getting themselves in for by going with the cheap competition. You get what you pay for.

With the latest round of hardware and pricing, not only is the TCO lower, but the *entry* cost is competitive.

And the hardcore Windroids and Linuxheads hate that. They can't point at the sticker price any more, so they have to come up with garbage like that 'analysis'. Lame.
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post #37 of 63
Apple is able to do this because they are consistently offering value to their customers. Upgrading is an option that I have always chosen because the cost divided by the hours of usage has always been well worth it.

Microsoft has given me no such option for the past 5+ years.

There are little things that over time are worth $$$. For example, Microsoft could've copied the way Apple has the sidebar and incorporated the feature in every open/save/explorer window. They could've done just that and called it XP2 and I would've gladly paid for that. There are like a million little things like that where it's obvious Windows XP was never fully fleshed out before release, that Microsoft could've spent a tiny fraction of R&D on to improve and offer users the option of upgrading.

Meanwhile my Mac keeps getting faster, easier to use, and capable of doing more each year with OS upgrades and new versions of iLife, and it only costs a little in upgrade fees.
post #38 of 63
I would hardly call this guy a 'Windroid' or 'Linuxhead'.

Quote:
Factor in the total cost of ownership, and Macs have been ahead of the game damned near their entire existence...

Got any data to back that up?
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post #39 of 63
Quote:
Originally Posted by mariofreak85

Windows doesn't require it either. On any windows machine I have ever owned I never put anti-virus software on there, and I've never had a problem with a virus, but then again I'm not an idiot who opens up all those odd email attachments. I find it easier to create a restore CD and just wipe my computer clean every few moths. Windows tends to get bogged down pretty quickly with spyware and things.

Then either you never go on the internet while in Windows, and never accept a file from anyone else, or you are the luckiest guy around.

There are many "flyby" sites that drop viruses, Trojan horses, spyware, and robots without you knowing. That is a big problem.

Opening email is only one way to get infected.
post #40 of 63
Quote:
Originally Posted by melgross

Then either you never go on the internet while in Windows, and never accept a file from anyone else, or you are the luckiest guy around.

There are many "flyby" sites that drop viruses, Trojan horses, spyware, and robots without you knowing. That is a big problem.

Opening email is only one way to get infected.

Generally the quickest way to avoid that stuff is to run Opera or Firefox.

I do run a firewall which happens to prevent unauthorized programs from running too, so that's helpful but those that aren't computer savvy might not understand it or accept that type of program.
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