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

Posted:
in General Discussion edited January 2014
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, HP?s 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 doesn?t 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 let?s 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 Apple?s competition," wrote the Loop's Jim Dalrymple, who was first to draw attention to Richman's revelation.
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Comments

  • Reply 1 of 190
    clemynxclemynx Posts: 1,501member
    This only shows how Apple makes their products too expensive.
  • Reply 2 of 190
    tallest skiltallest skil Posts: 43,399member
    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".
  • Reply 3 of 190
    xsamplexxsamplex Posts: 214member
    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.
  • Reply 4 of 190
    xsamplexxsamplex Posts: 214member
    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.
  • Reply 5 of 190
    whozownwhozown Posts: 128member
  • Reply 6 of 190
    boogabooga Posts: 1,075member
    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.
  • Reply 7 of 190
    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.
  • Reply 8 of 190
    sockrolidsockrolid Posts: 2,788member
    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/
  • Reply 9 of 190
    cameronjcameronj Posts: 2,357member
    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.
  • Reply 10 of 190
    supremesupreme Posts: 31member
    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.)
  • Reply 11 of 190
    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.
  • Reply 12 of 190
    seanie248seanie248 Posts: 174member
    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
  • Reply 13 of 190
    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.
  • Reply 14 of 190
    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.
  • Reply 15 of 190
    cameronjcameronj Posts: 2,357member
    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.
  • Reply 16 of 190
    sddavesddave Posts: 24member
    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.
  • Reply 17 of 190
    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.
  • Reply 18 of 190
    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?
  • Reply 19 of 190
    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
  • Reply 20 of 190
    What profit margin does MS make on the OS?
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