Margins in the 40% range are very good for a company selling physical goods.
But they pale in comparison to the margins over at Google (average of 61% for the past 10 years) or Microsoft (average approaching 70% and a record high of 80%). Yet I don't see anyone giving them a hard time about how much money/profit they're raking in.
You beat me to it. I was going to comment that those who vilify Apple on it’s enormous pile of profits have the choice of buying a Windows setup on Microsoft hardware where the combined total of their purchases hands 70% margins to Microsoft. Where’s the beef?
Is this report talking about gross margins or profit margins? Do you have a comparison of average selling prices over time?
Meaningless to to this discussion. When Dodge started selling the 12-cylinder Viper it would have had a positive effect on ASPs. But it offered a lot more power and sportiness. Apples latest iPhones offer a lot more performance and capabilities versus previous generations. You’d expect ASPs to climb. Gross margins is where the comparison should lay, and this article does a good job pointing out how they have not significantly moved during Cook’s tenure.
There is gross margin, which, after the crisis period after Jobs' return to the helm stabilized pretty consistently at just about 38% on average, give or take a bit. It's a very consistent Gross, and has been for well over a decade now. They keep their pricing across all their lines (hardware, software, services, etc.) at levels clearly designed to maintain that +/- 38% gross margin. They've been incredibly adept at keeping it there.
I was interested in a similar comparison of Net Margins over the same period. How much did the business cost, how much of that steady Gross did they have to spend to keep it all running, and running profitably?
How steady are the Net Profits? That, in the end, is a better measure of whether a company is "gouging" or not. Gross is fine, but Net is where the 'bottom line' sits. If a company manages to keep their net always at or above break even (even in slimmer quarters) then they're doing it right. This chart seems to indicate (for the last 5 years, at least) that they are. Scroll down to see a longer list (uncharted) of margins going back to 2006 when they were at or around 10%. Apple was still recovering, helped in part by the iPod, and just before iPhone. Then the magic happened. They've been in the 20-percentile range for most of the past decade. This is before-tax profit, I believe. So not at all gouging, considering they have a pretty specactular global demand. They see more profit in better quarters, and typically razor thin in slimmer quarters (summer), but they aren't in the red, ever. That's where a company should be to remain healthy.
https://ycharts.com/companies/AAPL/profit_margin
So, after-tax profits in the area of 15% ~ 20%, which is still above average but not exactly gouging, especially with products they can't make enough of for a couple of months after they release.
Their services are all pretty reasonably priced, none are at all higher than the market in general. iCloud (I pay $3/mo for the 200GB of storage, which is reasonable, and it's extremely secure), Apple Music @ $100/year is basically the same as Prime's annual. I think the $100 ~ $120 annual for unlimited content access is becoming kind of a standard. The rest, Apple Care has been affordable,, and Apple's support is second to none. You get what you pay for...
All to say, if anyone accuses Apple of gouging, that's nonsense. You can only accuse them of making "high end" products, that sport a premium price tag, but also have the quality to match.
I know of very few people who kept a Samsung "smart phone" for 5 years without a glitch or the slightest decrease in performance (other than battery life)... I've owned iPhone 1, 3GS, 5S, and now X... I had the 5S for about 5 years, and never a single issue. It performed the same from day to the day I traded it in for the iPhone X.
Same is true of my 9 year-old iMac (replaced last year as my main workstation, but still going as an "everyday computer"), my soon-to-be-replaced 5-year old MacBook Pro... Problem-free, running strong, and worth every penny I paid for them.
This is why the "premium" is so worth it. Total Cost of Ownership (TCO) is still lower than all the disposable crap in the PC world. So, is it really gouging because we have to pay a bit more up front? Not when it ends up performing better and costing less in the long run...
And that's my big fat 2-cents worth on the topic.
Last night updated my late-2010 MacBook Air to High Sierra. Updating Numbers, iBooks Author, iMovie and GarageBand now. After 8 years I think it’s time to sell it on and grab a new one. Money well spent.
The actual products by Apple are pure innovations like Steve was like to. who try to robbing is android. They try to sell products of hundreds euro that have the same os system of a smartphone about 80 euro. Like microsoft at that time also android cheat thanks to dinsinformation. Your article this time make no sense.
Those margins are pretty damn low. My gay friend works in cosmetics and the margins for that industry are ridiculous: 500-5000%. And don't get me started with pharmaceuticals. Apple's profit margins are reasonable, if anything, I think they should be higher. That's just me... as I used to work in cosmetic surgery where the margins are 10x
At least the crap worked when Jobs was running it. Nothing but issues and more un-needed, "upgrades" that I never asked for while removing useful features since Cook has been in.
There’s the cost of the annual platform OS updates: iOS, MacOS (which of course was not always free), etc. Wondering how theses costs are accounted for in the overall gross margin discussion.
At least the crap worked when Jobs was running it. Nothing but issues and more un-needed, "upgrades" that I never asked for while removing useful features since Cook has been in.
I wouldn't say robbing me, but Apple has consistently made decisions that make it much more expensive to own their products. For example, the refurbished 15" mid-2012 MBP with the high density screen (1680 x 1050) I'm typing this on cost me C$1,599. Because it's user upgradeable, it now has 16 GB of RAM and a 2TB SSD. Not much I do with it stresses the CPU, which is still faster than the dual core processers they sell in current Macbooks for multi-core tasks, and the GPU is still able to keep up for the most part. The SSD launches programs impressively quickly, again, it's not as fast as a new machine, but still fast enough. Assuming they made 40% profit on this machine, they would have made $640 on it.
However, to get a similar sized, entry-level replacement would cost me C$2,791. If I wanted to future-proof it by getting 1TB of storage, it would be more than C$3,300. Assuming Apple's profit margins are the same, they now make about C$1,120 for the base unit, almost double. The improvements and lack of upgradeable parts, whether I want them or not, make it hugely more expensive. Granted, everything is "better" but it's not an obvious improvement like I saw when I moved from my PowerBook 5300 to a Pismo, years ago. Sure, the screens are lovely, but when I sit my current machine next to my 5k iMac the difference is noticeable, but not annoying. I also need to add a dongle to my budget, if I want to use any of my old backup drives, a USB drive or an SD card. The keyboard is definitely better on the old machine.
So, while Apple isn't "robbing" me, they've made decisions that greatly improve their gross profits, marginally improve some parts of my computing experience, but cost me a lot more.
Is this report talking about gross margins or profit margins? Do you have a comparison of average selling prices over time?
Meaningless to to this discussion. When Dodge started selling the 12-cylinder Viper it would have had a positive effect on ASPs. But it offered a lot more power and sportiness. Apples latest iPhones offer a lot more performance and capabilities versus previous generations. You’d expect ASPs to climb. Gross margins is where the comparison should lay, and this article does a good job pointing out how they have not significantly moved during Cook’s tenure.
The 2010 MBA had more performance and capabilities than the 2008 model but it was cheaper. Same with the $329 iPad compared to the original. Anyone who doesn’t see that Apple is offsetting slower/flat unit sales growth with price increases is blind. New flagship iPhones used to start at $649, now they’re $999. Now you can argue the XS is $350 better than 6 was, that’s obviously subjective but it’s still more expensive. Take the new Mac mini. Starts at $799. The previous entry point was $499. Again, one can argue that the new mini is way better and deserves the $300 price increase but the bottom line is you used to be able to get into the Mac ecosystem for $499 and now the cheapest entry point is $799. The previous entry point to iPhone was the $399 SE. Now the cheapest entry point is the $499 7. And the cheapest iPad used to be $259; now it’s $329. In the past you could get an Apple TV for $99; now it’s $179. It costs more to get into the Apple ecosystem that’s just a fact.
Margins in the 40% range are very good for a company selling physical goods.
But they pale in comparison to the margins over at Google (average of 61% for the past 10 years) or Microsoft (average approaching 70% and a record high of 80%). Yet I don't see anyone giving them a hard time about how much money/profit they're raking in.
You beat me to it. I was going to comment that those who vilify Apple on it’s enormous pile of profits have the choice of buying a Windows setup on Microsoft hardware where the combined total of their purchases hands 70% margins to Microsoft. Where’s the beef?
So because someone else does it also makes it OK? $200 extra for 8 --> 16GB RAM in a MacBook? $850 price premium for 1TB worth of SSD storage in the new iPad Pro? $200 more for 128GB extra SSD in the new Macbook Air? There isn't any other way to describe it BUT robbery.
Also, not sure what you mean "combined total" but you don't buy Windows and then buy a piece of Microsoft hardware. Like macOS, Windows is included in the price.
Compared to most of you here I’m still quite new to the Apple ecosystem. Having owned my first Apple device in 2012. So my question is had Steve Jobs never passed and at the helm of the ship would the doomfest be the same? Are people responding to Cook or they just like to hate Apple period? I mean I get it that they are morons and naysayers out there. Just wondering guys.
First of all, the article should be retitled, "If you think Tim Cook is 'robbing' you, you're stupid" because no one is forcing you to buy Apple products at all.
Second, the article takes a rather defensive position toward Cupertino about price while forgetting to mention that Apple products under Steve and even before Steve LASTED LONGER than they typically do now. It's Cost and Performance, baby.
At the end of the day, people fed up with the lack of options can go with a low-cost Hackintosh. I've not yet resorted to that, but if Apple keeps raising prices AND stripping away important features, I just might.
Is this report talking about gross margins or profit margins? Do you have a comparison of average selling prices over time?
Meaningless to to this discussion. When Dodge started selling the 12-cylinder Viper it would have had a positive effect on ASPs. But it offered a lot more power and sportiness. Apples latest iPhones offer a lot more performance and capabilities versus previous generations. You’d expect ASPs to climb. Gross margins is where the comparison should lay, and this article does a good job pointing out how they have not significantly moved during Cook’s tenure.
The 2010 MBA had more performance and capabilities than the 2008 model but it was cheaper. Same with the $329 iPad compared to the original. Anyone who doesn’t see that Apple is offsetting slower/flat unit sales growth with price increases is blind. New flagship iPhones used to start at $649, now they’re $999. Now you can argue the XS is $350 better than 6 was, that’s obviously subjective but it’s still more expensive. Take the new Mac mini. Starts at $799. The previous entry point was $499. Again, one can argue that the new mini is way better and deserves the $300 price increase but the bottom line is you used to be able to get into the Mac ecosystem for $499 and now the cheapest entry point is $799. The previous entry point to iPhone was the $399 SE. Now the cheapest entry point is the $499 7. And the cheapest iPad used to be $259; now it’s $329. In the past you could get an Apple TV for $99; now it’s $179. It costs more to get into the Apple ecosystem that’s just a fact.
The important thing is that you don't compare the newest device to what it replaced to justify the price increase. Back when the iPhone 6 came out, wasn't it the "fastest iPhone EVER!" and was priced accordingly? Same or the Mac Mini, or Macbook or any Apple device. You're correct, the entry points are much higher than in the past, but in the past those devices were bleeding edge, too, yet the entry points were lower than now. Technology is cheap now. Memory, SSD storage and GPU pricing are all DOWN. Yet, Apple prices are UP. Hmmmm....
Apple's R&D cost has ballooned under Cook, from $0.6bn to $3bn. Perhaps that along with stock buybacks are being used to help balance the profit margin and stop that ballooning too. I'm not sure the 5x increase in spending has really resulted in 5x the innovation, however.
If Jobs was robbing people too, why did the prices under him stay fairly stable? Why were there $499 eMacs and $799 iBooks, but now the cheapest current Apple laptop is $1200? Obviously inflation is a thing, but then why is Apple still selling a 4 year old Air with the same introductory price? The profit margin on that will now be massive, since all the components will be probably 40% of their original cost, and its massively extended lifecycle means no design resources have been spent on it either. Jobs actually reduced the price of the original iPhone by $200 because demand was so high that lesser profit per device but more sales would still offset the R&D. Cook seems happy to sell fewer devices at extortionate prices - which breeds discontent - plus those devices come with less ports, less RAM and less SSD space than competitors. In fact the 2018 Air has the same base RAM and SSD as the 2014 model, if that's not nickel and diming I don't know what is. Anyone claiming that to be "ok" needs to pull their head out their ass.
For the comment above, it is night and day to compare margins on hardware (Apple) vs margins on software (Google/Microsoft). Hardware will almost always have a lower margin as things cannot be printed, whereas once the software is developed, it can really and literally (ok, not really literally) be printed onto CDs by the millions and sold.
Is this report talking about gross margins or profit margins? Do you have a comparison of average selling prices over time?
Meaningless to to this discussion. When Dodge started selling the 12-cylinder Viper it would have had a positive effect on ASPs. But it offered a lot more power and sportiness. Apples latest iPhones offer a lot more performance and capabilities versus previous generations. You’d expect ASPs to climb. Gross margins is where the comparison should lay, and this article does a good job pointing out how they have not significantly moved during Cook’s tenure.
The 2010 MBA had more performance and capabilities than the 2008 model but it was cheaper. Same with the $329 iPad compared to the original. Anyone who doesn’t see that Apple is offsetting slower/flat unit sales growth with price increases is blind. New flagship iPhones used to start at $649, now they’re $999. Now you can argue the XS is $350 better than 6 was, that’s obviously subjective but it’s still more expensive. Take the new Mac mini. Starts at $799. The previous entry point was $499. Again, one can argue that the new mini is way better and deserves the $300 price increase but the bottom line is you used to be able to get into the Mac ecosystem for $499 and now the cheapest entry point is $799. The previous entry point to iPhone was the $399 SE. Now the cheapest entry point is the $499 7. And the cheapest iPad used to be $259; now it’s $329. In the past you could get an Apple TV for $99; now it’s $179. It costs more to get into the Apple ecosystem that’s just a fact.
Exactly, increasing prices to offset lower demand is never a good strategy. It works in the short term, but there's only so far you can go (and Apple's already there) before it affects sales in the medium to long term. I think Cook saw the revenue growth go negative in 2016, and to correct it just applied the easy fix of raise prices. The number one problem I and everyone I speak to has with regards to Apple products is the price. Apple gear is just not good value for money anymore. And articles like this don't help matters in Apple's favour; if articles excusing Apple's pricing need to exist, there's a big enough proportion of people who are concerned over the pricing, meaning there's a problem with it. People don't mind paying a bit more for quality and customer service, but people don't want to be ripped off.
Apple stuff has never been cheap but the older Macs were always reasonably repairable and upgradeable. The stuff they are selling today is mostly sealed shut and uses copious amount of glue.
I did not mind the pricing when we were getting HW that could last for many years and be kept fairly current to the needs of the latest SW. These days a 5 year old iPad or iPhone is pretty much a brick.
If one pays attention to the Windows/LINUX PC market, we can also see that Apple is charging premium prices for what is often less than top drawer technology. They are kind of falling into the reputation of GE Medical: "You can buy better but you cannot pay more."
Apple has nickeled and dimed it’s loyal user base by eliminating the 3.5 to lightning dongle etc. The dongle probably cost Apple less than a dollar to make if I’m paying $1400 for an iPhone does Apple really want $9 more for the dongle they gave me for free with a $750 iPhone I bought last year Maybe that’s not Apples intent but that’s the way people are perceiving it Enough said!
Is this report talking about gross margins or profit margins? Do you have a comparison of average selling prices over time?
Meaningless to to this discussion. When Dodge started selling the 12-cylinder Viper it would have had a positive effect on ASPs. But it offered a lot more power and sportiness. Apples latest iPhones offer a lot more performance and capabilities versus previous generations. You’d expect ASPs to climb. Gross margins is where the comparison should lay, and this article does a good job pointing out how they have not significantly moved during Cook’s tenure.
The 2010 MBA had more performance and capabilities than the 2008 model but it was cheaper. Same with the $329 iPad compared to the original. Anyone who doesn’t see that Apple is offsetting slower/flat unit sales growth with price increases is blind. New flagship iPhones used to start at $649, now they’re $999. Now you can argue the XS is $350 better than 6 was, that’s obviously subjective but it’s still more expensive. Take the new Mac mini. Starts at $799. The previous entry point was $499. Again, one can argue that the new mini is way better and deserves the $300 price increase but the bottom line is you used to be able to get into the Mac ecosystem for $499 and now the cheapest entry point is $799. The previous entry point to iPhone was the $399 SE. Now the cheapest entry point is the $499 7. And the cheapest iPad used to be $259; now it’s $329. In the past you could get an Apple TV for $99; now it’s $179. It costs more to get into the Apple ecosystem that’s just a fact.
Exactly, increasing prices to offset lower demand is never a good strategy. It works in the short term, but there's only so far you can go (and Apple's already there) before it affects sales in the medium to long term. I think Cook saw the revenue growth go negative in 2016, and to correct it just applied the easy fix of raise prices. The number one problem I and everyone I speak to has with regards to Apple products is the price. Apple gear is just not good value for money anymore. And articles like this don't help matters in Apple's favour; if articles excusing Apple's pricing need to exist, there's a big enough proportion of people who are concerned over the pricing, meaning there's a problem with it. People don't mind paying a bit more for quality and customer service, but people don't want to be ripped off.
Like I said, it’s subjective whether someone thinks a product is priced fairly. But it absolutely is a fact that Apple products are getting more expensive.
Comments
Last night updated my late-2010 MacBook Air to High Sierra. Updating Numbers, iBooks Author, iMovie and GarageBand now. After 8 years I think it’s time to sell it on and grab a new one. Money well spent.
who try to robbing is android. They try to sell products of hundreds euro that have the same os system of a smartphone about 80 euro. Like microsoft at that time also android cheat thanks to dinsinformation. Your article this time make no sense.
I wouldn't say robbing me, but Apple has consistently made decisions that make it much more expensive to own their products. For example, the refurbished 15" mid-2012 MBP with the high density screen (1680 x 1050) I'm typing this on cost me C$1,599. Because it's user upgradeable, it now has 16 GB of RAM and a 2TB SSD. Not much I do with it stresses the CPU, which is still faster than the dual core processers they sell in current Macbooks for multi-core tasks, and the GPU is still able to keep up for the most part. The SSD launches programs impressively quickly, again, it's not as fast as a new machine, but still fast enough. Assuming they made 40% profit on this machine, they would have made $640 on it.
However, to get a similar sized, entry-level replacement would cost me C$2,791. If I wanted to future-proof it by getting 1TB of storage, it would be more than C$3,300. Assuming Apple's profit margins are the same, they now make about C$1,120 for the base unit, almost double. The improvements and lack of upgradeable parts, whether I want them or not, make it hugely more expensive. Granted, everything is "better" but it's not an obvious improvement like I saw when I moved from my PowerBook 5300 to a Pismo, years ago. Sure, the screens are lovely, but when I sit my current machine next to my 5k iMac the difference is noticeable, but not annoying. I also need to add a dongle to my budget, if I want to use any of my old backup drives, a USB drive or an SD card. The keyboard is definitely better on the old machine.
So, while Apple isn't "robbing" me, they've made decisions that greatly improve their gross profits, marginally improve some parts of my computing experience, but cost me a lot more.
Also, not sure what you mean "combined total" but you don't buy Windows and then buy a piece of Microsoft hardware. Like macOS, Windows is included in the price.
If Jobs was robbing people too, why did the prices under him stay fairly stable? Why were there $499 eMacs and $799 iBooks, but now the cheapest current Apple laptop is $1200? Obviously inflation is a thing, but then why is Apple still selling a 4 year old Air with the same introductory price? The profit margin on that will now be massive, since all the components will be probably 40% of their original cost, and its massively extended lifecycle means no design resources have been spent on it either. Jobs actually reduced the price of the original iPhone by $200 because demand was so high that lesser profit per device but more sales would still offset the R&D. Cook seems happy to sell fewer devices at extortionate prices - which breeds discontent - plus those devices come with less ports, less RAM and less SSD space than competitors. In fact the 2018 Air has the same base RAM and SSD as the 2014 model, if that's not nickel and diming I don't know what is. Anyone claiming that to be "ok" needs to pull their head out their ass.
Exactly, increasing prices to offset lower demand is never a good strategy. It works in the short term, but there's only so far you can go (and Apple's already there) before it affects sales in the medium to long term. I think Cook saw the revenue growth go negative in 2016, and to correct it just applied the easy fix of raise prices. The number one problem I and everyone I speak to has with regards to Apple products is the price. Apple gear is just not good value for money anymore. And articles like this don't help matters in Apple's favour; if articles excusing Apple's pricing need to exist, there's a big enough proportion of people who are concerned over the pricing, meaning there's a problem with it. People don't mind paying a bit more for quality and customer service, but people don't want to be ripped off.
I did not mind the pricing when we were getting HW that could last for many years and be kept fairly current to the needs of the latest SW. These days a 5 year old iPad or iPhone is pretty much a brick.
If one pays attention to the Windows/LINUX PC market, we can also see that Apple is charging premium prices for what is often less than top drawer technology. They are kind of falling into the reputation of GE Medical:
"You can buy better but you cannot pay more."
Maybe that’s not Apples intent but that’s the way people are perceiving it
Enough said!