“Apple brought in $4.976 billion in revenue from the sale of 3.76 million Macs last quarter. Divide the $4.976 billion in revenue by 3.76 million Macs and you get an average selling price of $1,323.40,” Matt Richman blogs.
“A June 1st research note from Peter Misek of Jefferies & Company pegged Mac gross margins at 28%,” Matt Richman explains. “Multiply $1,323.40 by .28 and Apple makes $370.55 for every Mac sold… HP makes $52.00 for every PC they sell.”
Richman reports, “Apple makes more money from the sale of one Mac than HP does from selling seven PCs.”
The full article, “A Consequence of Losing the PC Wars,” here.
MacDailyNews Take: The state of the Macintosh is strong and growing stronger each day.
[Thanks to MacDailyNews Readers “Ellis D.” and “krquet” for the heads up.]
That $52 would be a bit higher, if HP didn’t have to pay Microsoft for the Windows license per unit.
Apple makes most of the available profit selling a fraction of the total units. The scariest thing for the competition is iPad; in tablets, Apple has most of the total units too.
Not bad considering that Macs are 10 times better than HPPCs
I don’t think HP is begrudging apple their margin on Macs when you consider the markup they get on ink jet cartridges.
The kid is 15-years-old and a sophomore in high school and he has the Tech world’s attention.
On the Internet, no one knows you’re a dog.
Punchline from a widely circulated New Yorker cartoon from the 1990’s in the early days of the popular Internet. Nowadays we know they do in fact know everything about you on the Internet.
Quality vs quantity. POS product vs Good products. You get what you pay for and its priced accordingly.
There’s a bunch of teens like him. The Wintel companies aren’t going to fool them. They want their tech to powerful and efficient. It ain’t going to be a Dell anything running Windows anything.
Very simplistic account. He forgets that MS takes $250 (approximate guess). Then there is No iPhoto, no iMovie and no Garageband. Lets say those three are worth on average $17 each.
Then to get the Apples to Apples comparison, Apples only makes $370.55 – $250 – $17 – $17 – $17. That makes a GRAND $69.55.
Doesn’t it?!
@paul
Not at all.
He already was comparing Apples to Apples:
ASP (average selling price) – reported gross margins.
First, what it “costs” each company to deliver the product to a happy customer is exactly the point…
You can’t force an extra cost on Apple to try and disprove what plain figures are saying.
The point isn’t to “level the playing” field. The whole point is that Apple delivers quality and value for money, and people are willing to pay for it.
Second, your $250, etc. are entirely arbitrary. MS might sell an OS for 250 retail, but few people think that OEMs pay that kind of money per PC. More to the point, why should you deduct this arbitrary amount from Apple’s posted margins? Apple sold an OS retail for 129, then 79, now 29. But that’s retail. Does Apple charge itself per PC? No…
Apple makes integrated products, and this is exactly where the value is found. Apple’s investments in both hardware and OS reinforce and complement each other, boosting the value of both while reducing some costs that competitors may face.
All the great Apple software that you cite is exactly why Apple can keep its hardware prices at a certain level, why customer demand is sustained, and why Apple’s margins are relatively high — with virtually no added cost to Apple.
This is part of Apple’s strategy (ie profitability before market share), and there is little competitors can do about it without re-inventing themselves.
So, again, how can you take away from Apple exactly what it is that makes them so profitable, and therefore so successful when compared to their competitors? Why do you think HP bought Palm? To hopefully help reduce the very gap in profitability that is described in the article.
What I am trying to do is to make a point of the INTRINSIC VALUE of the two companies computers. You on the other hand are, (I think), analyzing it purely from the point of manufacturing costs.
Bottom line, is that there are components in the Apple product that are not included in the HP product. Such as iMovie, iPhoto, etc. You have to account for those by adding in their VALUE. You cannot just assume they are worth NOTHING, even if it might cost Apple next to nothing to produce.
When I read your initial post, I also thought like counterproductive above. But after seeing what you next brought up, I now believe you have a valid point. However, I think your prices are off for the MS OS purchase (see http://arstechnica.com/microsoft/news/2009/09/microsoft-oems-pay-about-50-for-each-copy-of-windows.ars ).
Still, a better comparison in my book.
Well, that is not the point you seemed to be making. By calling the initial accounting of the article “simplistic”, and then going on to refigure it in concrete terms (whether your figures were merely examples or not), you were implying a disagreement with the thesis of the article, plain and simple. So, do you disagree that a) Apple does in fact make healthy margins that puts other companies to shame; or, b) do you think that Apple should not be making these margins, or think that Apple shouldn’t say they are making them because you think they are not accurate and don’t account for some factors because HP doesn’t include certain things?
I would never assume the software is worth nothing. On the contrary. To me, and most other Mac users, there is tons of intrinsic value in buying a Mac — which is precisely why we buy one. I would “say” OS X and iLife are “worth” $1000. I wouldn’t give you two bucks for Windows. You couldn’t pay me to use a PC. How’s that for intrinsic value?
To me the choice is easy — Mac gives the better value proposition, every time, hands down. BECAUSE of the intrinsic value.
But what you did say was something like this: you have to take these items “missing” from HP, “give” them a value, and “take” this value OFF the ~28% margin Apple has posted. Why?
So, some products from some companies include more features than comparable products from their competitors, so what? That is true of every product in the world — that is WHY you choose one over another. You measure the value proposition of the one against the other and you make a choice. BOTH the intrinsic value proposition AND the margins are far greater with a Mac.
What has this intrinsic value got to do with the accounting angle of the article? It doesn’t change Apple’s margins one whit. Nor does it change the comparison to HP one whit when apples are compared to apples: one computer delivered as is, out of the box.
I think you must ADD something, not take it away… Here is what I believe you mean by intrinsic value, and what I think you could have said initially:
“OS X and iLife give great value to Macs, let’s call it $250 + $17 + $17 + $17. That means your 1149 iMac is actually worth $1450! But Apple is actually giving you a break, Hallelujah! And what is more, they actually preserve their margins while doing it! Incredible! This means they can continue to give their customers great value and not skimp on the quality or user experience or support (unlike some we could name who must scramble to sell far more computers). Wow, Apple can retain their margins while giving me a discount of $370.55, can HP?”
In short, the intrinsic value we get from our Macs has nothing to with the accounting figures or the plain facts in the article. What this *added* value means is that we are very pleased with our choice of a Mac and we are very happy for Apple to be getting the actual margins they are getting.
Apple will undoubtedly account for the cost of developing their software somehow. But you needn’t *assume* that their margins must be reduced simply because the intrinsic value of a Mac is much greater than that of an HP PC.
Do NOT select accounting as your profession. And please, although you seem to be qualified, don’t go into politics. We need to start working on improving that gene pool.
I think there was some Grimm’s Fairy Tale named “The Gallant Tailor: Seven at One Blow.” It had something to do with a meek tailor bragging about his strength because he luckily killed seven flies in one swat or something to that effect.
This tale is neither here nor there, but it just happened to pop into my mind from my childhood. I guess this tale could be related to the article in some vague way if HP represents the flies viewpoint.
yay! …….um…….wait…..that’s my cash Apple has
A lot of time has passed since the last time I bought a PC, thank the Lord!, but If I remember correctly, every PC vendor gets a chunk of extra money from all the Bloatware they pre-install in every machine, I bet nowadays that’s the only thing that keep their industry alive. One more reason to be a Mac User.
So, how about lowering the price a bit, say 200 dollars and still make a reasonable profit? You’ll sell more and as I was taught back in 68: units sold times profit margin equals profit.
Trying to make up margin with volume is the core of many sales and management jokes – companies who try this often fail. Lowering your costs to increase your margin works, but PC hardware is a commodity and Windows is a closed shop. Not much room for HP to do anything except buy Palm and try to get out from under the Wintel rock.
Apple please continue to gouge the Macheads!
Apple has gradually reduced prices and increased value at the same time. My 2007 24″ iMac is still running great – fantastic, in fact.
As long as Apple maintains quality, value, longevity, and customer service, then I am willing to pay a fair price for a new computer every six years or so. Cost of ownership is quite reasonable when your Mac lasts 5+ years, and the peace of mind? Priceless.
I GLADLY pay for the ease of use, no virus, and don’t forget TCO.
Absolutely, without a doubt, the best purchase of a computer to be made.
In order to yield the same gross revenue as Apple on 4.976M Macs, HP has to sell nearly 35.5M units.
I like that apple is doing well but… some could say with their massive war chest and high margins they could easily afford to lower margins a bit to make their macs more affordable to everyone, of course you get what you pay for, total cost of ownership etc but they obviously have a little room to move here.
Bear in mind management’s responsibilities to the shareholders.
Apple devices could be a bit cheaper, perhaps. But Apple is in business to make money. In fact, it is the duty of the officers of the company to maximize shareholder value – shareholders own the company, they run it for us (and are also significant shareholders, making the health of Apple a common interest as well as a calling for them).
Companies have their ups and downs, and big companies occasionally have opportunities to develop or acquire a position in a new area. Big companies also bear the risk of large liabilities from quality issues and lawsuits of all types, including the recent patent battles. So I don’t begrudge Apple a good profit on a good product. The question should not be why Apple’s gross margins are healthy at around 28%. The question should be why the PC makers have such low profit margins.
I like a bargain as much as the next guy. But I don’t want Apple to turn into the Walmart of computers. Cost cutting at other companies can and has gone too far, sacrificing quality of life for laborers and product quality to add a few more percent to the bottom line. This is not what America was about for most of its history. But it is a trend that has grown since the 1970s, and I don’t want Apple to get pulled into the muck with Acer and the rest.
Apple does have a “little room to move,” and they have repeated made such moves over the past decade. Given Apple’s success in moving product, however, it is difficult for me to understand why anyone feels justified in expecting price reductions just because Apple has been so successful.
Please remenber that is mac was any cheaper….that would be the end of PC…and maybe mac gets a cut of microsoft profit for being expensive…that is the only way microsoft can secure to sell that shittty software
Yes, Apple is keeping all the profit to themselves. Just ask any Apple dealer, most of the are only getting 4-7% margin. 🙁 . Just work it out how much a dealer can get by selling an iMac. That margin apply to the top end Mac Pro too.Now a day you actually getting more money selling Window PC computer than selling any Apple equipment.
Maximizing profit is perhaps the most important factor, but it is not the only factor involved. Pricing is also a way to fine-tune demand to most optimally match a company’s ability to deliver goods and services. A steady and sustainable demand for growth is much easier to plan for and deal with than an overwhelming short-term demand that goes unmet, creating bad will in the process.
The key for any company (any company that I’d like to be involved with anyway) is to think like tomorrow’s consumer when designing products and services, but think like a long-term shareholder when planning roll-outs and pricing.
Apple’s pricing is as much a part of their brand as is their product. As mentioned before, Apple’s policy is to choose a competitive price for a premium product and then continually add value to it.
This allows them to distinguish themselves in the marketplace. I experienced this different after two recent experiences setting up an Airport Express and Linksys wireless router in two different locations. The Airport was definitely the better experience overall.
I hope this article finally puts an end to the folly of the whole “marketshare” argument. Apple, please stay away from the cheap, commodity end of the market! We like our virus-free, high-quality products just the way they are, thank you….
Actually, Apple is one of the rare companies resellers MAKE money on.. Most resellers LOSE MONEY on windows based PC’s. They actually MAKE margin on Mac’s..
I don’t think Apple’s goal has ever been to be the BIGGEST.. It has simply been to be the best.. And when you are the best, you succeed, instead of diluting yourself by chopping your prices down and down and down until you are shlepping a half cocked product with a half cocked operating system.. Same with iOS vs. Android..
Android is the windows of the mobile world. Craptastic copycat that will never give the full experience.. Hating on Apple is like a guy who owns a 96′ Ford Taurus saying it’s the same thing as a 2011 Mercedes S Class because it gets from point A to point B the same way.. If someone told you that, you’d call them a moron.