“Microsoft’s problem is not that it has difficulty offering an operating system for tablets. The problem is that the economics of both systems and application software on tablets is destructive to its margins,” Dediu writes. “Apple charges $9.99 each for iOS versions of Pages, Numbers and Keynote which can be installed on several devices. The economics of tablets imply a ‘“commoditization’ of system and application software. So what’s Microsoft to do?”
Dediu writes, “The answer is Surface where the software margin is captured in hardware. This explains the pricing of Surface. The price isn’t significantly below what Apple charges because Microsoft wants to capture a comparable (30%+) margin.. Device economics offer the explanation for an otherwise perplexing Surface strategy. The question remains how many Surface units could Microsoft possibly sell to maintain its revenues.”
Read more in the full article here.
MacDailyNews Take: Not anywhere near enough.
Apple commoditized Microsoft’s main product (software). OS X costs $19.99. Pages, Numbers, and Keynote cost $9.99 each.
This is how Apple is killing Microsoft: They’re starving them to death.
[Thanks to MacDailyNews Reader "Dan K." for the heads up.]
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