Why Microsoft makes more money than Apple
Microsoft has just announced its financial results for the past three months and has beaten out Apple’s profits by nearly 50 percent, despite extremely similar revenues. Why? Because it makes the right type of revenue.
The figures for the quarter ending 30 June show revenue up 22 percent to $16.04 billion, operating income (costs minus revenue) at $5.93 billion and net income (what the company is left with after taxes and interest payments) of $4.52 billion, the latter two both up by roughly half on the same period last year.
For the past year as a whole, Microsoft had a net income of $18.76 billion, which isn’t exactly chump change.
This past quarter, which is a record performance for Microsoft in the April to June period, did particularly well thanks to both ongoing Windows 7 sales and the launch of Office 2010.
The figures also display a key difference in Apple and Microsoft’s business. With Apple taking $15.7 billion in the past quarter, the two companies have revenues which differ by barely a couple of percent. Yet Microsoft has a $4.52 billion to $3.35 billion when it comes to net income.
It’s possible part of this is the result of Microsoft operating more efficiently: shedding 5,000 jobs will have saved something like a couple of hundred million bucks. But the real difference is simply that Microsoft is predominately a software company, while Apple is mainly a hardware firm.
Nobody’s suggesting Apple doesn’t have healthy mark-ups on its products: we recently noted that the manufacturing cost of a $729 iPad is $287. But once you’ve made enough cash to cover the development and marketing costs, the marginal profit on each extra unit you sell is considerably higher with software. Apple may keep more than half the cash when it sells an extra iPad, but Microsoft keeps virtually every cent when it sells an extra copy of Office (and even that’s assuming its a boxed retail copy).
So the lesson is that there’s big money in well-marketed and well-received hardware. But there’s huge money in software, and when you’re the biggest software firm in the world, it almost become difficult not to make a genuine fortune.
July 23rd, 2010
whats apples workforce size? is it near MS’s 80K?
Just wondering how MS are able to do so much marketing, so many events, so much incentives for its products and still pull such massive income over apple that really does nothing (in comparison)
July 24th, 2010
Shows what we knew all along….M$ gouges its customers thanks to its monopoly…
July 24th, 2010
Microsoft Derangement Syndrome seems to be chronic and terminal.
Apple has it’s fanbois bragging about huge markups and profits but Microsoft is gouging. Apple limits it’s customers to a hardware and software closed system. They routinely limit hardware options like SD and USB slots or stick the CPU in a monitor to force consumers to buy a more expensive model. If anyone is gouging, it’s Apple.
There are many choices in OSes and Open Source applications, many at no cost to the consumer. There is no monopoly, only user ignorance.
July 26th, 2010
uh, yeah, Apple has 5% of the market share, MS has 95%, sure, no monopoly there.
Read the article, genius boy! It clearly states MS has far higher profit margins than Apple given equal revenues. Duh!! Please tell me you are not an American!
Apple has established a brand, brands get to charge more, that’s why Bentleys cost hundreds of thousands of dollars while a Ford costs tens of thousands. Free market capitalism!
July 26th, 2010
Mr. X, u ignore Linux, a lot of which is open source and such a solid alternative to Windows, your beloved Apple use it as the base for OSX.
No one likes Microsoft, but please don’t assume that everyone must love Apple aswell, the only difference is Apple has had the luxury of being able to see where Microsoft have gone wrong and avoid these mistakes…
But now they are making a lot of mistakes of their own making… But they might be able to save money on staff if they continue to jump off their factories’ rooves to end their lives.