Microsoft Still More Profitable Than Apple — Barely
techcrunch.com
techcrunch.com
However Apple's hardware margins compared to other manufacturers hardware margins are quite huge. I've heard figures from those tear downs say that Apple have a margin close to 50% or more (or at least in the double digits). Compare that to a more competitive field (by this I mean more direct oranges to oranges competitors) like TV's (or Cars) where margins are squeezed tight in order to sell.
Also don't forget now that Apple have this whole *Store thing going where they make pure profit from the sale of software that someone else has made (and taken the sunk cost hit for). That means the ratio of profit to software development cost is near infinite, so how's that for a profit margin.
Apple is actually growing faster than Microsoft and it is not in any way strange that Apple, as a hardware and software company, has worse margins than Microsoft, that has always been the case. Here is an illustrative chart, showing all that: http://www.businessinsider.com/chart-of-the-day-microsoft-ap...
The article just reports those facts and includes the author’s prediction that Apple’s earnings will overtake Microsoft’s soon, probably in the next quarter. That’s not at all unreasonable or unrealistic.
But I do think Apple does stand a good chance to surpass MS. But I do think the consumer space is also a fickle one, especially the phone market. If they do one release of a "meh" phone or tablet, and Android progresses, they could see their profits literally cut in half in a year (see Sony for how you go from +$2B to -$2B in one year).
It’s not typical Siegler. It’s typical many people. Siegler holds a common position on this particular issue.
The popular trope that Siegler is defending Apple despite obvious evidence to the contrary which the first commenter seems to be alluding to is certainly not true when it comes to this particular issue. (It is true on other occasions but not this time.)
There's an old saying that if you don't know the history of the author, you don't know what you're reading.
Lets look at the title of the story for when Apple released their earnings, "Apple’s Insane Q1 ’11: $26.7 Billion Revenue, $6 Billion Profit; 7.33 Million iPads, 16.24"
He's just an obvious hack. But it gets page views. I think he probably makes a decent living doing it. No complaints about that. But I do think that if you are actually getting news from him, you're getting it from the Fox News of the tech sector. John Gruber is even a little embarrassed at how obvious his bias is.
Oh, and Apple’s Q1 earnings are actually insane. I don’t know how you could find fault with that particular headline. I think no one could dispute that Apple’s Q1 results were extremely impressive.
Can’t we attack people for what they actually say, not for what we think they are saying?
And he NEVER says that revenue don't count. When Apple surpassed MS in revenue he says, and I quote, "Naturally, it’s important to note that Microsoft still has a lead in profit, $5.41 billion to $4.31 billion, but that’s because one is mainly a software maker (huge margins), while the other is mainly a hardware maker (lower margins)."
So lets be clear, he's saying that earnings need a qualifier due to margins (which is absurd in itself), but he NEVER NEVER says anything about revenue models not being comparable given that Apple is a hardware company and MS is a software company. Do you know who makes more revenue than Apple -- HP, yet MG has never mentioned another hardware company in his revenue posts.
I think you'd have to blind to see how MG selectively omits certain key facts from his "articles", in order to create a specific pro-Apple anti-MS spin.
Not surprisingly, no article about how Android blew past Nokia and Apple in Q4 2010 (already past Apple before that, but YoY).
It's like watching a basketball game where the announcer only calls baskets made by one team. And then goes on and on about how team Apple just BARELY lost. But actually if you look at timeouts, team Apple used fewer timeouts, so if the game was to minimize timeout usage, Team Apple actually won!!!
I’m making no claims about other articles by Siegler and don’t want to defend them. He tends to say incredibly stupid or one-sided things about Apple very often. It’s just that I cannot find any fault with this particular article.
The fact that I can find, literally about 10 positive articles written about Apple in the past few months by MG, and maybe one (borderline) about MS, is quite telling. Despite the fact that MS generated larger profits than the "Insane" profits of Apple.
There is no need to turn a harmless disagreement into a pointless attack.
This applies to Fox News and everything else equally. I will not attack anything someone says just because I think they frequently say stupid stuff.
That's where we differ. I don't attack Siegler as a person. I don't have any reason to believe isn't a great guy. But I do think his writing shows a very strong bias.
It seems like your broader point is that its just tech writing -- who cares? And I generally agree. I certainly don't lose any sleep over it, but I do think it is fair game to comment on in the spirit of commenting on things that generally don't matter that much.
Do you really believe he should cover Microsoft and Apple equally?
Yes. Or at least cover them fairly. But I don't expect that he will. And he probably gets paid not to. He's the Sean Hannity of tech journalism. Everyone knows what he's going to say, and that it will be a trainwreck, but you tune in anyways -- because its a trainwreck. Good work if you can find it.
Of course not. But he's not a beat reporter. He editorializes his reporting to promote Apple as he did in this case - which is what makes it typical Siegler. How is one to hold your position to be genuine when despite your saying that this article is an exception to his typical bias towards Apple, you have defended the objectivity of every other piece of Siegler's writing mentioned?
How could saying that Apple’s Q1 results were “insane” ever be considered biased? Just look at those results! They were insane in every way!
The headline wasn't "Microsoft Profits Beat Apple's (for the 83rd Time.)" Instead, beating Apple by more than 10% became "barely," lower margins become a justification for lower profits, and more revenue and greater market cap become what really matters anyway when it comes to Apple. That's what makes it typical.
I also don’t understand what this whole margin-profit justification talk is all about. It’s just a consequence – not a justification – of lower margins that a company can have less profit than another company despite having higher revenue.
A question for you: Has Apple been getting closer to Microsoft’s profits during the last years or would you see that as a mischaracterization?
Also: Why am I getting downvoted?
Previously you could argue that Apple was purely a hardware company because they bundled their OS and software with Mac hardware, and Microsoft was purely a software company because they didn't but recently the lines have blurred. Apple, like Microsoft, backs the creation of consumer devices for hardware that they did not invent nor own (e.g. the Zen vs the iPod). Microsoft also is now selling software bundled solely with hardware---the Kincet, and the Xbox---taking a page out of Apples book.
When it comes to software/hardware hardly anyone competes with a company that exists in a proper set of their own industries. For example, Sony is competing with Microsoft when it comes to consumer entertainment hardware (Xbox/Playstation), but they're competing with Amazon when it comes to eBook readers and Apple when it comes to portable music players.
Sure Ms and Apple are not identical companies but they are worth comparing.
Being a hardware manufacturer may be a reason for lower margins, but its not an excuse for lower profits. And using the difference of $70 billion dollars in market cap as a some sort of justification for Apple's ability to continue to grow just doesn't make sense.
The heart of Siegler's prediction is the contention that Microsoft's profits will drop more than Apple's next quarter - the article contains no basis for this. Apple just had it's best quarter ever at $6 billion. Microsoft just did better than $6 billion in the quarter for the second year in a row. Microsoft's worst quarter last year was almost equal to Apple's second best quarter ever.
Essentially, Siegler's prediction is as sound as the idea that the curve determines Apple's profits.
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Look, Siegler is a journalist, not an analyst. He says “Apple has grown faster than Microsoft in the past which means that if nothing changes, they are going to overtake Microsoft’s profits sooner or later.” That’s a perfectly reasonable but not very well supported position, perfectly appropriate if you write for a tech blog.
Your objections are reasonable but sort of miss the point.
That one liner comment of yours was just unnecessary. You should have posted your response to me instead, that would have been much more informative.
Not only is Siegler not an analyst, he is not a logician either. Growth is a measure of the rate of change. Were there to be no change, there would be no growth and Microsoft's profits would continue to be greater than Apple's for so long as there was no change.
Siegler's shortcoming as journalist is not a tendency to poorly support his arguments, it is the utter lack of an argument in the first place. The piece is solely an apology for Apple. That this is appropriate for a tech blog, does not excuse the fact that Siegler wrote another piece of Apple fluff.