That, I think, is the nail on the head. Much like Google. Microsoft's MSR group (Microsoft Research) is fascinating. I've worked on a few of their projects, and everyone knew they were going to be stillborn, but they still did the project, because 2-5 years later something will grow out of it.
Additionally, it's amazing how much design Microsoft does for other companies! Most of the telecom work I've done for Microsoft was either sold only under a completely different brand, or shuffled from MS branded to someone else in a year (such as the RoundTable). Microsoft eats this R&D because it ultimately sells more OSes for the backend, and further tightens the coupling between hardware/ancillary products and their core products.
Just like Google gives away products left and right simply because it sells more ads.
I think, actually, if you look at the bottom lines it's a MORE successful strategy than Apple's "make money on everything" approach. Not only does it leverage 3rd party/other people selling your product, but it keeps you actually focused on what is your core business - OS/Office for Microsoft and ads for Google!
And the proof is in the pudding, as they say: Microsoft and Google both have higher net margins than Apple. Microsoft does about $62 billion in revenue, with $19 billion in net profit - a monstrous 30% margin!
Google does $24 billion in revenue, and $6.5 billion in profit - a very large 27% net profit margin.
Apple does $43 billion in revenue, with $8 billion in profit - a respectable 19% margin.
Looking at those numbers above, in terms of profitability, it seems the approach of lots of R&D with most "going away" or being given away actually pays off! The margins are higher, and THAT gets investors interested.
That's one of the reasons I think the original Motley Fool analysis is wrong; it does not consider that the margin of Apple is less than its two main competitors, is rapidly being approached by the smaller of the two, and really isn't gaining much ground in the market of the larger.
Profit margin is often the rally-cry of the pro-Apple-everything camp here, yet Apple has a lower margin than Microsoft and Google. Interesting, indeed!
Interesting numbers there. I don’t like Google but they are doing a good job of expanding their company into new markets. Whats Apples new market? Video rental????
There you go again...comparing the wrong numbers. Using NINE months of Apple's figures compared to a whole year of the other companies'! You've also understated Apple's profits by 1.7 Billion dollars. That's ridiculous. And dishonest.
Apple, using their usually conservative guidance, will most likely produce $62 billion in revenues for the fiscal year, not $43 billion, and weigh in with approximately $14.25 Billion in profits... or ~23% margin... for 2010 which ends in just 10 days of so.
Microsoft is not the company to praise for tight hardware/software coupling. Apple is.
And the proof is in the pudding, as they say: Microsoft and Google both have higher net margins than Apple.
It's easy to have high margins when you manufacture little hardware. Apple develops software and runs server farms for services like the other two. On top of that, Apple has to PAY to have millions of devices manufactured, and generally using high quality materials too.
Profit margin is often the rally-cry of the pro-Apple-everything camp here, yet Apple has a lower margin than Microsoft and Google.
Apple's margins have been compared to other phone and computer MANUFACTURERS. Apples to apples, figuratively.
The company’s Entertainment & Devices group — which includes Xbox 360, PC game, consumer software, mobile and Zune sales — reported revenue of $1.665 billion in the third fiscal quarter ended March 31, compared with $1.629 billion a year ago. Operating profit was $165 million, compared with a $41 million loss in the midst of the recession last year.That's about a 10% profit margin on a recession rebound. And that includes decreased R&D and production cost on the XBox hardware, practically no-cost game licensing, lots of software income, and most importantly income from Live subscriptions. The XBox is planned to get even cheaper to manufacture due to one SoC replacing all core components. Still, that's just taking advantage of Moore's Law on a five year-old design. I do find it fascinating how they had to slow down the SoC to remain compatible because modern tech is so much faster only five years later.
Apple has to constantly ramp up manufacture for a few new products every year using the latest in technology.