Macs Out-Profit the Whole PC Industry

Moneybox
A blog about business and economics.
April 16 2013 11:39 AM

Mac Makes More Profit Than the Entire PC Industry

mac profits

Horace Dediu has a fascinating quantitative look at the PC industry, of which I thought the above charts were the most telling.

One thing that pops out of this is that even though it's the iPhone and the iPad that make Apple such a giant company, they're pretty much killing it as a PC vendor too. That said, particularly in light of the PC sector's decline in the face of quality improvements and a slowed consumer upgrade cycle, you have to wonder why Apple's corporate strategy involves such high profit margins on Macs. It's clear that profits from iPhone and iPad are more than sufficient to meet Tim Cook's goals in terms of dividends and investments. According to Dediu, Apple earns an average 19 percent operating margin on its Mac sales compared to 4 percent for Dell and less than that for HP, Lenovo, and Acer. A question to ask is whether piling up extra cash in the Braeburn Capital account is a smarter strategic move for Apple than investing in larger market share via lower prices. You could cut Mac prices 15 percent across the board to match Dell's margins.

If it were me, though, I'd take a good hard look at really shaking the industry up with a 20 percent price cut. That would reposition the Mac as a loss-leader whose function is to enhance the overall value of the Apple ecosystem. You'd recognize that Mac is nowhere near as important as iOS to Apple's bottom line, but that full-fledged computers are still a strategically significant market segment. A world where Mac has a much larger market share is one in which it's much harder to erode iOS' strengths in the mobile and tablet markets. At some point, Mac market share might grow loud enough that the DOJ or FTC would complain about selling at a loss but there's room for substantial market share growth before that kind of "predatory" pricing would become a real issue.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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