msft 1 year

Two interesting bits of financial/market share news today:

  1. Microsoft reported its first annual revenue decline ever.
  2. Apple has 91% market share for personal computers in the US costing more than $1000.

What do these two things have in common? In my world, netbooks. Look at it this way. There are a number of reasons Microsoft saw a revenue decline this year (and please, before you shed any tears, bear in mind that the company is still making a profit, just not as big a profit as it did last year). Some of those reasons have to do with software: Windows Vista didn’t catch on the way Microsoft hoped it would, and Windows 7 isn’t available yet.

But the recession has also led to a decline in PC sales generally, and a surge in sales of low cost netbooks which run older copies of Windows XP which Microsoft is offering at a deep, deep discount in an attempt to provide an affordable alternative to Linux powered netbooks. And that’s led to lower profit margins for Microsoft.

Apple, on the other hand, doesn’t sell a netbook. And it doesn’t (officially, anyway), make its operating system available for use on existing netbooks. So the company is pretty much ignoring the low end of the personal computer market. And while analysts have been predicting for the past year or two that the company would have to release a netbook, here’s the thing: It doesn’t. Because Apple has built a name for itself providing high quality computers. Not cheap ones.

And while that might not seem like a good strategy during a recession, it appears to be working overall. For people who are willing to spend a lot of money on computers, Apple seems to be the most popular choice, by a long shot. Sure, the vast majority of PCs that are sold cost less than $1000. But there are still a fair number of people willing to spend top dollar for premium computers. And if Apple were to start offering cheaper $300, $400, and $500 computers, it might be hard to convince consumers that the company’s other computers are worth a premium price.

While I generally prefer a cheap and good enough computer to an expensive one that offers more features than I need, I think Apple has been smart to stay out of the netbook space, even if there are a number of Apple enthusiasts clamoring for some sort of Macbook Mini,

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10 replies on “Financial results: Cheap netbooks hurting Microsoft, but not Apple”

  1. >Because Apple has built a name for itself providing high quality computers. Not cheap ones.
    High quality??! Notebooks with screens that are worse than netbooks’?

  2. Apple builds quality and communicated that quality to customers. So customers who value quality will happily pay Apple for quality. Personally, a went all Mac last year – new job + Vista avoidance – and I am wonder why I didn’t switch sooner. Such a better computing experience! Now converting home to all-Mac. Worth every penny.

    1. ENOUGH!!!
      They sell the exact same components other companies sell except for the chassis and a few internal doodads.
      HD? Same.
      Intel chip? Same.
      Video cards? Same. Defective Nvidia and all.
      Memory? Same.
      Screen? Im not sure but I dont see why not.
      The companies that make the Mac products are sub contractors that also make other products.

      Its bad enough when the brainwashed crowd was hyping that processor speeds werent the only measuring stick since the Motorola chips were magical but its Intel now so at least weve gotten that BS out of the way.

      Its a niche product. Fine. Enjoy it. Some people pay more for their wine, others dont care if its got a bottle cap. Some people buy expensive euripean cars, others will never buy a new car. Its a choice and a question of priorities.

      >I’ve never understood why companies don’t focus more on building >something of quality where they can charge a premium

      Some people…many people wont pay a premium.

      Some people like choice. Some dont mind only chocolate or vanilla ice cream while others like the fact tha there is 42 flavors.

      Some people just cant understand things. WHich is why a few times a week I either talk to or read someone talking about how underpowered netbooks are. Yes, if you want to edit HD movies, they are. But to do ‘net’ things, theyre not. Still, some people just cant understand.

      >Money is not Apple’s bottom line. Building the best machines with the >best consumer experience is.

      Ok, just shut up now.
      Youve lost any credibility repeating company PR campaigns.
      YOU are the person marketing campaigns are built around.

      i understand that people need to justify their spending and that people love being part of a ‘club’ but I hear the same thing from riceboys who talk about the money they put in their 4 cylinder cars to make them ‘sound’ faster.

      >If companies build quality products that people really desire it could >really change the world.

      Im going to throw up now…..

      1. Dude, it’s a computer, not a religion, take a pill.

        The chassis, IMO, is the difference. You’re right that modern PC components are generally fine and fast and reliable enough to meet all needs, but Apple builds their PCs integrated a way you’ll never get slapping components together from off-the-shelf parts, and they do put a premium on quality.

        Go check out a MacBook Pro at an Apple store- its got glass over the LCDs instead of plastic, a chassis honed from a single block of aluminum, MagSafe power connector, backlit keyboard, multitouch mouse pad- all this is how Apple demonstrates that it’s a superior product, and people respond to that.

        Now, consider that Apple just dropped the entry-level price for these touches that, I will contend, make a HUGE difference in day-to-day use, down to $1300 (for the new MBP 13) from over $2k (previous models MBP which started at 15″). That’s one part of why Apple is up and Microsoft is down.

        The other part is, the two are apples (rimshot!) and oranges- OSX is a loss-leader Apple uses to sell hardware, while the only hardware Microsoft sells is the XBox, where they take a loss to sell more software. The first of these is a sustainable business model, while I would contend that the other is not.

  3. dude, the reason MS has a revenue decline is because they didn’t release a single good software title since Windows XP and Office 2000.

  4. Apple’s way of making money is exetremely smart and good for the economy. If more companies focused on building the best products then our economy would transform.

    Money is not Apple’s bottom line. Building the best machines with the best consumer experience is.

    I’ve never understood why companies don’t focus more on building something of quality where they can charge a premium which in turn would allow them to pay their employees more which would in turn stimulate our economy.

    There’s absolutely no reason why we can’t have a radically different economy than the one we have currently.

    How can constantly cutting costs by cutting corners be good? I believe capitalism could work better for everyone. We’ve just got to get out of what I call the Walmart way of doing business.

    Everybody deserves to earn more money. If companies build quality products that people really desire it could really change the world.

    I hope to see this in my lifetime.

    1. “Money is not Apple’s bottom line.”

      Uuuuhhh… yes it is. They just happen to be better at doing it without insulting their customer base, which is what Microsoft tends to do.

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