New research claims iOS generates 2.3x Windows profits, but does it really?

By Tom Warren, on 4th May 11 9:31 am with 9 Comments

New market analysis from Asymco claims that Apple’s iOS platform generates 2.3 times the amount of profit that Windows musters.

Apple’s Mac platform now accounts for just 13% of the company’s profit, 20% if software as part of the OS X franchise is included. However, iOS now accounts for more than 75% of Apple’s profit. The result is 96% of Apple’s profits are generated from OS X and iOS together. Apple’s Mac OS X profit hovered at around 50% between Q4 2005 and Q2 2008 before dropping steadily and reaching just 25% in Q4 2010.

Mac OS X profit vs iOS profit

The shift is an alleged example of the “post-PC era” that both Apple and Steve Jobs allude to. Microsoft’s Windows and Windows Live Division generated sales of $4.445 billion in the most recent quarter, with an operating income of $2.674 billion. Asymco claims that the Mac generates half the profits of Windows but that iOS generates 2.3 times Windows profits.

“The end of an era is the end of growth in one dominant business model,” said Asymco’s Horace Dediu. “The PC era was epitomized by the concentration of profits in a dominant operating system vendor. That growth has slowed if not ended. The post-PC era is being kicked off by a new business model where profits are being concentrated in a hardware+software+service integrator.”

However, Asymco’s figures do not combine profits from other PC makers including HP, Dell, Lenovo, Asus etc. Microsoft simply sells software to run on partner hardware, a different approach to Apple’s tight integration. IDC previously revealed that for every $1 that Microsoft makes, its partners generate $8.70 in revenue. If Microsoft had as much control over its ecosystem as Apple then its revenue would be considerably more. The report does highlight Apple’s massive gains and profits in its iPhone and iPad business though, ones that Microsoft will be hoping to compete against with its strong business partnerships. The software giant has inked tight deals with RIM and Nokia recently, both are struggling to compete against Apple and Google in the mobile smartphone market. Microsoft’s strategic partnerships will help the firm spread its Windows everywhere message and will ensure that any profitability from those partners efforts with Microsoft software will also earn Microsoft revenue.

Microsoft is also set to reveal its Tablet strategy fully in September. The company is planning to unveil its next-generation of Windows, set to run on ARM based chips. Microsoft is currently developing a touch centric user interface that is expected to run Windows Phone applications. The “Immersive” user experience that Microsoft is developing has leaked several times but has so far only shown a glimpse of what Microsoft is planning. Who really knows what September will bring?

  • Tom Servo

    iOS doesn’t generate squat. It doesn’t cost anything. Any profit from it comes from device sales, which is entirely different that pure software sales, since Microsoft doesn’t sell PCs. Or phones.

    • Sebastian Gorgon


  • GP007

    This really is comparing Apples to Oranges, Apple sells hardware, MS sells software. There’s no real comparison since for apple one iOS software sale equals a $500 or so smartphone while for MS a WP7 license is what? $25? Even if you want to compare desktops a OSX sale can be anything from a $1k-$2k+ Mac most of the time while MS charges PC OEMS what? $50?

    This clear difference between hardware and software as far as price goes is why Apple is now beating MS in revenue and profits. It’s also why someone like IBM, who barally gets in the tech news yet makes it’s money on expensive server hardware + services makes a boat load of money too yet is basically forgoten to the consumer.

    • Anonymous

      funny that there are so many idiots that consider MS operating system as expensive. With the amount of things you can do on a computer Vs. a punny happy touch phone is incredible that people even suggest it as expensive. A cellphone total cost range up to 2-3000 dollars per contract, depending on use and features and there’s not much productivity to gain from smartphones like the iPhone at least not compare to the Windows Environment.

    • Mark

      “while for MS a WP7 license is what? $25?”

      The figures I’ve heard are closer to $10-15. Someone like Nokia is probably paying even less when you subtract money flowing the other way. And the PC average is probably below $50 now. Netbooks dropped it a bunch already, and now >50% of sales are coming from developing countries (both of which = less $ for MS).

  • Joe05

    More pro Apple PR dribble, where do thee people come from? Companies I’ve never heard with reports that are directed towards who ?

    One day we’ll look back on these times as not only great innovations in technology, but also what could best be described as a massive Disinformation campaign. There seems to be a contingent of bloggers and tech pundits who seems to have made it their agenda of driving the Message, Google and Apple good no matter what the facts are, Microsoft, Rim or Samsung any non silicon valley based company is bad and not news worthy or not worthy of positive evangelism .

    What a joke.

  • Guest

    Asymco is actually just an Apple fan. He wrote an article about MS partners but was wrong because WP7 is different from WM. He trolls Windows.

  • Mark

    Post-PC is a poor choice of names, but there’s little doubt that we’re entering an era where the PC is no longer the center of computing growth and innovation. Today, smartphones and increasingly tablets have taken over that role with cloud services behind them. Unfortunately, MS blew its headstart in mobile and tablets and allowed Apple to become a leader in both. With that success, and because they ship the full product stack and not just the OS, Apple has been able to surpass MS in revenue and profit and take huge shares of total undustry profit (even in PCs they enjoy a large share of that). PCs aren’t going away, just as mini-computers and mainframes haven’t even though the PC long since took over primacy from them. But growth is slowing (negative right now) and will likely decline over time.

    The issue for MS is how will mobile and tablets evolve? Clearly the early moves on both have been dominated by the “iPod” model and Apple has been very successful because of that. But mobile is already showing signs of following the “PC” model with one OS and multiple OEMs. Unfortunately for MS, the standardized operating system there, due to MS’s ridiculous delay in responding to iPhone, is now Android. But Android has its own problems, not the least of which is unclear IP ownership. Will tablets follow suit? Will Android become the defacto there too?

    Apple is in a can’t lose position as long as both markets keep growing. Any way you slice it, they’re going to have a much larger share of mobile and tablets than they ever had in PCs. Google is currently well positioned to be the Windows of mobile and tablets. And MS has the most to lose and is behind.

  • oolong2

    “Post PC” is definiately a poor choice of words… From my perspective these are all personal computers even mobile phones are personal computers. If anything we’ve just moved into an era where everying is not just ONE PC that is either a Mac, Windows, or Linux desktop.

    We are in a multi-device world where people may have an Android phone, windows desktop, X-Box or PS3s, an iPods, etc.

    The digital information world is much bigger than it used to be and that has opened up many new markets for consuming all of this content. These are usefuly devices, however there is no argument for using an iPad or Andriod tablet for content creation other than for typing out a quick email.

    This is where Windows 8 running on ARM comes intothe picture. Consuming content on a optimized device is one thing. However these devices are now powerful enough to replace laptops.

    However running Windows 8 on ARM doesn’t just mean an iPad runnng windows…. It’s being able to support multple types of input (thousands of devices, Kinect, etc.) and multple types of output (large screens, smalls screens, multple screens). It’s seriously going to open things up in ways that people can’t imagine today because they are currently enamored with toy touch tablets.