3 ms·

Those numbers are very misleading when you understand that the industry/market was expending at such rapid pace, that even a poor/marginal player could do well.

• scholia 10y ago
  The market expanded much more dramatically in the 1990s, after Sculley left. Of course, that massive expansion was kicked off by Windows 3.1 and then Windows 95. Microsoft's annual turnover went from $3.75bn in 1993 -- less than half Apple's -- to $32.19bn in 2003, which was 5x more than Apple. Dell is perhaps an even better illustration. Its turnover grew from $2.9bn in 1993 to $35.26bn in 2003. Apple's "market share started declining rapidly" after 1995 (when it reached $11.06bn) because it couldn't compete with Windows 95.
  • hollerith 10y ago
    >Microsoft's annual turnover went from $3.75bn in 1993 -- less than half Apple's -- to $32.19bn in 2003, which was 5x more than Apple. OK, but remember that Microsoft's only significant "variable costs" (cost per unit sold) were the costs of stamping CDROMs and providing basic tech support, whereas Apple (and Dell) incurred all the variable costs involved in making whole computers, so Microsoft's "gross margins" (turnover minus cost of goods sold) was much higher than Apple's. Supermarket chains have tremendous turnover, but their gross margins are around 1% in contrast to Microsoft's margins in excess of 30% in the 1990s -- and Apple's sky-high margins of recent years -- and IBM's sky-high margins before they lost their dominance during the rise of the personal computer in the 1980s. My point (since we are talking about CEO performance) is that Microsoft was probably much more profitable than Apple already in 1993 although the ratio definitely increase in the late 1990s as you point out.
    • scholia 10y ago
      Well, Microsoft is basically a licensing business so the profit margin should correctly be 100%. Unfortunately, it also has to create stuff to license (ie pay for R&D) and incur some marketing, support and other costs, so that reduces the margin somewhat ;-) In the 1990s, Microsoft also had CD manufacturing and packaging costs, but those have mostly gone away now. In a competitive market, hardware generally results in manufacturing_cost+plus_profit pricing, which drives margins close to zero. That's what happened to the PC OEMs. Apple makes better margins because it doesn't use cost-plus pricing: it picks whatever price it thinks the market will bear. The higher margins are justified by product design, branding, saturation advertising and/or whatever. That's how IBM worked as well, until it had to face competition from PC clones. They're different business models, but Sculley took a bet, essentially thinking that there was more turnover (and profit) in selling PCs for $2,500 than there was in licensing software for $50. He was wrong in the 1990s, but maybe times have changed ;-) IBM has got rid of as much hardware as possible and shifted its focus to high-margin licensing, and it's not doing too well....
      • yuhong 10y ago
        To be honest, it was in the early 1990s when PC prices was falling fast.