4 ms·
Different industries have different margins. Apple and Microsoft are not really comparable businesses.
by kgwgk 4y ago
Different industries have different margins. Apple and Microsoft are not really comparable businesses.
- drawfloat 4y agoYou have to take quite a narrow view of the business world to say Apple and Microsoft aren't comparable. They might have different products, but it's not like Apple is a greengrocer.
- fauxpause_ 4y agoFrom a profit margin perspective they are wildly different. Amazon profits are mostly just AWS. Microsoft is, I think, driven by their enterprise software. Apple is, I think, more hardware and App Store. We shouldn’t expect them to have similar margins.
- cubefox 4y agoNobody said we should, but they have.
- safog 4y agoAnd so it's a meaningless correlation. Telsa has a 30% margin too. Do you want to lump them along with Apple and MSFT?
- cubefox 4y agoThis source says 15%: https://companiesmarketcap.com/tesla/operating-margin/ https://companiesmarketcap.com/tesla/operating-margin/
- lotsofpulp 4y agoI have doubts that Tesla can convert that operating margin to profit margin, which puts them far behind MSFT and AAPL which are tried and true profit margin machines.
- kgwgk 4y ago80% of Apple’s revenue is from selling products and 20% from services. The gross margins on those segments are completely different - twice as large for services. Microsoft reports three segments with roughly the same size and similar margins.
- ubermonkey 4y agoApple is a hardware company. Microsoft is almost entirely a software company.
- sleepybrett 4y agoxbox, surface, HID devices, hololens, ... microsoft is TRYING to be a hardware company, they just suck at it.
- lmm 4y agoMost Microsoft hardware is excellent IME.
- sleepybrett 4y agois it? the new natural keyboard is literal landfill, the surfaces are great until they break, i don't think even MS can open them up for repair without destroying the damn things. The surface studio was apparently a technical dud and way too expensive to boot. The xbox 360 had such terrible heat dissipation problems that it got it's own moniker 'the red ring of death'. In the old days their HID device devision was solid, and was doing some interesting things. Back in the 90s-00s their keyboards and mice were pretty much best in class (if you wanted a membrane keyboard), the natural keyboard was a big step forward in ergonomics. On the gaming side they had solid mid range flight sticks that the rest of the industry lacked (it was either crazy high end or literal trash). Hell they even tried some coolish experimental devices that were at least interesting .. Specifically I'm thinking of the Sidewinder Strategic Commander. A kind of one handed keyboard that was sitting on top of a two axis sliding mechanism. In the 2010s they did some interesting devices (or branded some) like the kinect and the original surface tables (the ones that looked like cocktail style arcade machines)... and they started moving into compute devices like the 'second gen' surface branded tablets/convertables/laptops. Those seem less successful overall. I don't see too many enterprises giving people surfacebooks instead of lenovos...
- lmm 4y ago
- edgyquant 4y agoThe entire argument behind capitalism is that high margins attract competition that drives those margins down towards zero. If that isn’t happening, it’s due to an environment that isn’t competitive (e.g. too high a barrier to entry.)
- 1980phipsi 4y agoIn the economic model of perfect competition, price equals marginal cost, so margins will be zero, as you say. Though you don't explicitly argue it, it is worth making clear that capitalism doesn't mean that the perfect competition model will always hold for all markets. There are plenty of reasons why monopolistic competition could occur, even in a strawman version of capitalism. People could pay attention to branding, for instance. Firms that spend more on branding might be able to maintain higher margins. So even in the strawman capitalism, margins could be high for reasons other than a lack of competition. In the real world the technology industry does tend to have higher margins than other industries. There might be perfectly normal explanations for that, such as network effects, but there are also government policies that have the effect of reducing competition. For instance, intellectual property laws reduce competition in order to attempt to encourage innovation. The strawman version of capitalism doesn't exist in the real world. Margins can remain high for some time. That being said, there are competitors for Microsoft's bread and butter products. If you want an alternative to Windows, try Linux. If you want an alternative to Office, try Open Office. For many users, however, they get a better experience with the Microsoft products than these alternatives, even though they are free. Microsoft has to keep making their products better than the alternatives or people will use others (though there are costs of switching and network effects that mean that MS probably doesn't need to have the absolute best product on the market in order for customers to keep using them).
- cubefox 4y agoIn what industry is a 40% operating margin considered normal? For comparison, Elsevier has an operating margin of 37%.
- kgwgk 4y agoMcDonalds has an operating margin over 40%. And for Altria is above 50%. And for Visa or CME Group above 60%. How are any of those things relevant for the comparability of the businesses of Apple and Microsoft anyway?
- smeagull 4y agoThe holding company that does no selling to customers and only manages land and franchises has a margin over 40%. Nobody is surprised there.
- kgwgk 4y agoNobody was trying to surprise anyone here. The point was precisely that the margin depends among other things on what the company does and the things that Apple and Microsoft do are not really comparable.
- smeagull 4y agoThey're essentially the same company with minor philosophical differences.