As PCs decline, it's Apple that's making real money from PCs

A blip on the radar for PC sales globally, Apple's Macs nonetheless make nearly half the industry's profits

Apple doesn't even make the list of top five sellers of PCs in the world (though it is No. 3 in the United States), but some number crunching by Asymco's Horace Dediu shows a surprising fact: Apple earns 45 percent of the operating profits in the PC industry. The top five sellers -- Hewlett-Packard, Dell, Lenovo, Asus, and Acer -- together make only 33 percent of operating profit. (Operating profit is the cash the companies keep after all expenses, including day-to-day operational costs, are paid for.)

Apple has a similar outsized profitability in the mobile market, where it makes about three-quarters of the entire industry's profits, despite selling about 15 percent of the world's smartphones. For PCs, Apple's outsized profit from selling Macs isn't as close as it is for mobile, but nonetheless remains surprisingly large.

The reason why Apple's sucking up nearly half the PC industry's profits is that its product margins are higher than Windows PC makers' margins. The cost of an average Mac is more than that of an average PC, but the cost to Apple to make those Macs is not that much more than what it costs Dell, HP, and so on to make their PCs. That of course suggests that buyers are willing to pay more for the Apple user experience than the Windows one.

Dediu -- famed for his insightful charts based on industry data -- notes in his detailed explanation of how he derived the profit figures that PC makers have long made less money per PC than Apple makes per Mac, but they sold so many PCs that they earned much more money in total (known in the industry as "making it up on volume"). But as PC sales continue their four-year decline, their old strategy of making it up in volume is less and less effective. Plus, Apple's Mac sales have risen through most of the last four years, so the proportion of Macs sold has increased, moving more of the industry's profits to Apple.

This story, "As PCs decline, it's Apple that's making real money from PCs," was originally published at InfoWorld.com. Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest developments in business technology news, follow InfoWorld.com on Twitter.

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