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Apple leads PC industry in profit share, analysts say

Apple leads PC industry in profit share, analysts say

Wondering why other computer makers suffer from Apple envy? Deutsche Bank may have an answer for you: its profits are higher--way higher--than any of its competitor.

According to a Business Insider article, the banking giant has aggregated numbers from the top ten PC makers in the world and determined that, while Apple only commands 7 percent of overall revenues in the PC market, its products account for 35 percent of the operating profits. (Operating profit represents the surplus generated by the difference between the sale price of a product and its cost; it doesn't take into account things like taxes, interest payments, and depreciation.)

None of the other manufacturers on the list--which includes such giants as Dell, Hewlett-Packard, and Lenovo--comes even close to matching Apple's five-to-one ratio between revenue and profit share, a fact which the article attributes to the fact that those companies need to pay a "Windows tax" in order to distribute Microsoft's operating system installed on their products.

While the fact that hardware and software are tightly integrated in Apple's platform undoubtedly affords them some economies of scale, however, one should also consider the fact that OS X doesn't appear magically out of thin air. Apple needs to invest--and likely invest heavily--on developing and maintaining the operating system, and that's not an inexpensive undertaking.

Apple's success is probably due to a combination of factors, including a well-defined lineup of products with little overlap, the tight inventory control for which Tim Cook is famous, and the higher production quality that attracts buyers willing to pay a premium for what they perceive as superior craftsmanship.

This purchasing power makes Apple customers attractive to software developers, which might explain why the OS X software market is so vibrant despite a relatively small share of overall PC sales.


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