First Ring Daily 1195: Apple Makes Bank

Posted on January 28, 2022 by Brad Sams in Podcasts, First Ring Daily with 11 Comments

On this episode of First Ring Daily, Apple reports earnings and we dive into the details of the balance sheet.

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Comments (11)

11 responses to “First Ring Daily 1195: Apple Makes Bank”

  1. Stabitha.Christie

    I'm guessing Paul doesn't see the irony of saying Apple's margins are too high while then praising Microsoft for actually having higher margins :)

  2. Paul Thurrott

    Apple's margins are too high because they make hardware which is always low margin. Just not for Apple.

    That was the point.

    • Stabitha.Christie

      Your stance is kind of perplexing. Who is the arbiter of margins? Why is hardware not allowed to have as high of margins as software? That seems a tad arbitrary. Also, why doe all companies have to have the same margins? Because other hardware makers have poor margins Apple has to as well? All kinda goofy to me.

      • Paul Thurrott

        What the hell are you talking about? My "stance" on margins? This is an observation, not an opinion: Software and services are generally high-margin businesses, and hardware is a universally low-margin business ... except for Apple, that's what makes them unique. PC and phone makers make low margins. Consoles are sold at a loss. Etc. It's OK if you don't understand this. But don't confront me over nothing.
        • Stabitha.Christie

          I understand that hardware typically has low margins. I understand that software has higher margins. This isn’t the part I’m confused on. I’m confused why you see Apple’s atypical margins as an issue. Maybe I’m misunderstanding your point but when you say Apple’s margins are too high you seem to be implying they should lower them to be closer to what the industry is. That is the part I find perplexing .

          • johnnych

            I agree with your take as well, it's like someone trying to criticize Porsche for having high margins - there's a reason they charge a lot for their cars, because they are the best quality on earth. Same with these new Apple Processors, iPhones & Macbook Pros I purchased, they are a lot of money but they are amazingly solid - the exact same reason why I only buy German cars!

            Sent from my Macbook-Pro-M1-Max-14-inch-ARM-based laptop (Intel free since pre 2023!)

            • Paul Thurrott

              Nobody is criticizing any company for having high margins. I was simply pointing out how unusual---unique, really---it is for a hardware maker to have such high margins.
              • Stabitha.Christie

                I'll go ahead and risk another patronizing comment like "It's OK if you don't understand this"..

                I think looking at Apple as "a hardware maker" and then comparing to other companies like Dell or HP is looking at it through the wrong lens. Apple isn't a simply a hardware company. Yes they make PCs, phones, tablets and wearables. But they also are do software and services which have higher margins. They do processors, have seen Intel's margins? They are in the 60% range. They do media creation. So it really isn't unreasonable for their margins to be somewhere in-between a company that is simply a hardware maker and those that like Intel and Microsoft which have much higher margins. Reducing to simply making hardware is just widely inaccurate. I'd try to draw a comparison to someone else but I can't think of another company that takes their "whole widget" approach.

              • pecosbob04

                From a business standpoint at least there may come a time when the greatest accomplishment (of many) of the 'visionary' Steve Jobs will be seen as his hiring of Tim Cook.

  3. Michael_Miller

    I suspect that Apple's non-recurring costs on its hardware is small; particularly on phones and IPADs. On phones, they probably recover their non-recurring in one-weekend of sales. So, their costs are largely made up of manufacturing with production in low labor wage China. Their 'formula' for revenue and profits is repeatable and sustainable. What can fragment their markets and/or disrupt their products and their business units? In short, nothing in the medium term.

    • L Gilles

      First, Apple has markets where they don't compete directly with the others, Macs vs all PC manufacturers, iPhone vs all Android.

      Samsung first competitors are the Chinese manufacturers, they even profit when Apple sells well.

      Second, Apple can compete with itself, iPads vs MacBooks, as both devices have roughly the same margin.

      Third, Apple has perfected the supply chain during all these years with Tim Cook as a master chief. The iPad supply chain is redirected to the iPhone as the MacBooks success is compensating the iPad losses.

      AWS always has been the main income for Amazon. It's an impressive business.