On Apple Business Strategy… How to increase profit by 20%

I have a simple suggestion to increase Apple (AAPL)’s bottom line by about 20% or $ 1.5 Billion of increased profit on top of their current $ 6 Billion earnings:

Open bundling of Mac OS X with Dell, HP, Acer & Lenovo… Imagine a “Dell Mac” !!

Here is a summary of how Apple might be able to get the 20% increase in Earnings:

  • Global PC unit shipments from top 4 PC vendors (Dell, HP, Acer, Lenovo) is about 120 Million
  • Macs could easily become 10 percent of these PC shipments if the above strategy is followed.
  • Mac OS X price is $129. Apple wont need to lower this price even for these vendors & the gross margin on OS X sales will be more than 95%.
  • Any Mac OS X sales via these PC vendors will be direct profit to Apple.
  • Current Apple Profit = $ 6 Billion
  • Additional Apple Profit = $129 x 12 Million units = $ 1.5 Billion

20% increase in Apple’s profit and any related increase in AAPL stock price seems like a small issue… And it is !

But the bigger impact would be the penetration of Mac in the computer world. This will lead to pull-thru sales of more Apple gear – including Macs and other miscellaneous products. Of course, there might also be a small cannibalization of Mac hardware sales. As shown by the success of iPhone over other much better phone hardware from Nokia, LG, etc, Apple’s prowess is in their software portfolio. This strategy of opening up Mac OS X to be bundled with other PCs can leverage this and make a significant impact in the computer world – 30 years after Macs first made their big impact.

Now would be a good time to open up the bundling of Mac OS X to other PCs because:

  • Microsoft Windows is in its weakest spot in a decade with Vista. Many people would be happy to run Mac OS X with Windows XP via VMWare or Parallels.
  • With a slowing US economy (biggest Mac market), Apple is going to find it difficult to increase revenues – much less profit.
  • With the success of iPods, iPhones, Apple is no longer solely dependent on Macs for their business. So, keeping OS X tightly bundled with Apple hardware is less of a strategic concern for Apple.

Most importantly, I would be able to buy a cheaper “Dell Mac” πŸ™‚


About navanee
Citizen of the Universe. Visiting Earth on a valid world-visa, presently parked in Bangalore India. Detailed Bio here: http://www.linkedin.com/in/navanee Previously, lived 17 years in Coimbatore, 4 years in Chennai, 2 years in Provo, Utah and 11 years in San Jose, California.

4 Responses to On Apple Business Strategy… How to increase profit by 204

  1. Love your article. Easy to read and very informative and relevant!

  2. dineshbabu says:

    Mac OS X on a Dell will be Hell. The Whole Mac experience comes from both the software and the hardware, by opening up OS X to Dell and others Apple will have to worry about compatibility, support and (not so small) cannibalization of their own hardware. Granted they’ve got iPods and iPhones now, but still Macs make up for a large portion of their bottomline. It would make sense to open up OS X only when Apple grows in other consumer products direction so much that Macs become a smaller portion of their business. This may be a while. In any case no one can predict what Steve J has in his mind, he did shift to Intel from Power PC which kind of surprised everyone, so you never know.

    By the way, I was looking around to see if my friends were blogging and found you on WordPress. Cool job! I have been blogging for a while, stopped and then restarted a month back under a new name.

    — Dinbu

  3. dineshbabu says:

    Here is my blog – http://maduraiveeran.wordpress.com, not sure why it doesnt link it that way on my name.

  4. Ovation says:

    Somehow i missed the point. Probably lost in translation πŸ™‚ Anyway … nice blog to visit.

    cheers, Ovation.

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