Possibly, but nonetheless the incremental profit on a $999 OS X
Server sale
(sunk costs are just that, sunk) dwarfs the profit margin on a
$2999 Xserve
sale,
Again I don't know where you come off stating this.
OS X development costs are very, very high.
Dan, do you not understand the concepts here?
I'm not as dumb as my picture. Yes.
Incremental profit is the profit from selling an additional unit.
R&D costs
are sunk already-- Apple can't recover them if OS X server doesn't
sell.
When Apple sells a boxed OS X Server, their incremental costs are
the costs
specific *to that box*-- physical deliverables (disk, manual, cute
little
Apple software coupon, packaging) and the costs to deliver that
specific box
(shipping, warehouse space, sales rep time). If Apple sells only
one copy of
Leopard server, they will lose a lot of money-- but every
additional copy
has a minimal incremental cost and a huge incremental profit.
And Apple would have to sell millions of units in order to dent the loss
Xserves don't work that way-- the processor in the 2,000th Xserve
they sell
costs roughly the same as the processor in the first. Ditto logic
board,
hard drive, power supply, etc. (Yes, component prices fall over
time, but
not enough to bring Apple to the 99% incremental margins that software
enjoys.)
So, Technology Economics 101 review: Software has huge up-front
costs for
R&D and much smaller incremental costs. Hardware has much smaller R&D
up-front costs but very high incremental costs. This is why MS has
gross
margins in the 79% range (software company) while Apple has gross
margins in
the 33% range (hardware/software company) and Dell has gross
margins in the
18% range (hardware company).
--
Dave Pooser, ACSA
Manager of Information Services
Alford Media http://www.alfordmedia.com
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