profit

The extraordinary thing about Macs is its ability to convert sales into profit — no other computer manufacturer does it as well as Apple. For every $100 worth of computer that Apple sells, Apple makes $19 of profit whereas competitors are lucky to make $4. That’s more than 4x the margin, which is amazing.

PC makers feel the sting, but Macs still comprise less than 7% market share so Microsoft hasn’t felt the same kind of pressure. The Redmond company soon will, however. In Apple’s latest quarterly report, Macs grew 21% compared to the previous year’s quarter, over a time when the overall PC market is flat. Apple hasn’t done as well since 1995.

Apple has traditionally focused on the high end market; but more and more, Apple has been willing to compete in the middle. That’s why Apple is still selling the the non-retina MacBook Pro, the original iPad mini and the iPhone 5C, even though those products aren’t likely to garner the same high customer satisfaction scores that Tim Cook often brags about.

While Mac units shipped grew 21%, revenue only grew 18% — evidence that the average selling price of Macs sold has declined. This is a signal that Apple intends to grab market share.

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Yesterday, I wrote about how difficult it is to make decisions based on either business analysis or product vision. It’s a tension most large technology companies struggle to balance.

Of all the leaders I’ve read about, Larry Page of Google seems to have the best approach to addressing that tension with his moonshots strategy.

A quick recap: “moonshots” in Google are projects that aim to achieve 10x improvements vs. say, 10%.  10% means you’re doing what everyone else is doing.  You probably won’t fail, but you won’t break new ground either.  To disrupt an industry, you need more than a 10% increment, you need a 1000% quantum leap.  The only way to do that is to re-think everything, re-examine assumptions everyone else forgot to challenge.

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