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TMO Reports - Analyst Compares Windows, OS X Costs [UPDATED]

by , 1:45 PM EDT, August 28th, 2006

Piper Jaffray analyst Gene Munster on Monday issued a research report in which he compared Microsoft and Apple's OS strategies, concluding: "Apple's OS pricing strategy in line with the company's overall strategy: Apple users are willing to pay a premium for hardware and software built for the Apple platform, enabling Apple to expand profit margins."

Mr. Munster noted that his comparison showed that Mac OS X costs users US$129 per year for the full version, or $107.50 on average to upgrade, given the fact that Mac OS X v10.1 was a free upgrade. In contrast, Microsoft has averaged 2.25 years between major Windows releases, with an average cost of $114 per year for the full version, or $48 annually to keep up with upgrades.


Gene Munster's chart of OS upgrades

"Apple's strategy assumes that users are more inclined to buy cheaper versions more frequently," the analyst wrote, "which results in higher costs per year for Apple users when compared to Windows users. Given Apple's ability to drive greater revenue per customer versus its competitors through sales of peripherals and frequent OS updates, Mac market share gains will mean more to the company than simply increasing Mac revenue. Most analyses of the impact of Mac market share gains exclude the positive potential impact on the company's peripherals and software segments, which account for 12% of revenue.

"We believe it is important to keep this added benefit in mind, as a growing number of Macs in consumer's hands will lift these segments as well."

Mr. Munster retained his "Outperform" rating on Apple's stock, with a $99 price target. At 1:43 PM EST on Monday, the company's shares were selling for $67.41, down 1.95% for the day.


If you are interested in Apple's stock, join our forum members in the Apple Finance Boards, a moderated forum for Apple Investors and people who are interested in Apple's financial dealings. For other stories regarding Apple's stock activity, visit our updated Apple Stock Watch Special Report.

3:41 PM EST: Updated article with chart.

Observer Comments

Show: Subjects Only | Full Comments
Close Name:ireid2k Posts: 125 Joined: 07 Apr 2003
Subject: Just goes to show. . .

. . . that you get what you pay for! or as the old Chinese proverb says:

'Cheep ting no good'

Close Name:L0u13 Posts: 4109 Joined: 26 Dec 2001
Subject: Security software...

Do any of these "analysts" take into account the $40-50/year for antivirus software? Granted free alternatives are available... But it's something that needs to be accounted for. And completely unnecessary on the Mac side.

Close Name:Small White Car Posts: 1950 Joined: 02 Jul 2004
Subject: Re: Security software...

Quote
L0u13 wrote:
Do any of these "analysts" take into account the $40-50/year for antivirus software?


No, because Gene was comparing the company's pricing strategies.

What (and how often) Apple and MS decide to charge shows how they view their customers and what kind of people they're trying to atract.

Antivirus software has nothing to do with that.

Close Name:Bosco Posts: 999 Joined: 03 Jun 2002
Subject: Munster's Next Book Report

Next Monday, Gene Munster will offer a long anticipated book report on The Cat in the Hat in which he concludes that his price target for AAPL is $99.

Close Name:tiff Posts: 1 Joined: 28 Aug 2006
Subject:

Quote
Bosco wrote:
Next Monday, Gene Munster will offer a long anticipated book report on The Cat in the Hat in which he concludes that his price target for AAPL is $99.


Are you kidding me? Why aren't you doing Gene Munster's job, since you obviously know so much more than he does. His track record proves itself.

Close Name:Ahnyer Keester Posts: 663 Joined: 25 Jun 2001
Subject: Uhhh

"2.25 years between major Windows releases, with an average cost of $114 per year for the full version, or $48 annually to keep up with upgrades"

As I recall, it was a heck of a lot more than $114 for XP. And if you don't include the long wait for Vista with its frequent delays, I'm not so sure 2¼ years is correct.

Close Name:codebowl Posts: 10 Joined: 28 Aug 2006
Subject:

From what i understand apple puts out a new version of the OS every year, MS does not do this, there was Windows 95, 98, ME, 2000, XP, 2003 (directed towards servers)........... Vista?

ME was just 1998 with more bugs added.

You defenatly do not see a new os from MS every year, unless they count service packs which really are just bug fixes and maybe a few internal app upgrades (IE, WMP)

If i recall the only way you could get 2000, XP for under $299 was if you bought the OEM off of ebay, you can get this for about $130 from there, but you get no books etc. and most of the time it is distributed illegally (not sent with a piece of non MS hardware, i had this issue with ebay and was unable to use the OS for my company according to MS, i had to fight for 3 months with paypal to get a refund).

These are only a few reasons that i made the migration to Mac.

Close Name:Ahnyer Keester Posts: 663 Joined: 25 Jun 2001
Subject: Ha!!

If this is correct, those numbers are gonna change!!

Full Version
•Vista Ultimate $450
•Vista Business $341
•Vista Home Premium $269
•Vista Home Basic $233
Upgrade Version
•Vista Ultimate Upgrade $269
•Vista Business Upgrade $224
•Vista Home Premium Upgrade $179
•Vista Home Basic Upgrade $116

Close Name:rpaege Posts: 73 Joined: 16 Dec 2005
Subject:

He compared OS X to Windows HOME addition. It should be compared to the Professional edition, no?

Close Name:Bosco Posts: 999 Joined: 03 Jun 2002
Subject: Thank you Ahnyer...

You'd think you guys would eventually get wise to the analyst game. He set a target quite awhile ago. Now his future reputation depends on the stock meeting the target. So every 3 or 4 days, he issues a report with an increasingly meaningless indicator of how AAPL will jump from the $50-$70 range it's stuck in to $99, which would be a 40% - 100% increase in value depending on what you call the starting point. MacHeads are all happy with their cheerleader because AAPL stock success means sticking it to Bill Gates, apple pie, and an end to teenage pregnancy. Yet week after week, as AAPL goes up and down between $50 and $70, Munster offers new reports to give us all hope. To paraphrase the old Wendy's commercial, Where's the Beef?

Ahnyer points out that Munster's latest report is looking at old data, with new Windows pricing already announced and already taking away the supposed advanatages that Munster touts for Apple's premium OS pricing. BTW, does anyone remember when high TCO was generally considered a disadvantage? If anything, Munster's report confirms for me that Apple is playing to the small crowd that will pay for quality and style.They aren't going to suddenly convert the price conscious folk just because there is a hockey stick growth prediction for their market share.

Close Name:codebowl Posts: 10 Joined: 28 Aug 2006
Subject:

and if you are talking about the windows vs apple upgrade you cannot compare like that because mac does not offer an upgrade, thier os is just priced at the upgrade price, windows upgrade disks are just that. I would always prefer a full install disk anyday over an upgrade. If you buy windows 98 and upgrade to windows 2000 then to XP, if you ever have to reinstall you have to reinstall each of them, with windows you are looking at an hour for each

I support Mac all the way now

Close Name:ericmurphy Posts: 19 Joined: 01 Aug 2001
Subject: Windows Updates

I wonder how many consumers even bother to update to a new version of Windows on a PC? I'd be willing to bet that most people use the version of Windows that shipped with their PC, and the only time they get a new version of Windows is when they buy a new PC. How many consumers are even up to the challenge of installing a new version of Windows on an existing machine, especially when that means you need to reinstall virtually every single application you use?

It would be interesting to see what percentage of revenue Microsoft gets from Windows sales that doesn't come from OEMs. How many actual shrinkwrapped copies of Windows XP are ever sold? Given that virtually every PC that's still running today (i.e., how many 5+ year-old PCs are still in use?) is running XP, I can't imagine that it's very many.

Close Name:codebowl Posts: 10 Joined: 28 Aug 2006
Subject: Re: Windows Updates

Quote
ericmurphy wrote:
I wonder how many consumers even bother to update to a new version of Windows on a PC? I'd be willing to bet that most people use the version of Windows that shipped with their PC, and the only time they get a new version of Windows is when they buy a new PC. How many consumers are even up to the challenge of installing a new version of Windows on an existing machine, especially when that means you need to reinstall virtually every single application you use?

It would be interesting to see what percentage of revenue Microsoft gets from Windows sales that doesn't come from OEMs. How many actual shrinkwrapped copies of Windows XP are ever sold? Given that virtually every PC that's still running today (i.e., how many 5+ year-old PCs are still in use?) is running XP, I can't imagine that it's very many.


Couldnt you use these same drawbacks for the mac as well? if you buy Leopard wont you have to install everything again? Forgive me if i am wrong i have yet to have to go through that but i assumed it would be the same or similar.

Close Name:LaurieF -   TMO Forum Mod Posts: 3497 Joined: 15 Jun 2001
Subject:

No, not necessarily. Although you can. The generally recognised way of doing it is to use Archive/Install method, which retains network settings and user files.

Here's Apple's note on it: http://docs.info.apple.com/article.html?artnum=107120

It is possible to do a patch upgrade, but I've always had problems with it.

The nuke-and-pave option (aka Erase and Install) is the one which is the complete re-install from scratch.

Close Name:Small White Car Posts: 1950 Joined: 02 Jul 2004
Subject:

Quote
codebowl wrote:
Couldnt you use these same drawbacks for the mac as well? if you buy Leopard wont you have to install everything again?


No, you don't have to. You certainly CAN chose to do a fresh instal, reformat, and load everything again. But you can simply upgrade the OS around your apps if you like.

I think Windows offers similar options too, so I'm not sure what ericmurphy is saying, exactly. Perhaps the upgrade path for Window doesn't work very well? I'm not certain about Windows, but with OS X I know you can either upgrade or start over...your choice.

Close Name:codebowl Posts: 10 Joined: 28 Aug 2006
Subject:

Quote
Small White Car wrote:
Quote
codebowl wrote:
Couldnt you use these same drawbacks for the mac as well? if you buy Leopard wont you have to install everything again?


No, you don't have to. You certainly CAN chose to do a fresh instal, reformat, and load everything again. But you can simply upgrade the OS around your apps if you like.

I think Windows offers similar options too, so I'm not sure what ericmurphy is saying, exactly. Perhaps the upgrade path for Window doesn't work very well? I'm not certain about Windows, but with OS X I know you can either upgrade or start over...your choice.


Excellent! I look forward to Leopard in the spring

Close Name:Kar98 Posts: 3 Joined: 28 Aug 2006
Subject:

Quote
codebowl wrote:
From what i understand apple puts out a new version of the OS every year, MS does not do this, there was Windows 95, 98, ME, 2000, XP, 2003


There was Windows 95, A, B, C, each of which added features, there was 98 and 98SE, Me and 2000, XP, XP SP1 and SP2. One for each year, and you couldn't update intermediate version, like the original 95 couldn't be updated to 95C (which for instance added USB support)

Close Name:Rainy Day Posts: 607 Joined: 07 Jun 2005
Subject: Not old data just yet!

Quote
Bosco wrote:
Munster's latest report is looking at old data, with new Windows pricing already announced and already taking away the supposed advanatages that Munster touts for Apple's premium OS pricing.


You’re assuming that Vista will actually ship someday, and that people will actually buy it. So far, the stars are not aligning for this to happen, and the tea leaves do not predict they will anytime soon.

Close Name:WetcoastBob Posts: 78 Joined: 17 Aug 2006
Subject: Can't Compare Apples and Windows

My old PC runs Win98/SE and does just fine. Microsoft knows this so they have discontinued support and so has Zone Alarm- the firewall people.
I bought a MacBook Pro in April (my first mac since a II/e way back when) and I love it. The only Microsoft I am still using is Excell 2004 which is a pain in the butt compared to the 2000 version. The only thing I miss--I miss like a farmer misses a toothache: bugs,spyware,bugs,viruses...........
Apple Computers Inc. is more profitable than Microsoft and I have no problem with this. Fine! I like the product a lot. To use the phraseology of the marketing people: "My computing experience has been significantly enhanced."
Cheers:
Bob

Close Name:DawnTreader -   TMO Staff Posts: 13787 Joined: 04 Jan 2002
Subject:

WetcoastBob, welcome to our forum community and welcome to the universal community of Mac users. I think you'll enjoy the stay.

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