Analyst: Snow Leopard’s Marketing Value to Exceed Its $66 Million in Profit

| Apple Stock Watch

The value in Snow Leopard is not the profits it will bring to Apple -- some US$66 million or $.05 a share -- but rather the marketing and perceived value boost it will give to the company in promoting the Mac platform, or so says Piper Jaffray analyst Gene Munster.

Mr. Munster did the back-of-napkin math on the revenue Apple will see from Snow Leopard, which ships Friday, August 28th, in a research note to clients. He believes Apple will sell approximately 5 million copies in the current quarter (ends in September) at an average price of $22 per copy.

With gross margins on software at 60%, that works out to $66 million in profit for the September quarter, profits that are already worked into the company's stock price as this release has long been anticipated.

This is minor, according to Mr. Munster, who also dismissed Snow Leopard as a minor update to the OS, "without many significant new features." Snow Leopard's improvements are almost all under-the-hood improvements designed to position Mac OS X for the future of multiple processing cores that better takes advantage of the 64-bit architecture of the hardware on which it currently runs.

Be those improvements minor, as Mr. Munster asserts, or major, as some others assert, he feels that the opportunities it presents Apple are more important than any incremental profit increase the OS might bring to Apple.

"Apple is promoting the Mac platform as a superior alternative to Windows in terms of newer technology, more frequently, for less money," he wrote. "The release of Snow Leopard is not about new features; rather, it is about keeping Mac users up to date with the latest technology vs. Windows XP and Vista users on antiquated technology."

Shares in Apple closed slightly lower Monday at $169.06, down $0.16 (-0.09%), with moderate volume of 14.5 million shares trading hands.

*In the interest of full disclosure, the author holds a small share in AAPL stock that was not an influence in the creation of this article.  

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Comments

iJack

I gotta agree with Mr. Munster on this.  The ability to say, “16 Billion Gigabytes of memory,” when you’re trying to sell a Mac must count for something.  Snow Leopard is simply going to make all Intel Macs better.  And for $29, or for nothing, if you’re buying a new one.

Frogmella

You’ve gotta wonder how much this Munster gets paid to state the bleedin’ obvious!

Quite apart from Snow Leopard costing Apple FAR more than US$66 million to develop - I mean, they’ve rewritten much of the core functionality in 64-bit - does anyone believe they’d have done it just to try to make a measly few millions of US$ of upgrade profit?

The alternative is that Apple just released no new Mac OS X in 2009/10, and allowed the competition to catch up a little. Yeah, right.

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