In this post, we will compare Apple and Microsoft revenues, net profits, and net profit margins for the years 1995 to 2015. In the race of revenues and profits, Microsoft kept winning from 1995 to 2010. But, Apple has come back strongly from then on. Now, both the companies hold strong position in their respective markets. Who will dominate over the next five years?
Apple Vs Microsoft - Business Models Focus
Apple and Microsoft are the world’s leading technology companies. Both of them were founded 40 years ago. Apple’s late co-founder Steve Jobs and Microsoft’s co-founder Bill Gates are among the world’s most well-known business executives. Both of the companies offer computer software, consumer electronics, and online services. Both of the companies are extremely innovative. Both of them are among the world’s top-most recognized technology brands.
Key Elements Of Apple Business Model
Apple products and services include iPhone, iPad, Mac, iPod, Apple Watch, Apple TV, a portfolio of consumer and professional software applications, iCloud, Apple Music, Apple Pay, and a variety of accessory, service and support offerings.
Apple generates revenues from product sales, subscription fees associated with iCloud and Apple Music, and extended warranty fees for its products. Apple also generates revenues from the fees charged to content owners and application developers for selling their digital content and applications through the iTunes Store, App Store, Mac App Store, iBooks Store, and Apple TV App Store.
Apple focuses on providing the best user experience and owns it completely. Apple designs and develops own operating systems, hardware, application software, and services. Then, it integrates them seamlessly to build easy-to-use products. Apple is not dependent on its partners for any technical breakthroughs. Apple innovates at its own pace.
Key Elements Of Microsoft Business Model
Microsoft products and services include: Operating systems for computing devices, servers, phones, and other intelligent devices; Server applications for distributed computing environments; Cross-device productivity applications; Business solutions applications; Desktop and server management tools; Software development tools; Video games; Online advertising; Hardware products such as PCs, Tablets, Gaming and entertainment consoles, Phones, Other intelligent devices, and Related accessories; Cloud-based solutions; Consulting and product solution support services; and Training and certification services.
Microsoft generates revenue from: Licensing of its software products; Subscription to its cloud-based services; Designing, manufacturing, and selling devices that integrate with its cloud-based services; and delivering relevant online advertising to a global audience.
Microsoft depends primarily on original equipment manufacturers (“OEMs”) to distribute its software. OEMs pre-install software on new PCs, tablets, servers, phones, and other intelligent devices that they sell. The largest component of the OEM business is the Windows operating system pre-installed on computing devices.
Apple Vs Microsoft - Revenues 1995 To 2015
Apple had $11 billion of revenues in 1995, whereas Microsoft had $6 billion revenues at that time. Microsoft revenues kept increasing consistently from 1995 to 2015, except for the year of 2009 when they had a small dip in revenues. In contrast, Apple revenues went up and down from 1995 to 2004. In 2004, Microsoft revenues were four-times more than that of Apple.
From 2008 onwards, Apple has continued to grow at a much faster rate than Microsoft and has added much more incremental revenues every year. As a result, in 2015, Apple generated 2.5-times more revenues than Microsoft. Apple generated $234 billion of revenues in 2015, whereas Microsoft generated $94 billion of revenues.
Apple Vs Microsoft - Net Profits 1995 To 2015
Apple had less than half-a-billion of net profit in 1995, whereas Microsoft had $1.5 billion of net profit at that time. Apple struggled with net profits over next 10 years. In 2005, Apple net profits exceeded one billion dollars and reached $1.3 billion. Microsoft had $12.3 billion net profit in 2005.
Apple net profits exceeded that of Microsoft in 2011. Apple earned $25.9 billion of net profits in 2011, whereas Microsoft had $23.2 billion of net profits. From then on, Apple has beaten Microsoft in the net profits earned.
Apple Vs Microsoft - Net Profit Margins 1995 To 2015
Apple had 3.8% of net profit margin in 1995, whereas Microsoft had 23.9% net profit margin at that time. Apple net profit margins went into double digits, after 11 years, in 2006 and reached 10.3%. Microsoft maintained decent net profit margins during all those years.
Apple kept closing the net profit margin gap with Microsoft from 2006. In 2012 and 2015, Apple had more net profit margins than that of Microsoft.
Apple Vs Microsoft - Who Will Dominate Over Next Five Years?
In the race of revenues and profits, Microsoft kept winning from 1995 to 2010. But, Apple has come back strongly from then on. Both the companies have created industry dominating positions for themselves. Besides Amazon, Facebook, and Google, not many other industry players can challenge Apple or Microsoft.
Microsoft dominates desktop personal computers software. Apple is trying to gain desktop market share with Mac. Apple dominates smartphone sales. Microsoft is trying to gain smartphone market share with the Windows Phone efforts. Apple company-owned retail stores strategy has been very successful. Microsoft has also developed a similar strategy. Microsoft has been successful with Xbox gaming and online advertising. Apple has been successful with digital music, video, and games sales over iOS devices.
Both of the companies are trying to gain more share of existing markets. Both of the companies will keep bringing incremental innovations to their existing product lines. However, it will be interesting to see which company comes with a next break-through product first. The winner will be the one that creates new markets.
Important Notes Regarding The Charts
- In all of the charts above, the revenues, profits, and profit margin numbers correspond to the fiscal years of the companies. Microsoft fiscal year ends in June. Apple fiscal year ends in September.
- The line charts comparing the two companies are not ideal. This is because Microsoft numbers are for the June-ending fiscal year and Apple numbers are for the September-ending fiscal year. The purpose of these charts is to show the overall trend. The focus is on providing the big picture. Making adjustment for one quarter of revenues of either company won’t impact the overall trend. The fiscal year numbers are chosen for comparison because they are readily available and most people can easily relate to these numbers.
- How Apple Makes Money? Understanding Apple Business Strategy
- How Microsoft Makes Money? Understanding Microsoft Business Model
- Apple Revenues and Profits 2000 to 2015: Pre- and Post- iPhone