Apple becomes more profitable than Microsoft

It seems that Apple has finally become more profitable than Microsoft. It was just a year ago when Apple passed Microsoft in terms of market cap while six months later they overtook Microsoft in terms of revenue. With today’s release of Microsoft’s Q3 2011 results, Apple has now passed Microsoft on profits too.

Despite this, Microsoft’s results were still good, with a record third-quarter revenue of $16.43 billion and with a net incoming at $5.23 billion, though this falls well short of Apple’s $5.99 billion last quarter.

The company did say that "Windows 7 remains the fastest selling operating system in history with 350 million licenses sold," despite failing to mention that their Windows and Windows Live division have seen revenues fall from last year from $4.65 billion to $4.445 billion this year

In the companies earnings release, Microsoft also showed that their Entertainment and Devices Division has been growing 60% year-over-year thanks to excellent sales of Kinect for Xbox 360 and good on-going sales of the console itself. The earnings release failed to state anything about Windows Phone 7 sales however.

"We delivered strong third quarter revenue from our business customers, driven by outstanding performance from Windows Server, SQL database, SharePoint, Exchange, Lync and increasingly our cloud services," said Kevin Turner, chief operating officer at Microsoft.

"Office had another huge quarter, again exceeding everyone's expectations, and the addition of Office 365 will make our cloud productivity solutions even more compelling. We continue to see strong adoption of our cloud-based services among the Fortune 500."

Times have changed for Microsoft though, with Apple’s market cap now standing at nearly $100 billion dollars higher than the Seattle based company. Sales of PC’s have been slower than Microsoft would have hoped, while Apple has seen both iPad and Mac sales increase year after year.

Report a problem with article
Previous Story

Beyoncé sued for $100 million by game developer

Next Story

PSN database with 2.2 million credit card details up for sale?

72 Comments

Commenting is disabled on this article.

In comparing years and contrasting to Apple...

1) Microsoft spends 10x on R & D vs Apple
2) Microsoft is growing very consistently, Apple has had a couple of years of growth spikes.

Microsoft's R&D return should ensure their consistent growth, with possibility of future spikes.

Apple has a bit of an uphill battle in expectations or even maintaing their gains, as they would have to make something as buzzworthy as the iPhone and iPad every other year to continue this growth rate. And sadly, this does not include just new verions of these products.

At the end of the day, both companies are doing fine, good even. The last few years have been awesome for Apple. The last few years have been ok/expected for Microsoft.

This doesn't mean anything but numbers and profit margins, which means Apple has leveraged their marketing and hardware margins to produce good numbers.

If you are anti-Microsoft this report will make you sing, until people remind you that this is not the first time Apple has dominated in numbers or a product market, and fell far enough behind that they have had to turn to Microsoft twice in the last 26 years for technology, software support, and even direct financial investments.

If you are anti-Apple, read above, no body has won anything, and Microsoft has some really good R&D going on.


My personal opinion is that Microsoft will own the mobile phone market in under 3 years, and retake the tablet market with Windows8 in a few months of its release.

And there are a lot of old time business and technical analyists that also share this view based on a lot of data, technical understanding, and past performance.


(One reason is iOS and OS X are already hitting hard techincal limits that just do not exist in Windows NT. End users are already seeing this too, as OS X can't properly even handle hybrid GPU technologies, let alone pre-emptively multi-task threads on a GPU or multiple GPUs, which is something Windows 7 users do every day.)

Well, 1st Justin Bieber on Glee, now this; the world is truly ending. & I won't get to see such great stuff hopefully coming out in 2012 like Windows 8 & Project Cafe...

sbdb said,
All good things eventually also come to an end at Apple (a few years after Jobs' death).

That is a horrible thing for you to say. Who are you to predict someone's death? I am quite sure you wouldn't want someone to say that about a member in your family.

Is Microsoft so ashamed to present WP7 sales figures ? Is Microsoft afraid to become the laughing stock of the Mobile world ?

2 years is a long time in this game, and if you think MS is not good at the phones and tablets, I suggest you check back in two years. Not only will it all tie together in a remarkable fashion and be bettter and cheaper, I'm looking forward to pinching and zooming using my fingers Kinect style on the laptops to come.

jimmyfal said,
2 years is a long time in this game, and if you think MS is not good at the phones and tablets, I suggest you check back in two years. Not only will it all tie together in a remarkable fashion and be bettter and cheaper, I'm looking forward to pinching and zooming using my fingers Kinect style on the laptops to come.

Why do you think that something that hasn't changed in the last 10 years will suddenly change in the next 2 years ? Apple has been closing the gap against Microsoft , in revenue and profit year-over-year, for the last 10 years. And now they have passed Microsoft on both and the gap will continue to grow in Apple's favor. I don't see any change in this pattern unless some drastic changes will happen to Microsoft management.

Balmer needs to go and they need to get someone there that knows WTF they are doing. Kinect? No Courier? Really? Microsoft is like General Motors. Good concepts but either lack in some area, or never come about.

Vista probably hurt MS as well. Kinda curious what it would be if Vista was like 7...and if Kinect was a success...haha

Played on an iPad2 for about 30 minutes today. I still feel like i'm enclosed in a box limited to what I can do with it. It just feels gimmicky and that it's uses are limited.

Don't get me wrong, awesome bit of kit..but I am going to wait and see what Windows 8 can achieve, if it breaks the 4 walls of gimmickness, I reckon Apple will get a massive smack in the face.

Alansonit said,
Played on an iPad2 for about 30 minutes today. I still feel like i'm enclosed in a box limited to what I can do with it. It just feels gimmicky and that it's uses are limited.

Don't get me wrong, awesome bit of kit..but I am going to wait and see what Windows 8 can achieve, if it breaks the 4 walls of gimmickness, I reckon Apple will get a massive smack in the face.

I've been travelling all winter, and the Ipad would have been a disaster for my uses, a big NODO. Storing tons of pics and vids, dowloading torrents, Skyping, Quicken, MS Office. Nope, still just a couch toy for us serious users.

Alansonit said,
Played on an iPad2 for about 30 minutes today. I still feel like i'm enclosed in a box limited to what I can do with it. It just feels gimmicky and that it's uses are limited.

Don't get me wrong, awesome bit of kit..but I am going to wait and see what Windows 8 can achieve, if it breaks the 4 walls of gimmickness, I reckon Apple will get a massive smack in the face.

Windows 7 was a rescue for Windows Vista but I'd say Windows 8 will mark an integration between the operating system and the services in very much the same way that Apple has done with mobile me. Expect to see Skydrive Explorer integration appearing like a normal hard disk, remote backups, maybe offer a premium service where you pay for extra space and bandwidth per month etc. Microsoft Office is also heading in the same direction as well.

The server side of the equation Microsoft already has wrapped up, their SQL server is top of the line, their application server and framework are second to none so they really don't have to worry too much about that. People are leaving Domino/Notes like their droves, Oracle is raping its customers without mercy and SAP is still trying to digest and grow its acquisition of Sybase. Microsoft is in a very strong position in other words.

The question isn't whether Microsoft 'beats' its competition but the success of its plans to diversify - something Ballmer stated a few years ago will be gradual, will take time and not everything will be an immediate success at first.

FMH said,
And like Magic it disappears.

Going at the defect after defect in OS and hardware keeps rising it appears that this maybe my last Mac (I'm a Mac user of 10 years and counting).

Of course they are. I mean look at how much their hardware costs. I am pretty sure they make a lot of profit on each device they sell

Microsoft is mid-cycle, it's hardly surprising there's not much momentum in PC sales during January to March. Lets see what happens once win8 comes along.

Tom W said,
Microsoft is mid-cycle, it's hardly surprising there's not much momentum in PC sales during January to March. Lets see what happens once win8 comes along.
]

Definitely. I have a feeling they're going to skyrocket.

Xxgreatestever said,
]

Definitely. I have a feeling they're going to skyrocket.


I dont know about that, not everyone is even on Win7 yet, For instance, I'm still running XP. If Win8 is all its cracked up to be I'll wait for that to become available before upgrading. But people who have recently upgraded to Win7 are going to be ****ed when Win7 is finally starting to take off and now they have to re-upgrade to an OS that might not be as stable and what-not as it claims.

Tom W said,
Microsoft is mid-cycle, it's hardly surprising there's not much momentum in PC sales during January to March. Lets see what happens once win8 comes along.

And if Sony keeps having problems, MS XBOX sales will increase...haha

Tom W said,
Microsoft is mid-cycle, it's hardly surprising there's not much momentum in PC sales during January to March. Lets see what happens once win8 comes along.

And these are MS revenues without a tablet OS, and a Phone OS contender! Imagine what they would be with these two in the coming year. And add Bing to that list too as it will get a boost from these two devices.

Brennon Miller said,

I dont know about that, not everyone is even on Win7 yet, For instance, I'm still running XP. If Win8 is all its cracked up to be I'll wait for that to become available before upgrading. But people who have recently upgraded to Win7 are going to be ****ed when Win7 is finally starting to take off and now they have to re-upgrade to an OS that might not be as stable and what-not as it claims.

Why are you still on XP?

Xxgreatestever said,
]

Definitely. I have a feeling they're going to skyrocket.

I have a feeling Windows 8 will NOT sell better than Windows 7 ... in fact it will likely sell far far less. After Windows 7, Windows 8 just doesn't seem like a must-have upgrade, as Windows 7 was over Vista & XP. Microsoft may be able to pull a mobile segment grab using its deal with Nokia, but other than that, I just don't see any real potential for Microsoft to do anything that would put them over Apple again anytime soon. I wouldn't buy any Microsoft stock, in any case. Stock value and market cap are based on year over year growth, which is definitely not in the cards for Microsoft, imo.

blueboy75 said,
Why are you still on XP?

Because he heard from an uncle who talked to a friend who is 'really good with computers' that apparently Windows 7 sucks and he should keep with Windows XP. Never be surprised the number of people who pass themselves off as computer experts then export their stupidity to all those around them.

I just think the management at Microsoft has been pretty bad especially at the top. They just need management shakeup at the top. I don't know when it will happen but I think would help a lot.

Melfster said,
I just think the management at Microsoft has been pretty bad especially at the top. They just need management shakeup at the top. I don't know when it will happen but I think would help a lot.

Microsoft had record earnings in a bad economy with a slowdown in PC sales.. i'd hardly call that poor management.

blahism said,

Microsoft had record earnings in a bad economy with a slowdown in PC sales.. i'd hardly call that poor management.

+1

Melfster said,
I just think the management at Microsoft has been pretty bad especially at the top. They just need management shakeup at the top. I don't know when it will happen but I think would help a lot.

Umm, you do know that Ballmer maybe the CEO but he isn't the one making the decisions when it comes to Windows, Office, XBox and so forth. The guy who is running the Windows division is the former head of the Office division - he has the Midas touch of turning everything he touches into gold. There doesn't need to be a shake up at the top, what is needed is better managers running the divisions who actually work with each other so that the services, XBox, Windows, Office etc. are all integrated into each other rather than being products made by the same company but any integration is by accident rather than design.

Mr Nom Nom's said,
what is needed ... divisions who actually work with each other so that the services, XBox, Windows, Office etc. are all integrated into each other rather than being products made by the same company but any integration is by accident rather than design.

Coincidentally, the antitrust restrictions will expire soon.

Seems unlikely that anyone will argue that in 2011, Microsoft is unassailable.

This is attributed to the iPhone and iPad. I see competitors rising up, and that will eat away at their profits.

Plus, they are fads. Fads last for a few years. In 5 years, we will see some new form of technology take the place of the iPad/iPhone.

ccoltmanm said,
This is attributed to the iPhone and iPad. I see competitors rising up, and that will eat away at their profits.

Plus, they are fads. Fads last for a few years. In 5 years, we will see some new form of technology take the place of the iPad/iPhone.

Apple knows that. That's why they're currently bringing in record profits rather than sitting around complaining about how the mp3 player market is collapsing.

firey said,
Thats what happens when you have to pay an arm and a leg for an apple product...

Yeah, i still can't fathom buying from a company that brags about ~50% margin with lucrative profits.. I'd buy an apple in a heartbeat if it was an honest product for an honest price, but right now even Microsoft of all companies is a more honest value and if you want to go at it yourself i'd take linux as well.

firey said,
Thats what happens when you have to pay an arm and a leg for an apple product...

... because the company manages to make it worth it.

The Apple ecosystem is powerful in its ease of use and the size of their app marketplace, and apparently many are prepared to pay extra for that. If Apple only did marketing with nothing to back it, they would get nowhere and just look silly. Many users don't (want to?) see this however.

blahism said,
Yeah, i still can't fathom buying from a company that brags about ~50% margin with lucrative profits.. I'd buy an apple in a heartbeat if it was an honest product for an honest price, but right now even Microsoft of all companies is a more honest value and if you want to go at it yourself i'd take linux as well.

It is very easy to keep your costs incredibly low when you only support hardware that is less than 4 years old (with regularly 'dropping support' with each release of Mac OS X), drop backwards support quickly with less focus on backwards compatibility and more about adding new features, a very limited amount of hardware supported by only upgrading each line 2 times a year by keeping the same base etc.

Microsoft has a completely different business model - they're a volume seller. Comparing Apple to Microsoft is like comparing the profits of a coffee shop to that of the local McDonald's franchise. McDonald's will have lower margins than the coffee shop because one is niche product with high margins and another is a mass produced volume product.

As for whether it is a rip off or not, the market has decided and people are happy. People don't make decisions based on the profit margins of the said company, they make a decision based on whether the said product meets their requirements.

Good for Apple. Microsoft really needs to step their game up in the Portable market. I mean c'mon we need to see an OS that's TABLET friendly Ballmer not just Windows 7 on a tablet. Did you see apple put the entire look and feel of OSX onto a tablet? No, they made tablets easier to use, and thats exactly what people want. If we wanted the OS, we'd all purchase laptops.

At least Windows 8, and the release of Windows Phone 7 to other manufacturers will bring profits back up!

Over the years we have been told over and over again by the Apple faithful that you cannot compare Microsoft to Apple for many reasons. Apple is a hardware company while MS is a software company, Apple is a mobile device company while MS is a desktop company, Apple is consumer focused while Microsoft is enterprise focused, blah, blah, blah.

Now when Apple is doing better in areas that were claimed that MS was not in, the rules are changed and Apple is suddenly competing with Microsoft.

Anyone who still wants to argue that MS and Apple are not in competition with each other have had their heads in the sand for the past 10 years. They clearly compete in a number of markets.

I never really know what to think when I see things like this, I mean what goes on in the background? How much are they pumping into other departments and R&D for example?

Edrick Smith said,
-cue anti apple people who will say how this is all false-

cue Troll remarks.

I am anti Apple...did I say it was false?

Edrick Smith said,
-cue anti apple people who will say how this is all false-

they will say that not because they are anti-apple, but because in the past a lot of the calcualtions where based on speculation and skewed numbers

warwagon said,
Microsoft is kicking ass in the OS market. It's just that they suck at the portable market.

They suck at both really, it's just cheaper to buy a Windows machine

Only thing going for it is gaming.

offroadaaron said,

They suck at both really, it's just cheaper to buy a Windows machine

Only thing going for it is gaming.

You mad?

offroadaaron said,

They suck at both really, it's just cheaper to buy a Windows machine

Only thing going for it is gaming.

Really because I bought my window machine because Windows is the only OS I can do my job with.

offroadaaron said,

They suck at both really, it's just cheaper to buy a Windows machine

Only thing going for it is gaming.

You're just upset because Windows is still dominating Apple in OS. Keep in mind Windows is the most compatible OS now and probably for a long time also in terms of software and hardware.

offroadaaron said,

They suck at both really, it's just cheaper to buy a Windows machine

Only thing going for it is gaming.

You really dont know anything or an Apple drone. And I guess that most companies are WINDOWS based means that companies must be playing games all day long. Because god forbid companies would actually do work and make a profit. After all, playing games is so much better.

Sarcasm aside, MS has made some blunders in a lot of hardware areas and Vista didnt help matters either. MS has been on top for a long time and who knows, next week they could be again. These things changes rapidly like everything else.

Edited by techbeck, Apr 29 2011, 12:02am :

techbeck said,

You really dont know anything or an Apple drone. And I guess that most companies are WINDOWS based means that companies must be playing games all day long. Because god forbid companies would actually do work and make a profit. After all, playing games is so much better.

Sarcasm aside, MS has made some blunders in a lot of hardware areas and Vista didnt help matters either. MS has been on top for a long time and who knows, next week they could be again. These things changes rapidly like everything else.

These things don't changes rapidly . Microsoft is trailing Apple in revenue growth year-over-year for the last 10 years. Now Apple has passed Microsoft in profit too and will continue to do so for the next 10 years.

alexalex said,
Now Apple has passed Microsoft in profit too and will continue to do so for the next 10 years.

Nobody takes anyone serious who makes predictions 10 years ahead in an industry that is extremely unpredictable...