iTunes is almost as big a biz as OEM Windows
Apple's revenue from music, apps and services equal 91% of what Microsoft made from the group that sells Windows to computer makers
Computerworld - Apple's iTunes, software and services group generated almost as much revenue in 2013 as did the Microsoft division responsible for licensing Windows to computer and smartphone makers, according to comparisons of the companies' financial statements.
Last year, Apple recorded $16.8 billion from sales in its iTunes, iBooks, App Store and Mac App Store; its AppleCare extended warranty program; its iCloud and other services; and other odds and ends it tosses into the financial bucket.
During the same stretch, Microsoft booked revenue of $18.4 billion for what it calls its Devices and Consumer (D&C) Licensing group, which covers all the Windows licensing to OEMs, including Windows Phone; sales of "perpetual" licenses of Office to consumers; and the multi-billion-dollar income from patent licensing deals the Redmond, Wash. company has struck with Android smartphone manufacturers.
The difference between the two groups' revenue, $1.6 billion, was about 9% of Microsoft's D&C Licensing sales for the year. Put another way, Apple's iTunes et al recorded 91% of the revenue of Microsoft's D&C Licensing throughout 2013.
According to independent analyst Horace Dediu, that revenue gap would have closed slightly -- to less than $1.3 billion -- if Apple had not lowered the prices of its iWork apps and OS X Mavericks to zero last fall. Dediu pegged the money that Apple left on the table at $350 million for 2013's fourth quarter.
"What's interesting about the iTunes revenue is that it grows off the cumulative installed base," said Ezra Gottheil, an analyst with Technology Business Research. "It's just additive. If Apple adds, says 50 million devices in a quarter, then the cumulative base is growing even if sales [of those devices] are not."
That, of course, is the definition, more or less, of a service-based business model, which relies on a large installed base of customers to serve with, well, the service.
Gottheil estimated the installed base of i-devices -- iPods, iPhones and iPads -- at 600 million, providing a huge market for the goods and services sold by the iTunes division.
In the December quarter, the group's revenue climbed 19% when compared to the same period the year before. Each quarter of the year, the year-over-year increase was in double-digits, with a high of 30% in the second quarter. "The revenue grows because the installed base [of devices] grows," Gottheil reiterated.
Meanwhile, Microsoft's D&C Licensing division's revenue decreased 6% in the fourth quarter compared to 2012.
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