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In shift to apple-like business model, microsoft is off to a great start


Editor in Chief

Microsoft (MSFT) and Apple (AAPL) have a rivalry that dates back several decades and the technology giants are constantly chasing each other in different areas of their businesses. In the latest major shift, Microsoft is toying with the adoption of a business model that bears more than just a slight resemblance to Apple’s. The Redmond, Washington-based company has historically relied on vendor partners to build computers and smartphones that carry its software, but the new Microsoft Surface tablet removes vendors from the equation and gives Microsoft control over the user experience from beginning to end. And according to a recent analysis, Microsoft’s shift into the Windows hardware business is off to a great start.

One of several key ingredients in Apple’s recipe for success is big margins. The iPhone, which is largely responsible for Apple’s meteoric rise to the top of the consumer electronics industry, is the most profitable smartphone line in history and all of Apple’s various other products carry big margins as well.

The base Wi-Fi only third-generation iPad, for example, has a profit margin estimated by IHS iSuppli to be 37%. While that figure is certainly impressive, Microsoft may have beat Apple at its own game according to a recent IHS analysis.

According to the firm’s estimates, the 32GB Surface tablet costs $284 in parts and labor to produce. With a retail price of $499, Microsoft’s margin on the entry-level Surface sits at 43%. While Apple’s 32GB fourth-generation model carries an impressive 49% margin, the entry-level iPad’s profit margin is estimated to be 41%.

Continue Reading @: Microsoft Surface analysis: BOM — Apple-like margins on first tablet | BGR