As Apple's Profits Surpass Microsoft's, All Eyes Are On iPad

For the first time in 20 years, Apple's quarterly profits were higher than Microsoft's.

Alhough Microsoft's earnings last quarter were up overall, revenue from the Redmond company's Windows operating system, a key moneymaker, fell 4.4 percent. The sagging Windows sales were mitigated by Microsoft Office sales, which was Microsoft’s top performing sector for the quarter. Experts attributed the declining Windows sales to the rise of tablet computers, which have cut into the sale of personal computers. While tablets have sold well -- especially Apple's wildly popular iPad, Microsoft has struggled to serve up a viable tablet competitor or tablet operating system.

"People could think about the tablet as a replacement for their traditional PC," said Harry Wang, director of mobile research at Parks Associates. "In some circumstances it could significantly impact PC sales because of cannibalization."

With tablet sales showing no sign of slowing, Microsoft risks losing more and more money if it doesn't adapt to new patterns of consumer computer buying. Eighty percent of the personal computer market runs Windows, but Microsoft's share of the tablet market is zero percent, according to Parks Associates, a technology research and consulting firm.

When it comes to tablets, Apple, which netted $5.99 billion in revenue last quarter to Microsoft's $5.23 billion, is the indisputable king. Sales of the iPad, which competitors and critics initially derided as a novelty item, have led Apple to hold onto 75 percent of tablet market share. iPad sales were lower than expected last quarter, but the company noted that it had sold every single iPad it produced, suggesting that demand for the device is still exceptionally high. Experts forecast Apple will ship 45 million iPads in 2011, tripling the 15 million tablets it sold in its nine months out in 2010.

Why should Microsoft care? More iPad sales mean fewer PC sales.

"Tablets could impact up to 30 percent of PC sales in the US alone." Harry Wang, director of mobile research at Parks Associates, projected.

Even though the tablet market is booming, Microsoft has expressed doubts about investing heavily in the market.

In a recent interview, Craig Mundie, Microsoft's global chief research and strategy officer, said, "I don't know whether the big screen tablet pad category is going to remain with us or not."

The longer Microsoft waits to enter the tablet market, the harder it will be for the company to crack into an aggressively expanding market, analysts warned.

"These things don’t happen over night. They take effort; they take planning," said Michael Gartenberg, an analyst with Gartner. "They’re going to have to react at an even faster pace if they want to capture the hearts and minds of consumers."

Tablets are not all Microsoft has to worry about. Though it revamped its mobile operating system, Windows Phone 7, last February, the software was late to the game, according to analysts. Windows Phone 7 arrived three years behind the iPhone, which debuted in 2007 and well after Google's Android had already gained significant market share. Microsoft has partnered with Nokia in an attempt to reclaim the mobile market, but Nokia itself is quickly losing share to nimbler rivals, many of which use the Android operating system.

Comments

[clarke90]

07:58 PM on 05/02/2011

There is no way that a tablet will every replace my PC, it just wont happen. that's how this Harry Wang fellow lost all credibility with me.

[helioszephyr]

10:10 PM on 05/02/2011

That's such an 90's statement.

It's not so much about a tablet replacing a PC for your applications/use, but more about how you will perform tasks and applications that will lend itself more to a tablet.

Unless you're splitting atoms with your accelerator in your basement, I predict that in about 5 years most consumers (including most general office apps) will be using a tablet, and without removable media.

[anthonyparker80]

09:31 AM on 05/02/2011

When Apple products stop being 'cool' they will go the way Jordache Jeans went.

A tablet is a poor excuse for a laptop ( anybody's ), IE Keyboard and Removable media

[becky bradshaw]

08:30 PM on 05/01/2011

Apple should follow IBM's lead. When IBM decided to abandon America for its personal and laptop computers, it separated those products and sold them to Lenova, at the time a token company. In this way, consumers were not fooled into thinking they were buying a USA product.

John McCain (that guy who was the Republican candidate for President) demonstrated the problem in March. When asked in an interview, McCain thought iPhones and iPads were made in California, LOL. This is a Senator from Arizona, and he was confused. (http://www.politifact.com/truth-o-meter/statements/2011/mar/09/john-mccain/john-mccain-errs-saying-ipads-iphones-are-made-us/)

Apple should have the decency not to pretend that they sell American products.

[AllyCat7]

11:10 PM on 05/01/2011

Yeah, and the sad thing is that they could easily afford to make their products in America, given how large their profit margin is. Apple s u c k s.

[JohnTheMac]

12:22 AM on 05/02/2011

When Apple DID make their products in the US, which ones did you buy?

[JohnTheMac]

12:24 AM on 05/02/2011

And the Droids and XBoxes being made in the same factory... I'm sure you're posting the same comment about those companies?

[becky bradshaw]

05:52 AM on 05/02/2011

Good point. I think the dishonesty is greatest for companies like Apple, Dell, Hewlett-Packard, and Motorola. Those brand names were American companies for decades, and it is likely that consumers would be confused,

There are still computers made in North America. If these Apple, Dell, Hewlett-Packard, and Motorola would operate honestly, much of this business would move to the American companies.

[jflorish]

03:16 PM on 05/01/2011

I use Microsoft for my desktop PC, but I use Apple for my iphone and ipad (and ipod). It doesn't always have to be one versus the other :)

[GunnyJ]

08:39 PM on 05/01/2011

Same here.

[crenelle]

02:36 PM on 05/01/2011

MS is just being recalcitrant. Microsoft developed tablet versions of its OS years ago. Manufacturers built and sold tablets for years. They didn't catch on, in large part because parts of Microsoft did not support its own tablet initiative.

My early reaction to the Apple tablet would have been to develop and sell versions of Microsoft productivity packages, as well as development tools that make it easy for MS developers to use iOS devices with MS servers and services. If for no other reason than to learn how to make such software work properly with a touch panel. That work would be a blast!

Lastly, Microsoft is losing $700M per quarter on its Online Services Division; if that weren't happening MS would be more profitable than Apple. TechCrunch has an article up about that.

[Ergon]

02:31 PM on 05/01/2011

Of course Apple's profits are up; it exploits its workers: http://cryptogon.com/?p=22097
* Excessive overtime is routine, despite a legal limit of 36 hours a month. One payslip, seen by the Observer, indicated that the worker had performed 98 hours of overtime in a month.
* Workers attempting to meet the huge demand for the first iPad were sometimes pressured to take only one day off in 13.
* In some factories badly performing workers are required to be publicly humiliated in front of colleagues.
* Crowded workers’ dormitories can sleep up to 24 and are subject to strict rules. One worker told the NGO investigators that he was forced to sign a “confession letter” after illicitly using a hairdryer. In the letter he wrote: “It is my fault. I will never blow my hair inside my room. I have done something wrong. I will never do it again.”
* In the wake of a spate of suicides at Foxconn factories last summer, workers were asked to sign a statement promising not to kill themselves and pledging to “treasure their lives”.

[JohnTheMac]

12:30 AM on 05/02/2011

in the same factory, they're making Droids and XBoxes.
But please tell us which Apple computer you purchased when they DID make them in the US.

[Ergon]

09:28 AM on 05/02/2011

The only Apple I ever purchased was the Performa 630 CD, made in Mexico.

[JohnTheMac]

11:15 AM on 05/02/2011

Philly King said (but was deleted):
"you know something... i've see you post this up a couple places now... i hope you're not excusing this by stating 'they do it too'..."

Well, it isn't so much an excuse of "they do it too", but if the DO "do it too", shouldn't that be acknowledged? Is it any good if someone decides not to buy an iPhone because of labor concerns and instead buys a Droid and an XBox?
Apple at least makes policies and takes action against suppliers violating the law. Wouldn't they be more effective if Moto and MS joined them in demanding better labor conditions? But, I guess if you wanted to maintain it as an "Apple only" problem, Microsoft and Motorola would be wise to just sit back and be quiet.

[moving violation]

02:05 PM on 05/01/2011

MS has been coasting since windows 2.0

[Fiale]

12:56 PM on 05/01/2011

Shelving Courier has to be one of Microsoft's biggest error of judgement in recent times. Instead of having a competitor to the iPad with it's on unique twist they have had to rely on 3rd party development using Microsoft OP Systems.

[JohnTheMac]

01:50 PM on 05/01/2011

Courier was never a product, it was an animation of some concepts.
Watch the video of it again and listen closely to the demonstrator.
Ask yourself what she is doing, and how?
It looks easy when the "pro" is doing it in the demo, but how does she do it?
Everything is simple, when she needs internet, it's like "I pull up the web", but from where? The same place you "pulled up" something else a few minutes ago!
There was really nothing of detail on how the Courier OS worked.
I almost want to watch it again, to remember all the handwaving that went on in that video.
It's almost like watching Star Trek, and saying I wish I had a tricorder or that medical thing Bones would wave around your head. Sure! We all want one, but how did it work? It just always seemed to do the right thing at the right time.
But, you're not alone. I've read a lot of comments where people say they want a Courier.

[Fiale]

02:45 PM on 05/01/2011

Well it was part of the Codex project http://www.youtube.com/watch?v=049_U-0C9qU but as I said they shelved it. If they had stuck with it who knows what we could have gotten.

I understand that the project was cancelled not due to the fact they thought it was not achievable, but that they saw no market for it and wanted to concentrate on their core Operating Systems 'were where the money was'. Now we see how popular the iPad is we can see what a mistake it was, however hindsight is a wonderful thing, Microsoft have had tablet like devices for a long time and sales were poor - so no wonder they saw little future in such a device.

[ewj1]

12:22 PM on 05/01/2011

Both have larger profits and profits margins than the oil companies, Greed is good.

[Sundialsvc4]

10:40 AM on 05/01/2011

It will be interesting to see how the tablet-computing wars ultimately play out. Microsoft is basically a non-contender because "Windows Is Not Unix," and it will be curious to see whether Apple loses share because "OS/X is not Linux," or wins because "Android is not Linux any more."

What developers want, ultimately, is also what consumers also want: a thing that railroads call "standard gauge track." It wasn't always the case that you could fill your freight-car with goods in North Carolina and ship it all the way to Washington State (or wherever) because the distance between the rails was not uniform. Eventually, people realized that the only thing that works is uniformity, not pointless differences.

The electronics industries have always pushed for "pointless differences," calling them competitive advantage. But the products themselves are seen as commodities. I really want to be able to buy a tablet from XYZ Co. and switch at-will to one by ABC Co. and "it just works," and market pressures will eventually be so strong that this happens.

When it -does- happen, the hardware will become the commodity and software the only perceptible difference. The Linux operating-systems have this, being able to run on 20+ different platforms from mainframes to phones. But the Android people, who started out with "let's build a mobile-OS based on Linux and make it open source" have lost their way already: they think they're in the hardware business.

[moozungu]

01:05 PM on 05/01/2011

Your are so right...Apple is opening up pandora's box by creating there own private garden with Ipad and Iphone . I hope Android and BlackBerry Rim, with there common marketplace because a defacto standard for development. (BlackBerry claims it will allow android apps to run on its platform, if microsoft does the same and a developer can create one app the works nicely across android, rim and windows and as manufacturers begin selling tablets for a much better price than the ipad like the new AESUS tablet... which sold quite nicely upon it's debut, running Android GingerBread... priced under $400 bucks,

[JohnTheMac]

01:54 PM on 05/01/2011

If someone, or some company works to make a compelling OS or program, why can't they expect to make money with it? Open Source is fine, but what do you do for a living that we can replace with an open source?

[stupid humans]

02:27 PM on 05/01/2011

you find a New Career, just like when cars were invented...goodbye stables,feed,blacksmiths...etc...
it's called evolution and progress....

[Sundialsvc4]

11:04 PM on 05/01/2011

What I am suggesting here is that "the hardware IS NOT the most important thing." No matter what proprietary system you are selling, the only platforms that are going to be successful are those which do not attempt to lock the =software= =developer= into producing their products only for that platform.

Right now, if you have an application for a desktop computer and you implement that application "for Linux," then you know that you can deploy that application across many dozens of types of computer platforms without substantially changing the app. The language compilers that are used, are just as open as the rest of it. (Really, there is only one: the "gcc" suite.) And this is a crucial market advantage because software is hugely expensive to develop.

"Pad" and "Phone" markets haven't gotten that far yet. Android started in that direction, to create a Linux-based generic phone/pad operating system, but lately its owners have been moving to close it ... and if they close it, they will thereby kill it dead.

The scoop (IMHO) is simple:

(1) Microsoft isn't a contender and it never will be. They long ago built a completely closed system that "doesn't work like Unix" and at this point it really doesn't matter what they do. The only thing they own now ... is a VAX.

(2) If Android is fully open, then it is what developers want: Android wins.

(3) If Android closes up, it dies: Apple wins.

[AcademicFreedom]

10:32 AM on 05/01/2011

Their profits are made on the backs of overworked and inhumanely treated Chinese workers. Member of the Board of Directors, Al Gore, will make sure the government is kept away and that Apple will be able to be a huge polluter; yet, will receive no criticism from the media (try and find a review/article that is critical of Al's role in Apple on HP). Now that Al dumped Tipper and has his goddesses at his monster estate, it is all about the Benjamins for him.

[getoffmedz]

11:09 AM on 05/01/2011

Satire, right?

; o }

[stupid humans]

02:27 PM on 05/01/2011

lol....at you...:)

[Norma Desmond]

07:45 AM on 05/01/2011

these are machines like your tv, dvd player, microwave oven, etc... I personally don't care if it is apple or pc.

[YoBear]

12:26 AM on 05/01/2011

Nice to see American innovation succeed. They really do make great products and far better than the stuff Microsoft ever made. Microsoft pioneered new ground.... sell products prone to virusses and see if people buy them. And people did (and still do). Back to Apple; I'm not a big fan of manufacturing in China, but w/o a broader set of government rules to prevent such mfg, they have to stay competitive.

[JohnUSA]

10:19 PM on 04/30/2011

Misleading headline once again?
If you had invested in both MSFT and AAPL in 1985 you would have done good either way, but MSFT would still outperform. However over the last 5 years MSFT had done about nothing while AAPL gained 400%.
http://finance.yahoo.com/q/bc?s=AAPL&t=5y&l=on&z=l&q=l&c=msft

[pita143]

09:48 PM on 04/30/2011

I am stuck with PC's but I was lucky enough to win my IPad and use it quite often. I even used it on a Birding Walk while teaching kids. The App I was able to download showed them in nice clear detail the bird we heard, and it also had the calls of the bird within the app. Of course I also get to play Angry Bird also.

With all the programs out there for Windows I can just not see myself switching over completely to an Apple, just yet.

[YoBear]

12:21 AM on 05/01/2011

I've switched at home, but I have my work PC as a bailout just in case.

[JohnTheMac]

10:08 AM on 05/01/2011

"With all the programs out there for Windows I can just not see myself switching over completely to an Apple"

even that's changed, since all their computers are using Intel, you could make them dual boot for those few programs (I have them too- specialized industrial firmware tools, etc) that you need Windows for.

[pita143]

10:17 AM on 05/01/2011

I have heard that and I am leaving so far over to just switching that I am in danger of falling over. Thanks.

It helps that I am retired and do not have to use my PC for anything but my own amusement.