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Messy math about Microsoft and the iPhone 4

The technology industry runs on numbers: millions of bits per second in bandwidth, processor clock speeds by the gigahertz, millions of pixels of camera resolution, etc. So what could be a fairer way to evaluate a company's success than yet another set of stats?

Well, that depends on the rest of your math. Consider two recent news items: a Microsoft blog post on Friday afternoon written to counter recent chatter about the company's fortunes; and an outside analysis of what Apple pays to build an iPhone 4.

Friday's "Microsoft by the numbers," by company spokesman Frank Shaw, recited various sales, license, traffic, usage and financial data to make the case that the Redmond, Wash., firm--whatever the stock market may think--is doing quite well.

For example, Shaw writes that with 150 million Windows 7 licenses sold to date, that Windows release is "by far the fastest growing operating system in history." While Apple sold 8.8 million iPhones in the first quarter of 2010, he notes that Nokia sold 21.5 million smartphones in the same period (Microsoft's own Windows Mobile platform goes unmentioned in this post). And while Google's Gmail may have 173 million users worldwide, Microsoft's Windows Live Hotmail exceeds that and Yahoo with its 360 million users around the globe.

And so on.

But things aren't so simple or easy for Microsoft as Shaw suggests. MG Siegler does a fine job of that in this TechCrunch post. I'd add that Shaw's statistical snapshots ignore the effect of trends in too many cases: How have Apple and Nokia's smartphone sales and Google and Microsoft's Webmail numbers changed over the last five years? In others, he gives too much credit for past achievements: As long as nearly every PC manufacturer has to sell the newest version of Windows on its machines, a new Windows release should be a best-seller.

But the point I'd rather make is one about press coverage. We're not supposed to parcel this out by market share. We're also supposed to look for what's changing--especially change of the disruptive or innovative sort--then evaluate those shifts. That's why over the last decade, Apple's successful reinvention of its operating system earned coverage alongside a series of far more widely used, but often underwhelming, Microsoft Windows updates.

Speaking of disruptive changes, let's look at today's release about a "teardown" analysis of Apple's new iPhone 4 by El Segundo, Calif.-based market-research firm iSuppli. This study--not yet posted to iSuppli's Web site--is already being reported under such headlines as DailyFinance's "Cost to Build Apple's iPhone 4? $188."

Sure--if you assume Apple gets its software development, hardware engineering and product testing for free. I don't know what the Cupertino, Calif., company pays for those items, but I can assure you it's not zero. (ISuppli itself, which does good research in a variety of hardware-industry areas, is careful to note that distinction in its finer print.)

It's no secret that Apple collects some elevated profit margins. But it's a serious stretch to take iSuppli's research--which is legitimately useful in identifying the iPhone's components and their suppliers--as evidence that it's earning the kind of returns normally associated with loan sharks.

By Rob Pegoraro  |  June 28, 2010; 11:32 AM ET
Categories:  Mobile , The business we have chosen , Windows  
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Comments

I don't want Apple to be the biggest, only the best.

Posted by: jtsw | June 28, 2010 12:36 PM | Report abuse

The bottom line is that Apple products are easier to use to the normal person, last longer, and the customer service is 10x better.

It is an easy choice

Posted by: Bious | June 28, 2010 5:23 PM | Report abuse

Don't forget sales/marketing expenses. Apple spent $4.1 billion on SG&A vs. $1.3B on R&D.

If that figure is consistent across product lines, SG&A is the biggest line item of cost.

Posted by: rakeshlobster | June 28, 2010 8:01 PM | Report abuse

@Bious

Apple products last longer? Their PCs maybe (and that is debatable). Their mobile devices have a pathetic lifespan. A two year old iPod is pretty much worthless. Once the battery dies, it isn't worth the $50 to replace it. The touch screen devices are also extremely fragile.

Posted by: slar | June 28, 2010 8:56 PM | Report abuse

@Bious, Not sure where you're getting your stats but Apple does not make the most reliable products. They are well-designed and well-built but they are made from the same components that all PC's are made from no matter what "magic" Steve has convinced you of.

SquareTrade recently published their warranty claim statistics and Asus, Toshiba and Sony all finished better than Apple in 2 year malfunction rates. That's not to say that Apple products are unreliable, but they are certainly not the most reliable.

Posted by: scarper86 | June 28, 2010 11:29 PM | Report abuse

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