Today during its earnings call, Apple CFO Peter Oppenheimer confirmed that future versions of OS X would be free. Last week, Apple announced that OS X Mavericks would be available for free, but did not confirm plans for future versions of its operating system.
Oppenheimer’s statements during the call indicate that future versions of OS X will also be free. This, along with iWork updates and free copies for each purchaser of Mac and iOS hardware, would contribute to a $900 million sequential increase in net revenue deferred for software upgrade rights and non-software services in the December quarter.
Basically, a larger slice of revenue from each device will go towards ‘paying’ for those free software upgrades. Apple noted that this would be enough to affect its gross margins, using the phrase “dollar for dollar.” This indicates that its margins might have been hit by as much as 170 basis points, increasing what it has estimated for its future margins.
The market responded to the news that Apple’s margin estimates were directly affected by the deferrals, popping by a few points.
Oppenheimer says that these new deferrals would add to those already sliced off for software updates. He notes that this is now $15-25 per iPhone and iPad beginning in September, and on Mac it increased from $20 to $40 in October. He says that it will record those deferrals over two years for iOS devices and over Mac for four years.
Apple says that it will “work hard” to get down the cost curves on those devices in order to compensate for those increases.
Apple’s Tim Cook said that the primary reason for Apple to make OS X and iWork free was to “make it a part of what it means to own a Mac and an iOS device. Some other folks charge $199 for each of these — the OS and the productivity apps. We wanted to make it a part of the experience.”
Apple reported a strong quarter with $37.5B in revenue, $7.5B in net profit representing $8.26 per share. Apple sold 33.8M iPhones, 14.1M iPads and 4.6M Macs in the quarter.