Apple: Future OS X upgrades will be free

[Arthur]

Good news for us, less so for Apple.

 

Source: TechCrunch (via VR-Zone)

 

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.

[featured_spectre]

So they are releasing their OS for free on still disproportionately expensive and outdated hardware?

[Arthur]

So they are releasing their OS for free on still disproportionately expensive and outdated hardware?

Outdated hardware? Apple's iMac's, MacBook Pro's and Air's all have the latest 4th gen Intel processors, PCIe SSDs and 802.11ac WiFi. It won't be long until the Mac mini is updated either.

 

The hardware isn't disproportionately expensive especially once you factor in the free OS updates, bundled apps (iLife, iWork) and high resale value of Mac's.

[featured_spectre]

I won't get drawn into this...because it will turn petty...lol

[Arthur]

Okay. I believe you then.

[synaesthesia]

I'm not an Apple fan anyway (we all know this) but this could be good news. It feels like they've been forced into it.

Interestingly, I wonder if MS will counter it in any way.

[FN-GM]

Interestingly, I wonder if MS will counter it in any way.

 

I can't see how they can. They are a software company, they don't sell computers. Where apples majority profit comes from the hardware.

[glennda]

I can't see how they can. They are a software company, they don't sell computers. Where apples majority profit comes from the hardware.

 

Completely - if you want to resell any apple kit you make can only make 3% - hence why everybody who will ever try and sell you apple kit will try and sell all the add-ons and professional services.

[synaesthesia]

Without doubt (It's amazing what profits you can turn shoving Tesco No Frills beef into a Gordon Ramsay packaging). It may force them to do something though. I hope they do, I really don't want the rest of the sheep on the planet turning into mac users. It'll destroy the last bit of hope I have left for humanity.

[Arthur]

I can't see how they can.

Make Windows 9 a free update for consumers, but a paid update for businesses (similar to how Office 2013 RT is licensed)? OEMs would still have to pay for Windows licenses too.

 

...the bulk of Windows sales are done en masse, either through OEM contracts—which alone constitute 65 percent of the $19 billion in total 2013 Windows revenue—or from additional commercial and retail sales. (Those would include bulk sales to a big company’s IT department or single sales to individuals). (Source)

 

Microsoft could make enough money from their other divisions to give Windows away for free to certain groups of users.

 

http://i.imgur.com/A8QtXHS.png

Edited October 29, 2013 by Arthur

[sparkeh]

bundled apps (iLife, iWork)

Not too many people happy with the iWork update Post-PC era? Post-Mac era! OS X Mavericks 'upgrade' wrecks iWorks

[Arthur]

Not too many people happy with the iWork update

Not really an issue since when you upgrade to the latest versions, the Mac App Store puts the old version of iWork in a separate folder so you can still use it.

 

Lots of folks are getting all worked up about iWork being “dumbed down,” but it feels like a reset to me. I can see this playing out pretty much like Apple’s recent Final Cut Pro X re-thinking. That app was introduced in a radically simplified and streamlined form that caused immediate outcry. Over time, Apple has steadily added back features that were missing from the early dramatic redesign of the pro video-editing suite. A handful of mishandled decisions like pulling the old version of FCP too soon caused unnecessary friction there, but recent updates to FCPX have made it a very viable choice for professionals again. (Source)

 

Over the next year or so, Apple will most likely add a lot of the missing features back (like they did with FCP X). The biggest advantage to the new versions is that the file format is identical for both iOS and Mac apps (and iCloud). When you open a Pages document on an iPad created on a Mac, it won't need to be converted and the formatting/layout wont change.

 

There’ve been a lot of complaints this week regarding functional regressions in the Mac versions of the new iWork apps. The disappointment is justifiable; no one likes having features they rely upon removed in a major software update. But given Apple’s recent history — Final Cut Pro X and iMovie 08 to name two examples — no one should be surprised, either. I don't think anyone at Apple took these functional regressions in the Mac version of the iWork apps lightly, but they are no mistake, either.

 

The bottom line as I see it: you need to have clear priorities, and Apple’s highest priority here was clearly cross-platform parity for iPhone, iPad, web, and Mac. No other office platform in the world has that — complete parity between native apps for phone, tablet, desktop, and a web app. Other companies have different priorities; Microsoft, for example, has feature-completeness built into its DNA. A version of Microsoft Office for Windows that removed functionality to achieve parity with the mobile version is unimaginable. (Source)

Edited October 29, 2013 by Arthur