Not even Apple really knows if they could make more money selling software than hardware. But I suspect that they would need to sell it at something like that XP Pro price if they are to compensate for the hardware sales they might lose.

Yeah true, but what about their other ways to make revenue? What about itunes music store and ipods, and what about emagic, and the other companies apple owns? They have plenty of potential to make more money in other places, just like microsoft makes money in their xbox.

I'm not understanding. You seem to be saying that it is okay for them to make less money than they could in the computer division (hardware + software) just because they can survive on their other revenues?
Apple wants to maximize their profit in all divisions. The only reason they might accept a lower profit in one division is if that enabled them to make a larger profit in another. But the profit centres you mention are independent of the Macintosh division - so there is no reason to "leave money on the table".

Maybe i didn't explain it that well, my bad. I was referring to how they are making more and more money in general, and that they could easily shift into a different business model. IMHO, people who have tunnel vision and are complete elitist of apple products are the ones who do not see it in the same sense I do. I see it as potential money they are not making because some people DO NOT want to buy apple hardware.

My best example is my PC at home, built it for approx 700 dollars and it can easily keep up with a G5 no problem.

I have
amd 3400+
2gig DDR 400 ram
72 gig raptor 10k rpm sata drive (super fast)
pioneer 4x dvdrw drive
asus kv8se mobo
9800 pro radeon (then switched to a 6800gt)

Now it was 700 dollars and change for me to build this, finding the right deals online. I sold my radeon 9800pro and got a vanilla 6800GT and used the firmware hack to make it 6800GT Ultra. Now, if I could run OS X on this thing I would with out a second thought. I searched for a few months to find the best deals online and i did. Just to be fair I will admit that was my cost after rebates, I think inital cost was just under 1,000 dollars, but I did get several hundred back in rebates. Everyday there are more power users like me out there that want to build their own system. It is a market apple never really explored. Just go look at a case mod website, or the hundreds and hundres of DIY home PC websites. People are building their own machines more and more these days, and its just going to become a bigger market.

I work for a school district and there are kindergardeners already learning to use laptops. The high schools have Full labs of dual 2.5G5s running Maya and 3DSMax, there are even computer repair and basic networking courses that run PCs with windows based servers. This next generation of kids are going to be very computer savy, and they will be the next consumer market. Kids are learning the ins and outs of computers from kindergarden now. Most of the power users will more than likely like to build their own systems themselves.

So, why they make more money in certain areas (ie ipods, itunes music store, and emagic) they can afford to spend some money to develope a new model. If you don't change with the times you might end up losing a lot of business. Sure I agree with you that it is totally risky Hayne, but everything is a risk, and if apple doesn't change they risk not growing as much as they could.

Who knows how it will work out, you could be right, perhaps they won't change and apple hardware will make them a much larger amount of money. I think that is unlikely, but I am no business major, I just have worked on the business and sales end of IT support and picked up a few things here and there of how it works. Or at least how I think it works.

Bigger maybe, but only in absolute terms - e.g. from X users to (X + 1000) users. In relative terms, I maintain my 0.000 % estimate.

Of course I might be wrong, but the usual evolution of hardware devices is towards closed boxes - "appliances" that "just work".
Most people don't want to build their own - for most people it isn't fun and not worth the money they might save since it takes more time and the results for most people (who are less skilled than you) are inferior to what you can buy.
Also note that for most people, faster but uglier or noisier is not better.

XBox a profit maker?
 

Tom, this is a fascinating discussion with many good points being made. I definitely think that Apple has a big surprise up their sleeve in terms of adjusting their business model. Within three years I think things are going to look very, very different.

But I don’t think what you’re saying about the XBox is true. In fact I seem to recall reading somewhere that Microsoft has yet to make money off the XBox. As far as I know, they’ve been willing to carry a significant loss – it’s all about positioning, before the real money starts to roll in. Or do I recall that wrong?

Best regards,
ArcticStones

Another interesting article about the reasons for Apples popularity:

"The Five Rules of Cool

How does Apple Computer manage to pass
itself off as different from all the rest? It all
starts with great products, a classic story, and
the right adversaries. CEOs, take note."

http://www.forrester.com/magazine/ar...3.apple.r2.pdf

Actually you are correct but I just read in a recent video game magazine that the xbox 360 took MS to the next level of manufacturing and they are now getting very effecient. In fact, one of the higher up sales reps was quoted as saying that the xbox is getting cheaper to make now every day, and in 2006 MS will make lots of profit off of it. You have to hand it to them coming into a billion dollar industry battling against nintendo and playstation after they destroyed sega, atari, snk, etc.

Microsoft made the decision to lose some money in the begining, but now they are going to reap the benefits. It was a risk, and they did it in a smart way. I own an xbox, gamecube, and PS2, and the xbox is probably my favorite. I do not have a 360 yet, but I think I'll get one at some point.

IMHO, apple could do the same to the PC world. I mean imagine a time where anyone could build any x86 system (intel or AMD) and then have a choice to load windows, linux, and now mac os x on it, that would be very cool, and it would turn people towards macintosh more.

As mentioned earlier since MS was pirated so much all over the world people got used to it, and it is now the most widely used OS in the world. While apple was so propritary and would only run on apple hardware, meaning it was way less being pirated. That in turn could have very well hurt apple in the long run. Look at China, and their booming upcoming economy. When they fully industrialize China, and they make everything digital, they will use windows. That is because its been over there being pirated for the last 15 years and everyone has a free copy (or a cheap copy) of it. So, when they can finally afford to go legit, they'll just keep their same set up and just buy a site liscnese or something.

Look at what is happening over in India right now, with the huge surge of work being facilitated there technology wise. Their economy is rising, and they have a huge population too. What is going to happen when it becomes common for everyone in their household to have at least one computer like it is here in the USA? If you go to asia and check out their tech markets, you don't find hardly any apple stuff, but you can find just about any PC based OS or program you want over there, and yes its pirated.

So really piracy actually helps in some ways, which is why microsoft hasn't gone over there with an iron fist yet, they know that when they catch up they are already customer's of microsoft, and they will eventually get their money.

I think that apple may fear some of this type of stuff, and they definately do not want their product to be pirated as much as the other one's out there, and I don't blame them. If I made a product that cost my company millions to develope I would want compensation for it. So, yes the next couple of years will be very interesting to see how apple changes their business model, and I am willing to bet all the elitist mac users will come around when apple makes the change. We will just have to sit and wait, because I have no idea what is going on, I am just guessing:D

I'm guessing that you are talking about people running OS X on non-Apple hardware. Well, call me elitist, but I'm with Oscar Wilde:
"I have the simplest of tastes. I am always satisfied with the best."

Well, Oscar Wilde said a lot of fitting things:

On quality:
"The good ended happily, and the bad unhappily. That is what fiction means. "

"A little sincerity is a dangerous thing, and a great deal of it is absolutely fatal."

"Of course America had often been discovered before Columbus, but it had always been hushed up."

"Work is the curse of the drinking classes."

fair enough, to each their own, however I still think when apple makes the change everyone will go with it.