How the value trap squeezes Windows PC makers’ revenues and profits

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The Guardian discusses the impact of the value trap on Windows PC makers.

The problem for Windows PC makers is that they are caught in the “value trap”. Even as prices are being forced down by commoditisation and slumping demand, they have no obvious way to capture any of the money that a consumer who buys one of their products subsequently spends with it.

A comparison reveals the stark difference in profitability between Mac and Windows machines.

And how profitable are Macs on their own, even without that revenue stream? Apple doesn’t break out the figure for Mac profitability. But Horace Dediu of the Asymco consultancy reckons there’s a good-enough rule of thumb: assume that Macs have an 18.9% profit margin, which fits well enough with its historical operating margins.

That metric gives a hardware per-PC profit which has dropped from $241 to $232 – an erosion, certainly, but a margin that Windows PC makers would kill for: it’s more than 10 times greater than their per-PC profit.

LG and Sony are leaving the PC market. Acer might be the next in line if it does not turn its fortunes around.

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