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65% of Apple's sales came from iOS powered devices

The iPhone and iPad generated $15 billion of revenue last quarter. In addition, iPod touch generated about $2.3 billion, implying that iOS based devices were responsible for sales of $17.3 billion.

To put that in perspective I drew this chart which shows not only the sales by products but a rough representation of share of the two OS variants Apple uses to power its products.

iOS powered products (which did not exist three and a half years ago) generated 65% of all sales in the last quarter. OS X powered products generated 20% of sales. That’s a noteworthy combined total of 85%.

But software is even more important for Apple.

The sale of OSX software (both the operating system and applications for it) accounted for another $786 million or 3% of total. In addition, I’ve put forward some evidence to suggest that the proportion of sales due to Apps in the Music store is nearly half, or another $600 million (a bit more than 2%).

Therefore only 10% of Apple’s sales were for products not directly powered by its vengeful operating system. That speaks volumes not only for the importance of software to Apple but for the cohesion of an extensible, flexible architecture that allows it to inhabit a portfolio spanning from a music player and an enterprise server.

I recently answered a question on Quora on whether Apple is a Software, Hardware or Media company by saying it’s all three.

With 90% of sales dependent on a unique, proprietary operating system[1], perhaps the answer should have been different.

  1. I know that OS X has a large amount of open source. Proprietary, like Open is a partial definition.
  • http://twitter.com/jyrkiw @jyrkiw

    I think it will boost Apple's fortunes further that the same knowledge can be used to develop for all three (obviously some details are different)

  • asymco

    I forgot to mention that of the peripherals segment, iOS based Apple TV must be a significant portion. That could add another 1% to iOS percent of total.

    • Tim

      I'm pretty sure Apple accounts for Apple TV as part of it's iPhone segment but couldn't find a proper reference. I think this had to do with the subscription accounting that they have changed but I believe they never took out Apple TV from that segment.

      • asymco

        I have asked around to other analysts and there is agreement that Apple TV is peripherals, but I would love to see a specific citation in their reporting. Maybe someone should ask Investor Relations.

      • Brian

        I emailed them, they said that AppleTV was indeed reported under 'other peripherals'.

      • FalKirk

        Nice legwork Brian, but…

        …Apple responded to a request for information? What is that, the third sign of the apocalypse?

  • tim

    Only half of the ipods sold last quarter were ipod touch. The other half are not ios.

    • tim

      I didn't notice that on the chart not all of iPod is contained within iOS.

    • asymco

      The figures I cite assume a bit over 50% share of iPods are touch ($230 ASP for 10 million units out of total of 19.5 million iPods at an ASP of $176).

      • Tim

        Thanks for the clarification!

      • Synth

        So you are including iOS apps as part of the music portion of the income graph?

      • asymco

        That's where they are on the income statement. But it's hard to figure out what portion of that is app income. It's too small to discern in the chart above.

  • tim

    Btw something about this site and/or the commenting system works poorly with the ipad. The site keeps loading in perpetuity (even though everything seems to have loaded) and I'm unable to comment. Perhaps it's an anomaly…

    • Hamranhansenhansen

      It is working on iPad for me.

      • Tim

        Strange… Thanks for the info

      • Tim

        Works now!

    • famousringo

      I've had some anomalies with iPad, too. Lost posts, mostly. It usually works…

  • Hamranhansenhansen

    Where you say "OS X" it should read "Mac OS". Both iOS and Mac OS run on the exact same OS X core operating system. They are one operating system with 2 user and application interfaces. So it is 65% iOS, 35% Mac OS, 100% OS X.

    • http://twitter.com/relentlessFocus @relentlessFocus

      my thought too

    • asymco

      I believe the branding is fairly clear: the Mac runs OS X, the iPhone runs iOS. http://www.apple.com/macosx/ http://www.apple.com/iphone/ios4/

      The fact that they share OS X core is true but I have to call it what they call it.

      • http://twitter.com/aegisdesign @aegisdesign

        The base OS is actually called Darwin if we're going to pick nits.

    • Steven Noyes

      At one point, when Apple first introduced it, iOS was simply called OS X. It then got called iPhone OS and then renamed to iOS.

      So yes, the core OS is the same code base but they are branded differently because they have very different API layers for UI. OS X has things like NSWindow, NSView and NSButton. iOS has similar, but very different, UIWindow, UIView and UIButton. They both share almost identical things like NSData, NSUserDefaults, NSMutableString, NSThread, CGImage…

    • Adam

      That's not accurate. Mac OS X and iOS share quite a few low-level components, but many other core OS components have been completely redesigned for iOS. It's a constantly morphing process — sometimes components branch, sometimes they come back together again. It's certainly a virtuous cycle, and they benefit from each other, but iPhones and Macs most definitely do not share the "exact same OS X core operating system".

  • Guest

    Is there any estimate on where Apple makes their profit (as opposed to revenues)? I suspect that one or more of their product lines have a disproportionate percentage of their earnings depending on competition, production efficiencies, R&D reinvestment etc. Thx.

    • asymco

      Stay tuned.

    • Tim

      Gross margins on iPhone are have been close to 60% (prior to iPhone 4). Margins on Macs are closer to 30%. iPod is similar and iPad is less clear. iPhone is mostly what's driving profits.

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  • Dave

    I do recall steve jobs saying Apple is a software company that makes it’s own hardware. Apparently he meant it.

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  • http://twitter.com/parvc @parvc

    i am waiting for app store related revenue to increase at a significant rate due to the large installed base. Do you think that's likely to happen or the app revenue is just incremental?

  • KenC

    Great chart, as usual. As iPod sales double every Q4CY, creating a bumpy chart, I was wondering if it would be better for clarity, just to break out Q4s for comparison.

    • http://gravitationalpull.com/wp/ aaronpressman

      Or graph quarterly trailing 12-month percentages

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  • Nikolay Andreev

    Didn’t Steve quote Paul Allen on one of it’s keynotes: “People who are really serious about software, should make their own hardware”

    So it is interesting that while Apple considers itself a software company it seams to the outside observer to be selling hardware only

  • Brian

    Uh, yeah, but almost all the hardware comes with software, otherwise it's useless. Also, it's the software bit that is really hard to copy, especially when it's tied to iTunes, undoubtedly the best retail media outlet on the 'net.

  • Matt

    @parvc I thought Apple only takes a 30% cut of App Store revenue to pay for the expenses to keep it running? I dont think they make money off it.

    They use it as incentive to buy an iOS device (and Macs, soon, too).

  • Steven Noyes

    Horace,

    I think I might provide some insights for you for a change.

    My thoughts on this question:
    I recently answered a question on Quora on whether Apple is a Software, Hardware or Media company by saying it’s all three.

    Apple really is, in many respects, the last of a dyeing breed of what I call a "Systems Company" and this is where their strength lies. This is also where they offer a disruptive influence to the industry.

    Let me expand.

    Take Boeing. They are a Systems Integrator but not a true Systems company. They lay out high level specification to components like Avionics Suites, Air Frames and Engines. They find companies, like Rolls Royce, to manufacture them and Boeing puts the pieces together. They design the high level system and integrate the individual components into a finished product. They do very little design of the individual pieces.

    Take Microsoft. They are a Software Company though they have done some Systems work with the XBox. Their primary product, however, is software in the form of Office and Windows. When they went out of their area of expertise with the XBox, they did not not do to well at first. They lost billions even though the end product has now turned out pretty darn good. But this goes to show how hard it was for Microsoft to try and transition to a Systems company.

    Take Dell. They are a hardware company/Systems Integrator. They do offer some services, but they really are a hardware company/Systems Integrator. They do very little, if any, software and simply let someone else do the software. This includes products like the Streak and Optima.

    Take Google. They area mostly a services company. They have offerings in software with Android but their weakness in managing software shows through in how poorly Android is managed. By that, I mean updates. Google, with great intentions, created Android and "gave" it to the world. They have continued to improve it, but due to lack of control, you now have 5 shipping versions of Android on new devices (1.5, 1.6, 2.1, 2.2 and 2.3). I really believe this nightmare in upgrading devices is born from Google being, first and foremost, a services company and not a Software company.

    Now look at RIM, Nokia and Apple. These are what I call Systems companies. RIM does the OS, hardware and infrastructure. Apple does the OS, hardware and creates an "eco-system. Nokia is similar. Apple, however, has a great advantage in having a presence (even if weakly) outside of mobile. Apple also makes 35% of their revenu on the sale of computers and computer software. All of these components integrate stunningly well from hardware to software. They are all designed using a "Systems" mindset. A mindset that requires the hardware, software and infra-structure to play seamlessly together. Full Systems design is very difficult to do.

    This is also where people mis-judge Apple when they look at the hardware and ask "Why does it cost more than a Dell?" Dell is a hardware company. They specialize in making just hardware but they rely on outside companies like Microsoft, to build software and infrastructure support. Apple does the entire system. From the OS to communications protocols, Apple does it all. As a result, you get this seamless interaction that is difficult to achieve when the end user becomes the systems integrator. Why? because most people do not have the experience of being a Systems Integrator.

    So the answer to your question:
    I recently answered a question on Quora on whether Apple is a Software, Hardware or Media company by saying it’s all three.

    Is "Neither. Apple is a Systems company. It does not rely on any one of those three but all three simultaneously. Take one away and the entire company would collapse."

    • davel

      one more thing. a company like dell really doesnt design its own hardware. they buy the motherboard, the hard drive, etc. they may design shapes around the edges, but apple designs all its stuff and doesnt just pull off the shelf.

      and yes that costs money. it doesnt cost money to take off the shelf parts and put your sticker on it.

      • Steven Noyes

        Hence the Hardware/Systems Integrator name tag. I am betting that Dell does do some of their own case designs, mother-board layouts, power-supply designs and a few other simple components. For the most part, however, they buy COTS products and integrate them.

        They are closer to being Boeing but still do some of their own design.

    • Splashman

      Nice analysis, Steven. Thanks!

    • Bob Shaw

      Steven:

      Very nicely explained

    • asymco

      Systems analysis is a lost art. It's the study of sets of interacting entities. Thanks for bring it to the discussion.

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  • Jocca

    This is the best articulated article comparing the different technology companies that I have come across and should explain why it is so difficult for Microsoft and all the hardware makers to compete against Apple. It also explain why Apple users are so addicted to its products because they are made to just work with the least possible hassle.

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  • r00tabega

    I remember people wondering if buying NeXT was a bad idea for Apple… 100% of their sales rely heavily on evolved NeXT technology (NextStep -> OSX -> iOS).

    Apple is a hardware company but most of their competitive advantage comes from software that they completely own (hybridized with open-source projects).

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  • Jay

    Steve Jobs at the D5 conference, June 2007, approximately 29 minutes into his discussion with Walt Mossberg and Bill Gates:

    "An iPod is really just software. It's software in the iPod itself, it's software on the PC or the Mac, and it's software in the cloud for the store. And, it's in a beautiful box, but it's software.

    If you look at what a Mac is, it's OS X. Right? It's in a beautiful box, but it's OS X. And, if you look at what an iPhone will hopefully be, it's software.

    And, so, the big secret about Apple, of course, or not so secret maybe, is that Apple views itself as a software company… Apple's fundamentally a software company, and there's not a lot of us left."

    • Splashman

      And that's why I have a hard time imagining any serious competition for the iPad or iPhone in the near future (~5 years). Who has the resources and vision to compete with Apple's hardware expertise, software expertise, and ecosystem (iTunes store, etc.)?

      And no, I don't consider Android to be serious competition. It will dominate the low end of the market, but that's not where Apple is competing. Given that iPhone is coming to Verizon, Android's free ride in the upper end of the U.S. market is over.

      I cling to the hope that Microsoft will dump Ballmer (and all other "Windows Everywhere" execs) and get a clue. I detest what they have become, but would welcome a good competitor. The tech industry needs more than one visionary, innovative company.

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  • grouver

    Apple is NOT a Media company and never has been one. Not only that but Apple has no intent on being a media company. I am not sure what definition of a media company you are using, but for me a company is a media one only if they actually produce media content. Actually this is a pretty generally accepted definition. Apple does not produce any media content. What Apple does is, they rent out market space and maintain a digital/virtual market place where you can purchase media content. You can think of Apple as a retailer because essentially that is what they are. The difference to traditional retailers is that Apple operates on roughly 43% markup (30/70) rather than 100%. For a very brief period of time (right after the introduction of iAd) Apple was a media company because they used to produce advertisements. This is not the case any more and if you really want to split hairs, then Apple is also a media consultant in the sense that they set and police quality guidelines for the content being sold through the iTunes Store.Apple is NOT a Media company and never has been one. Not only that but Apple has no intent on being a media company. I am not sure what definition of a media company you are using, but for me a company is a media one only if they actually produce media content. Actually this is a pretty generally accepted definition. Apple does not produce any media content. What Apple does is, they rent out market space and maintain a digital/virtual market place where you can purchase media content. You can think of Apple as a retailer because essentially that is what they are. The difference to traditional retailers is that Apple operates on roughly 43% markup (30/70) rather than 100%. For a very brief period of time (right after the introduction of iAd) Apple was a media company because they used to produce advertisements. This is not the case any more and if you really want to split hairs, then Apple is also a media consultant in the sense that they set and police quality guidelines for the content being sold through the iTunes Store.

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  • http://twitter.com/goktuggedik @goktuggedik

    Hi there,

    I have a question which I could not figure out on my own from the numbers and charts…

    Does Apple state App Store (iOS or Mac OS) revenues directly? How much does Apple get from each store, compared to sales?

    Or, the field indicated as "Software, Services and Other Sales" represents all of the software sales (App Stores, boxed apps etc…)