Apple (NASDAQ: AAPL) is making a big deal out of the fact that 60 million software applications have already been downloaded by iPhone customers. New numbers show how modest the return is on the new business.
According to The Wall Street Journal, "If sales stay at the current pace, Apple stands to reap at least $360 million a year in new revenue from the App Store." The data show the extent to which Apple is still a hardware company. Apple's revenue run rate is now about $30 billion a year.
The software figures point to a misconception about Apple. Its iTune and Mac OS products only drive very modest revenue for the firm. It could be argued that these services help sell computers, phones and iPods, but their small returns show that Apple is still saddled with a lower margin business -- building products with fairly high component costs.
Apple likes to perpetuate a fiction for its shareholders that it will move into the ultra-high margin business of software and will get great leverage for its earnings. Looking at the numbers, there is very little truth to that.
Douglas A. McIntyre is an editor at 247wallst.com.


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