Nov 4, 2018 - Technology

Apple is an outlier from the open source boomlet

Open source illustration

Illustration: Lazaro Gamio/Axios

A stunning datapoint from Axios' Ina Fried: Apple's iPhone revenue rose by 29% in the most recent quarter, compared to a year previously — even as the total number of iPhones sold was flat.

Why it matters: Technology always plunges in price over time. Except, it seems, if you're Apple.

  • The cheapest Mac Mini was $499 up until this week. Now, it's $799. The rest of the lineup is also seeing price hikes.
  • Apple will no longer report unit sales for the iPhone and Mac, indicating that the company sees more growth from raising prices than it does from selling more gadgets.

Context: The low end of the market, for both phones and computers, is dominated by Alphabet's Android and Chrome. Apple has neither the inclination nor the ability to compete on price against an open-source competitor, so it's not even trying. Instead, it's extracting maximum revenues from its existing customer base.

Open source couldn't be hotter right now: After Microsoft bought GitHub for $7.5 billion, IBM came along to buy Red Hat for $33.4 billion. That's fantastic for Red Hat shareholders, but it doesn't necessarily reflect a hugely strong underlying business.

  • IBM is paying more than 10 times revenues, more than 25 times book value, more than 50 times estimated 2019 earnings, and more than 120 times Red Hat's fully diluted earnings per share over the past 12 months.

The big picture: Open source is of central strategic importance to all tech companies, including Alphabet, IBM and Apple. But the tech giants vary widely in whether and how they decide to build it, buy it or counterprogram against it.

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