If You Have a Cash Cow, You Should Milk It

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


Matt Yglesias thinks that Apple’s strategy of earning very high margins on Mac desktops and laptops isn’t very smart:

Apple already has an awful lot of cash. Getting even more cash is not particularly useful for any goal at this point (diminishing marginal utility). So they ought to do something. One smart thing to do would be to make a strategic investment in Mac OS market share since with its current rather small market share Mac profits are not a particularly important part of overall Apple profits, but Mac could and should be an important part of Apple strategy.

I’ll play devil’s advocate here. As I recall, Matt himself has made the point in the past that plowing money into a declining business usually doesn’t make sense. If you make buggy whips, you should forget about trying to make a better or cheaper buggy whip. Just milk the product for all it’s worth, return the profit to shareholders (or plow it into another product line), and shut the whole thing down when it finally gets too small to be worth running.

This is actually conventional wisdom, and my guess is that this is how Apple feels about Macs. Could they get more market share if they slashed prices? Maybe. Then again, maybe not. Mac buyers tend to be devotees who are willing to pay more because they love Macs. Anyone who’s truly price sensitive is never going to be a customer anyway—especially these days, when Windows and Mac OS have converged enough that, frankly, there’s not a big difference between them.1

But the kicker is the fact that the PC market is declining, and no one thinks this is going to reverse in the long term. It’s losing out to tablets and phones and Google glasses. Given that fact, why bother trying to increase your market share a point or two? There’s no long-term benefit since the entire segment is doomed.

Now, there’s still the question of what to do with the mountains of cash that Macs spin off, and it’s pretty clear that Apple doesn’t yet have any bright ideas on that front. Neither do I. But using it to buy more market share in a declining segment probably isn’t the answer.

1Yes, I know this is going to start a flame war. Save your breath. I’ve used both Macs and Windows boxes, and modern versions work about equally well and have pretty similar feature sets. There are differences, some that favor Macs and some that favor PCs, and those of us who live and breathe tech will defend them against all comers. But for your average consumer, who just wants to browse the web and send some emails, they’re about the same.

WE'LL BE BLUNT:

We need to start raising significantly more in donations from our online community of readers, especially from those who read Mother Jones regularly but have never decided to pitch in because you figured others always will. We also need long-time and new donors, everyone, to keep showing up for us.

In "It's Not a Crisis. This Is the New Normal," we explain, as matter-of-factly as we can, what exactly our finances look like, how brutal it is to sustain quality journalism right now, what makes Mother Jones different than most of the news out there, and why support from readers is the only thing that keeps us going. Despite the challenges, we're optimistic we can increase the share of online readers who decide to donate—starting with hitting an ambitious $300,000 goal in just three weeks to make sure we can finish our fiscal year break-even in the coming months.

Please learn more about how Mother Jones works and our 47-year history of doing nonprofit journalism that you don't find elsewhere—and help us do it with a donation if you can. We've already cut expenses and hitting our online goal is critical right now.

payment methods

WE'LL BE BLUNT

We need to start raising significantly more in donations from our online community of readers, especially from those who read Mother Jones regularly but have never decided to pitch in because you figured others always will. We also need long-time and new donors, everyone, to keep showing up for us.

In "It's Not a Crisis. This Is the New Normal," we explain, as matter-of-factly as we can, what exactly our finances look like, how brutal it is to sustain quality journalism right now, what makes Mother Jones different than most of the news out there, and why support from readers is the only thing that keeps us going. Despite the challenges, we're optimistic we can increase the share of online readers who decide to donate—starting with hitting an ambitious $300,000 goal in just three weeks to make sure we can finish our fiscal year break-even in the coming months.

Please learn more about how Mother Jones works and our 47-year history of doing nonprofit journalism that you don't elsewhere—and help us do it with a donation if you can. We've already cut expenses and hitting our online goal is critical right now.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate