3 Million Reasons to Love Apple's New Big Cat

Never one to avoid an opportunity to tout launch figures, be it 4 million iPhone 4S units sold over launch weekend or the 3 million new iPads moved on the tablet's debut, Apple (Nasdaq: AAPL  ) is at it again. This time, the Mac maker has announced that downloads of OS X Mountain Lion, the newest version of its desktop operating system, hit the 3 million mark in four days.

That makes it the "most successful OS X release in Apple's history," according to the press release. Apple is sticking with its moat-building ways by keeping the upgrade affordable at $20, even cheaper than its $29 predecessor Lion.

Longtime rival Microsoft (Nasdaq: MSFT  ) is even taking a page out of Apple's playbook here, offering a promotional upgrade to Windows 8 Pro for just $40 through January of next year. That's a big departure from the software giant's normal pricing, and this offer extends all the way back to machines still on Windows XP. That will surely boost upgrade activity for Mr. Softy.

At $20 a pop, we're talking about upwards of $60 million in revenue for Apple so far for Mountain Lion, although the actual figure is probably less because Apple extends free upgrades to recent Mac buyers and some of the downloads could be from one buyer with multiple Macs.

That figure is also pretty small compared with the revenue implications of the aforementioned iDevice launches. The iPhone had an average selling price, or ASP, of $659 during its launch quarter, implying a roughly $2.6 billion launch weekend; the new iPad's launch ASP of $559 similarly implies a $1.7 billion weekend.

At the WWDC keynote, Apple also said its Mac installed base had reached 66 million, with Lion installed on 26 million, representing 40% penetration. That was seven weeks ago, but 3 million downloads would represent roughly 4.5% penetration, slightly lower when factoring in the million or two more Macs that Apple has sold since.

At $20, Mountain Lion clearly isn't about the money. It's about streamlining support by quickly migrating users to the newest version, something Microsoft has been trying to do. For example, Microsoft recently sponsored a white paper on how Windows XP, now more than a decade old, costs business more than five times as much to support than Windows 7, in an unsubtle prodding attempt to get them to upgrade.

Mountain Lion is also about building a moat by delivering upgrades to users at impulse-buy prices, and it represents the broader trend we're seeing with mobile and desktop operating-system convergences.

Apple's moat has many facets, which all contribute to its astounding growth in recent years that shows no signs of slowing down in the long term. To read more, sign up for this brand-new premium research service that's all Apple, all the time. Apple is set to begin paying a dividend, while Microsoft has long been a Dow dividend stock, yet neither is one of three that dividend investors need to consider. This special free report outlines all of them.

Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft and Apple and creating bull call spread positions in Apple and Microsoft. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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  • Report this Comment On July 31, 2012, at 2:17 AM, dastaub22 wrote:

    >> its moat-building ways by keeping the upgrade >> affordable at $20

    moats were abandoned when the enemy hurled projectiles into the castle, and moats suggests a stationary target. Apple needs to be more agile and not hide behind a moat.

  • Report this Comment On July 31, 2012, at 2:27 AM, dastaub22 wrote:

    Every positive adjective and adverb is piled onto Apple, and every negative adjective and adverb is piled onto Microsoft.

    You report both Apple and Microsoft are doing the same thing about software upgrades. The only difference was the adjectives and adverbs you wrapped around your descriptions. The actual decisions were the same.

    The attempt to create a self sustaining ecosystem is almost every tech companies goal, no news there.

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