Shortly after Wall Street hammered Apple’s stock over health concerns regarding Steve Jobs, the company announced outstanding results for the quarter just ended. Both revenue and net profits were up nicely, at a time when any company turning in improved results is a shock. As always, the stories are mentioning that Apple’s gross profit margin was 34.7 percent, the same as in the prior-year quarter.

This is curious. In fact, this is nonsense. The issue is that the press is constantly comparing Apple to Dell or HP in this regard, but the comparison is silly. What they are overlooking is that Apple’s margin includes both the margin on the hardware, which is probably better than Dell’s but probably not all that much better, and its margin on the operating system, which is probably not as high as Microsoft’s margin on Windows. When Microsoft reports their margin, it’s closer to 85% on Windows. I have no idea what Dell pays Microsoft for an OEM copy of Windows Vista, but though it isn’t anything like the retail price, it isn’t trivial.

On server products, the advantage probably goes to Dell/MS or HP/MS. When a Windows server is sold, the base operating system is in the total to the tune of $500 and up, for five users, on which MS earns their 85%. But there isn’t much reason to buy a real server for five users, so the client buys sets of CALs – Client Access Licenses. Five additional CALs cost about $150, on which the MS margin has to be on the order of 99%.

In other words, the constantly repeated theme that Apple is making dramatically higher margins than their competitors is the result of poor logic and arithmetic skills on the part of the media. As has been said before on these pages, If I Were King, education would be focused on addressing this, and nobody with a high school diploma would be likely to make such an error. We assume that the media would continue to hire only those who have at least that level of education.