By making MobileMe free, those using it with iOS devices won’t be using services from Google or Microsoft, which makes switching to Windows Phone 7 or Android more difficult. While PC users would also have MobileMe free, they’d need to have iOS devices to make it really worth using. The Halo Effect, which argues that iOS device sales later lead to Mac sales mitigates the loss associated with giving away MobileMe to PC users in the present. If they do switch, free MobileMe helps encourage them to remain all-Apple in the future. Free MobileMe would be an investment in hardware customer retention, and it doesn’t even have to be completely free.
MobileMe is not a fundamental source of revenue for Apple. Apple makes money by selling mobile devices and computers. In fact, sales of software in the last quarter (which include OS X, iLife and iWork, among other things) generated $662 million. A free MobileMe — or at least the basic parts of it — would be an investment to keep people on the Apple ecosystem.
Jade also writes:
The point is lock-in. Get people using Apple’s free services with Apple’s highly profitable hardware, and they’ll be less likely to buy hardware from competitors.
Or, get people used to the integrated system.