Apple Surpasses Dell's Market Value

bonch writes "Nine years after Michael Dell said he'd shut down Apple and give the money to the shareholders, Apple has passed Dell in market value, at $72,132,428,843 compared to Dell's $71,970,702,760. Analysts expect Apple to continue to outperform competitors, citing 2006 as 'poised to be the year of both iPod growth and, more importantly, Mac market share gains,' with earnings growing more than 35%. I should have bought stock two years ago!" We talked about the approach of this moment back in November of last year.

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The secret

is Unix. And some good support and design. In the end Unix is the only way....

Re:The secret

"Unix is the only way"? Eh, Microsoft is very successfull with it's own non-Unix operating system.

Basically, yes. Every good operating system I know of or have used in the past 10 years is unixy. I did not do pre OS X Macs, I did do Apple squiggle squiggle in for 10 years before this time, and had no UNIX experience. The first MacOS was pretty cool, because there simply wasn't anything else remotely like it available. I didn't use it, I just played with it on other people's computers and in stores. I did occasionally use pre-OS X MacOSes, and I did not like them. Bombs from memory mismanagement, other stability issues, and whatever. I thought they were behind X windowing systems and even Windows in terms of cosmetic looks. The OS wasn't 3d-like until 8, but I crashed 8 within 10 minutes of using it, and was not impressed.

Hell, even Microsoft is starting to add UNIX features like better headless support, scripting, a real shell, remote access, periodic commands (cron), etc. They have had SFU, etc. These are standard unix features that have been around for about 30 years. I work with UNIX and Linux systems, and use Macs as my personal machines. At work, we have Windows, Macs, and UNIX and Linux, more on that later.

I'm not sure what "market value" is really an indicator of.

Actually, when first reading the headline and stuff, I was thinking what commodity OS are people going to use after Windows?

I don't see OS X being the standard any more than Ferrari or Porche or other high-end cars being standard. Even though the price (TCO for the PHBs) is about the same as other systems now, I just don't see Apple with 90% market share, and I'm not sure if they want to either.

But, IMNSHO, Windows is dead. Bear with me. At work the Windows admins, have mostly switched to Macs for their personal machines. I don't talk to them or see them that much, but I see that their emails are coming from Mail.app (Mac default mailer), and I have heard of people switching. Honestly, I can't think of one of our Windows admins that does not have a Mac now, I could be wrong. All of the UNIX admins have Macs.

I'm a geek, and a computer guy by trade. I simply don't have the need to use any Microsoft software for my personal or professional needs. The only MS software I have on my computers is IE and WMP. Both are basically EOLed, and horrible on the Mac.

Maybe people will still use Windows because it has been "good enough" and maybe that will stay the same. If Apple breaks the bond between the hardware and software integration since they now use commodity processors like Dell and others, then maybe OS X will become the standard. I just don't think Apple wants to have the issues with 3rd party hardware and the associated stability issues and support costs and possible tarnish their reputation. Maybe people will use Linux if the fundamental issues of conformity, ease of use increases with software installation, and a good GUI. However, there does not appear to be enough focus on that end. Maybe a commercial company will put these things together, and it will be the commodity OS. Don't know.

Interesting times for computers. There is still plenty of room for improvement across the board though.

Re:The secret

Well Unix was a smart shortcut for Apple. A relatively quick way to make a Stable and Secure OS. Take a Unix kernel Modify it for you OS. and there you have a stable OS in a lot less time from starting from scratch. I would say apples portable systems are the real grab. (iPods, iBooks, PowerBooks, MacBooks), Unlike most desktop systems, which you just put on your desk and work on, there is where price/performace is the key factor. But with portables design and style becomes a part of the factor.
With portable systems they tend to be accessories with your cloths that are functional, much like watches, you could ware an ugly plastic digital watch, or a shiny metal analog watch, they both do the same thing but one looks better. The same with portable systems, if you have to go to school with a laptop and you pull out some 3rd party Laptop which may be powerful but looks like a brick. Or you pull out a clean new Powerbook err um MacBook Pro, or some other stylish laptop such as a Sony Vio, even if the specs are not as good, you still look better to your class and other people. I am sure a lot of slashdotters don't care (or say they dont) about impressions to other people, but most people do, and they are the ones buying most of the computers now. Apple tends to understand the need for style. Secondly with portable gear you need to have what you really need integrated with the laptop and placed in a spot where you would use it. Things like needing to add Ethernet Dongles, or having to switch between Ethernet and Wireless cards, Easily accessible USB ports for Flash sticks, and things like Apples new magnetic Power Cord because you may be plugged in on a high traffic area. All these add up and are important to portable users. While the OS has some to do with apples success. I find that OS X is the best platform for Laptops, It detects new wireless hotspots easily, It changes networks without much of a hiccup, It works well on Windows, and Unix networks. But that is why it is doing so strongly lately. First people get the iPods because it is cool. Then while they are at the store they see the other cool things apple has and they realized how good much of their products are.

Re:The secret

Apple has sold 42 million iPods, 14 million in the last holiday season. Everyone I ask who doesn't have one would like one. There seems to be some room for growth there.

Re:The secret

Well, what your laptop says about your sense of style really does not matter if you show up to class in an old faded T-shirt and sweatpants now, does it?

Re:The secret

While I might get flamed for this one, in the home market at least, it's not Unix that people are buying, it's an experience. Unix is an important part in the scientific communities and for some hard core techies, but the people who buy the mac mini, iMac and iPod's aren't worried about the underlying technology.

Apple has created a brand experience that most marketing people try to copy harder than eCommerce sites copy Amazon and eBay. Everything about an Apple product lets you know your dealing with a company that puts the user experience first. That's Apples brand niche.

When I bought my first mac some 8 years ago... I was awe struck by the packaging - not of the computer - the card board box it came in was user friendly. It was perfectly clear what was in each box. It was intuitive which piece needed to come out next - the foam that was around the monitor was easy to hold on to and take out. Nothing about unpacking the computer was frustrating.

When Apple retail stores hit the scene, did anyone note that the UI on the electronic signature box matched that of Aqua? Did anyone notice that your receipt font matches the fonts on the box / os x / sales literature etc?

I bought a G4 tower a few years ago and the little details that go into engineering the case and hardware are what diferentiates Apple from any other manufacture I know. I lift a little handle on the side of my case and the whole thing flops open and I have access to clean the entire machine. Additionally, all of the edges of the stamped steel were de-burred so I didn't cut any of my knuckles open as I poked around inside the case. I understand most non-slashdot-reading users will not ever open their case, but much like a Mercedes-Benz, when you look under the hood or at any small corner of the car, you know no expense was spared to ensure whatever level you interface with the product it is solid, reliable and nice.

Even the iPod I bough 3 years ago came in a package that was clearly labeled. It was clear that designers had thought about the process of opening the package, puting the iPod on the left (since we're a left to right society here in the US) where we would look first when orienting ourselves to the two halves of the box.

I expect Jobs and the rest of the crew at Apple to continue making an experience that is every bit as robust and consistent with their products as my last few years of experience with the company has been.

Re:The secret

While I might get flamed for this one, in the home market at least, it's not Unix that people are buying, it's an experience. Unix is an important part in the scientific communities and for some hard core techies, but the people who buy the mac mini, iMac and iPod's aren't worried about the underlying technology.

Generally true, but "the experience" runs on Unix. When my non-techie friends ask what kind of computer they should buy, and I tell them to get a Mac, I don't say, "It's really cool to have a great GUI as well as access to all the great command-line Unix tools, all in one carefully thought out integrated package." What I do tell them is, "You get the best, most modern interface, plus it's much more secure and stable than Windows because it's based on Unix, which is the operating system that actually runs the Internet.* So you can just do what you want to do with your computer instead of spending half your time dealing with crashes, viruses, and spyware. Also, if you ever do decide you want to get into some more advanced stuff, let me know." Which is a pretty successful sales pitch, and has the virtue of being both true and relevant to "the experience" they'll have with the computer.

* Yes, I know this is a horrible oversimplification, but it's essentially true, and I'm always happy to go into more detail if people ask.

Re:The secret

Actually, Apple gets value from the combination of style and solidity.

Consumers resent a crappy product in a pretty box. They feel, with justification, that the company should have spent more money on "making the damn thing work" rather than just slapping on a few go-faster stripes.

That makes style a big market advantage for Apple. It doesn't matter how much you case-mod your Winbox, you'll still be on the patch-and-virus treadmill, and still have the same risk of BSODs as someone using a POS white box. Likewise, a KDE box in a gorgeous enclosure will have exactly the same function set as a built-in-the-basement wonder.

Apple's products are solid enough that their style is worth considering. People freaked out over the Nano because you could scratch the screen if you put it in a pocket full of change, not because it randomly locked up, or because they couldn't transfer some of their files, or because it stopped working in cold weather, or any other basic function issue.

Once you hit the point of diminishing returns on 'making it just work', style is the next playing field on which you compete. But you can't play in the 'style' arena until you've aced the 'it just works' level.

Re:The secret

The secret is Unix. And some good support and design. In the end Unix is the only way....

If that was really the case, then why is Linux, which is more than Unix ever was barely registering on the desktop market? If Apple licensed the Windows kernel with fixed hardware specs and rock stable drivers for the Mac hardware, do you think users would notice the difference? Everything that makes a Mac worth its pricetag (not my opinion, the market's opinion, I don't own a Mac) is what is running on top.

I do run both a Windows and Linux desktop, Windows because I must (not everything plays nice with WINE) and Linux because it works very well when it works. I've had to make quite a few "one-minute" fixes that don't bother me, but would stop someone like my parents dead in their tracks. Which is why they have Linux boxes I support via OpenSSH, their last Windows box got infected somehow, don't ask me as firewall, anti-virus and anti-spyware was running. I've considered buying them a Mac but it's really overkill for what they use it for.

I don't know quite what to compare it with, the way most people use computers is like having a car with tons of aftermarket parts and absolutely zero clue how to fix the simplest of issues. Hell, most of them like to play part-time mechanic and tune it themselves, or let third parties they don't know do upgrades to it. Not to mention being on the Internet is like having it standing in a bad slum with neon lights saying "Chop shop this" on it.

Macs deliver something like a "standard" car, but a very polished one at that. It comes with fixed accessories that you're not really supposed to replace. Basicly, it's trying to take as much complexity out of having a computer as possible, to make it one where you can just turn the key and drive, like you would a car. Seriously, if my car had as many issues as my computer, I would take the subway, bus, tram, bike, hell I'd even walk rather than own a car. Having a modded car is really cool if you like to tweak around and work on it. If you don't, it's a PITA. I like to tweak around on computers so I don't have a Mac, but that's why Macs do so well.

Market Cap: No. Equity Market Cap: Yes

Apple has surpassed Dell in Equity Market Capitalization, but not total market cap.

Dell has $600 million in debt, while Apple has none.

The total market cap is equity plus debt. Think of it this way - if you spend the 72 or so Billion on Dell, you still need to pay off an additional $600 million before you truly own the company. One alternative is to issue another $600 million in stock, and use the proceeds to buy back the debt.

Michael Dell said he'd shut down Apple...

... and give the money to the shareholders

Market cap or Equity Market cap, does it matter? I bet Michael Dell really hates it every time somebody brings that quote up in conversation and every body starts laughing. It must be the first thing every new employee at Dell HQ learns:"OK, iPods, PowerBooks and anything else with an Apple logo is off limits and whatever you do, don't crack that Apple shutdown joke when Mr. Dell is within earshot, the last time that happened he punched the guy who told it and cancelled our christmass bonuses!"

Re:Market Cap: No. Equity Market Cap: Yes

You are wrong, sorry. Equity value+debt is called "total capitalization." "Market capitalization" is the value that the market ascribes to the common equity value of the company. You are buying a share of this common equity. The fact there there exists debt is already baked into that determination in various ways based on how people think that such debt helps or hurts the company's future performance.

The calculation you describe is grasping at a concept called "Enterprise value" which is total capitalization minus cash. Think about it. If you are going to add on the debt that company has to the total amount someone would need to pay to buy the company, because they would be assuming the debt, you should also subtract the amount of cash on hand. Finance 101, dude.

Re:Time to Short Apple's Stock

"Sony is an R&D and manufacturing juggernaut and could outengineer Apple to build a better iPod."

So why haven't they done it yet? I mean, it's not for lack of trying. They've released 'ipod killer' after 'ipod killer' and Apple has gone from strength to strength. The reason that nothing has 'killed' the iPod is because it is a cool gadget. People want an iPod, not an MP3 player, and thats the main reason why Sony and Creative probably won't be able to 'kill' it for a long time.

Re:Time to Short Apple's Stock

Sony _could_ have revived the 'walkman' name with a stylish portable mp3 player.. remember when everyone had to have a walkman? but sony was at odds with itself over DRM etc etc.. the last thing they wanted to be making and selling was a product that could be used to illegally trade mp3's. so, there were a lot of people trying to make a name in the portable mp3 market, and that's when apple hit with the ipod. and the ipod it was good, and people loved it, and the ipod became the 'walkman' of this generation. 'oh you're not cool, that's just some crappy mp3 player, too poor to get an ipod huh?'

The cat is already out of the bag, and yeah, sony was well aware of mp3 players, and had the hardware and engineering guys who could have designed an efficient one. they were banking on the mp3 format to 'just go away' so their record label could make more money selling CDs. or something like that.

Besides sony was focusing it's effort at dominating the video game sector, they've done an awesome job at it, and they've managed to 'launch' the psp (against nintendo's iron grip on the handheld market) in every major country except the UK. And all this for a system that won't have a respectable* game title for another year, and has no back catalog of compatable games.

I know people who are very happy with their PSPs but most of them have hacked the firmware and are playing ROMs on emulators... frankly I'd rather buy a flash linker and play them on a cheap GBA SP, since DS linkers are still immature, and GBA linkers work with more systems than DS ones. http://www.gameboy-advance.net/nintendo_ds/neo-fla sh/neoflash-review.htm [gameboy-advance.net]

for $300(or less) i can get a very nice car/portable dvd player with detachable screen(s). and i don't need to buy movies that only play on a psp, plus i can play dvd+-r's i've burned, or movies i've rented from netflix. so the movie playback capabilites don't impress me.

the NDS however has several games i love, and several i wouldn't mind owning.. plus works with my old gba titles, which i have about 20 of or so. I am still worried about nintendo's long term strategy, but they've beaten everyone else out of the portable market, so if they keep on making awesome systems with awesome games, then sony will remain the 'other' portable gaming device.

*= IMNSHO psps launch titles suck, a look at gamefaqs doesn't show much promise til you look at games with no us release dates, or release dates a year or more from now.

Re:Time to Short Apple's Stock

The huge looming threat to Apple is Sony.

Wake me up when

1. the PS3 comes out
2. they make a non-fragile laptop; their stuff is cool-looking but much easier to break than an iBook
3. people forget about the r00tk1t -- that made it into non-techy national news
4. they come out with *any* non-absurd music player

I was a huge Sony fan for many years. But they've really lost direction in EVERYTHING but game consoles; I'll believe they get it back when I see it.

Even so, I think Apple's stock may be overvalued. It's valued for explosive growth; I think steady growth is more likely.

Times Change

Situations change.

What this has shown is that Apple was viable back then, and that Michael Dell doesn't have the necessary vision to run a company such as Apple.

He has enough vision to run a business selling PCs. Enough capability to scale it up to its current dominant position. He may indeed be a better business person than Jobs - I don't know - but Jobs clearly has something he doesn't (apart from the emotional attachment to Apple).

I'm sure he wouldn't say that today. Indeed I doubt he would have said it in 2000. But in 1997 it was certainly an option. An option that would have removed a competitor.

Re:Times Change

I don't know - but Jobs clearly has something he doesn't (apart from the emotional attachment to Apple).

Correct, he has charisma. I couldn't pick Michael Dell out of a lineup if my life depended on it, yet I went out of my way to follow the Jobs keynote online the other day. That's the difference.

Re:Times Change

I know I'm going to lose karma for this but there's more to Apple than Steve Jobs.. Attributing all of Apple's recent success to him is insulting to everyone working behind the scenes. Jobs' role is more of a public face than anything else, and he's damn good at this, but Jonathan Ive probably deserves the credit more.

Besides if Dell had brought an iPod to market first they'd have called it the MJS P440 or the Musicon 5500.

Re:Times Change

What this has shown is that Apple was viable back then, and that Michael Dell doesn't have the necessary vision to run a company such as Apple.

Maybe. Probably. But remember, Dell wasn't Apple's CEO back then, Jobs was. Don't you think a competitor is more likely to sound the deathknell for a company than its own leadership is? Michael Dell would have been singing a different tune had he really been in charge at Apple.

Price Earning Ratio is What Really Matters

Before you run out and buy your new Apple shares take a look at the P/E ratios.
Apple 54.87
Dell 23.71
The run up in the price at Apple while, commendable is predicated on the hype around iPod and the assumption that will translate into sales of desktop machines.
Tons of reasons to have concern.

Re:Price Earning Ratio is What Really Matters

This is the bit people fail to notice about a company. Apple for example aren't actually worth more than 70 billion but just their shares are. They're based on speculation and hope. This might sound like mac bashing but nothing at Apple indicates 70 billion in value anywhere. 6 billion in cash, some buildings and designs, some patents and about 1.5% of the market. with 5 billion revenue quarters. that's revenue not profit. so you're looking at maybe twenty billion at the tops in what something is worth.

  Looking at the fundamentals like you say is the important thing. Dell is a much bigger company and has almost 50% of the world market. That's more profit in one quarter than apple's entire value.

The share market is a funny thing.

Re:Price Earning Ratio is What Really Matters

Sometimes, an image is worth that. Just that little shiny apple...

Try to buy Coca-Cola. The buildings are not worth whatever they would ask for the company. Its just those two words in their name.

Re:Price Earning Ratio is What Really Matters

although for what's it worth
apple - PEG Ratio (5 yr expected): 2.47
dell - PEG Ratio (5 yr expected): 1.12

Some corrections

First of all, Apple has close to $9 billion in cash and cash equivalents, not $6 bn, about $12 bn in total assets, and no long term debt.

Then, you have the $5.7 bn revenue last quarter (not 5), including $1 bn in Apple Retail revenue, and the fact that revenues, profits, and unit sales are consistently increasing quarter over quarter, year over year:

Total revenues [and profits] for fiscal year, in millions:

2001 - 5,363 [(25)]
2002 - 5,742 [65]
2003 - 6,207 [69]
2004 - 8,279 [276]
2005 - 13,931 [2335]

Not to mention record (and increasing) sales of all of Apple's products, from iPod, to iTunes Music Store, to the Mac platform, including servers and enterprise.

You're also really wrong about Dell having "more profit in one quarter than apple's entire value":

Total revenues [and profits] for fiscal year, in millions:

2003 - 35,404 [2844]
2004 - 41,444 [3544]
2005 - 49,205 [4254]

Yes, Dell is a bigger company (surprise?) and has higher revenues and sales. But over the last two years, Apple is growing at a faster rate. Much faster. Also, when you say "market share" you'd do good to include the market share of all of a company's money-making products, not just the figure you like. It's funny when people keep going around saying things like "Apple, with 1.5% of the market" seem to forget that Apple has over 80% of another huge "market". Does that market not count?

Now we've got a transition to a commodity hardware architecture and platform, with the industry abuzz with what this could mean for Apple in the enterprise for a variety of reasons.

It's funny that you state exactly what is wrong with a lot of people in the financial sector: not being able to look past next year, or even next quarter, for what something is "worth".

Source for financial data: Apple [corporate-ir.net] Dell [yahoo.com]

Re:Price Earning Ratio is What Really Matters

1.5% of the computer market of course. And when iPod is a big moneyspinner for apple it is still not the core, of their business. Most profit they make is still coming from MAC's and software with them.

So they have 1.5% of the market for their biggest selling product. Doesnt sound so good 72 billion now does it.

No, you seem to have misinterpreted the "which market" question. To illuminate this a bit, let's try it with a different industry: imagine if an analyst published an article saying about BMW, saying "their outlook is dire; they control only a tiny fraction of the automobile market, and are taking few steps to expand their market share". You'd look at that analyst like he was crazy, because you'd realize immediately that BMW's target market is a restricted subset of automobile owners -- they market themselves to affluent customers who want something that's perceived to be a superior product and who are willing to pay a premium to get it.

Apple occupies an analogous place in the computer market; they're sort of a "luxury computer manufacturer", and their advertising is similar to that of luxury-car companies, focusing on design, amenities and uniqueness rather than on price point. So it makes little sense to talk about Apple's market share in terms of the total PC market; instead, any measure of their success or failure must be taken in the premium niche they vie for.

Re:Price Earning Ratio is What Really Matters

Apple had about 4% of the personal computer market 3Q05, and it still seems to be growing. It has been three years since Apple has been near 1.5, and that was apparently in 4Q03 at 1.7%. Dell still sells about 8x more computers than Apple does, but at much lower costs and much lower margins.

It doesn't hurt to point out that part of the excitement was about iPod sales, I think the predictions were 9 to 11 million units last quarter and Apple announced they soundly beat those predictions by selling 14 million.

Attributed to?

While moving the OS to a BSD-based (or BSD derived?) kernel, I think the iPod also contributed largely to their success. I mean, most kids at the high school I went to, they didn't want an MP3 player...they wanted an iPod. This ties in with marketing.

Current Snapshot

It is interesting to note also that Apple is near its 52week high. And Dell is near its 52week low.

Apple

Price & Volume
Recent Price $ 85.59
52 Week High $ 86.40
52 Week Low $ 33.11
Avg Daily Vol (Mil) 25.269
Beta 1.403

Dell

Price & Volume
Recent Price $ 30.58
52 Week High $ 41.99
52 Week Low $ 28.62
Avg Daily Vol (Mil) 22.084
Beta 1.08

Re:Current Snapshot

Yes, and Apple has been near its 52-week high for about two and a half years [yahoo.com] and pushing their all-time-high for about a year [yahoo.com].

Re:Current Snapshot

And funny thing too.. both partly because of Intel...

Dell under pressure specially in the serverspace because they do not use AMD processors.. and Apple because the switched to Intel..

Ofcourse the reasons go much deeper than that, including increased competition from even cheaper manufacturers from Asia for Dell and iPods for Apple and many other things.. But just wanted to reflect on the irony of Intel being a problem for one and good thing for other...

profile

Who is this Michael Dell guy?

Innovation v commodity

Dell's aim is to have the best supply chain and produce computers cheaper than anyone else, this means they don't really do any innovation its more of a Wallmart sort of play. Now you can get very big being a Wallmart type of business but the challenge is that Dell are in a field where competition has almost always been around innovation. From a margin perspective the aim of Dell is to operate at low margin but sell in bulk, Apple are aiming at high margin and selling decent volumes. The reason people pay more for Apple's stuff is the innovation and design, the reason more people buy Dell machines than Apple's is because of the cost.

Two different models, its not comparing two similar businesses.

Whoa!

That's a lot of iPods!

Mikes Statement:

Aside from the crappy products, that statement alone was worth never buying another dell, ever. Arrogant prick.

Jobs has the charisma, but ...

Apple better hope Jobs doesn't slip in the shower and turn into a vegetable (or have an MI etc).

A lot of their success hinges on his charisma alone. Charisma is hard to value or replace.

let me see now..

hmmmmm. it seems that part of apple's success over dell is because of the ipod, and they're unix-based computers. well, i have a solution for dell.

make a better mp3 player than apple, and allow customers to choose between using windows or linux, as this could probably bring the cost of their PC's down, as linux is free. although their customer satisfaction ratings may go down, as the average user may not have much experience with linux.

Please Explain to me this...

I am sure that I missed the original discussion of the Adoption of OSX to an X386 Based Intel platform, but how does this effect Apples Botttom line. Will they in essence become another Microsoft (without the diversity) and stick to Operating system Development/licensing? When a DELL makes the platform that the OSX will run on, and can and WILL do it Cheaper then APPLE... Why buy one.??? If it's because the MAC is pretty blue or Red? Is Apple going to have licence the Use of OSX to only one Maker of Intel Machinces (ex. IBM)? Is that going to Cause a Rift Between Intel and DELL, making Dell switch to AMD processors (although this may be an Apples to oranges comparision.. I'm just throwing it out here.) I recall after they mentioned the Intel based OSX, Leo Laporte (Who is a MAC FAN!) though this was a tragic mistake and would hurt Apple greatly.. Opinions on this..? And all this will do is to allow Folks to say.. If you like OSX on the Intel Platform, Try FreeBSD or some other open source stuff with GUI etc..and it will run the OSX software also.. For Free!!!.. I am way off topic..sorry...

Nothing to do with computers

Apple sold fewer computers in FY2005 than FY2000. In the same periods Dell more than doubled. Apple stock value has nothing to do with computers but everything to do with the iPod. So, why compare it with Dell?
And Michael Dell is not the only CEO making stupid remarks about other companies. How about Steve Jobs comment about Microsoft going out of business [nwsource.com]?

An even better quote from Michael Dell on Apple..

Business Week... April 16th 2001:
Q: That bad?
A: Maybe it's a little bit different. But if you look at proprietary computer companies, whether it's Digital or Silicon Graphics (SGI ) or Apple (AAPL ), I think the fates are all relatively similar. We know how the movie ends. It's just a question of what happens in the middle. Apple has a very little customer base. If you look at the economics, it has been extremely hard for Apple to get a return on its R&D with a shrinking volume base. It's not to say that Apple's products aren't innovative or cool, but the economic factors here are so overwhelming, it's very hard for them to swim against that tide.

Q: If you were running Apple, is there anything you could do to change that?
A: I would never take that job.

http://www.businessweek.com/magazine/content/01_16 /b3728067.htm [businessweek.com]

Re:An even better quote from Michael Dell on Apple

This is interesting because if a firm is selling other peoples stuff or depends significantly on the innovations of others, and does not add unique value, the firm logevity is limited.

I mean look at KMart and Sears. Very good store with very good prices. Both added some value to through the product initially, through selection and location, but failed to continue to push that value. Walmart can in and they were toast. Dell is the same thing, but worse. Dell has the added cost of repackaging, but limited flexibility in terms of managing costs. OTOH, Apple has shown that will act aggressively to manage hardware cost, and is able to make changes to the OS to so do.

Dell is succesful becuase they are able supply large number of cheap computers to large firms. As long as they can win contracts, they will survive. However growth is out of their hands. Growth depends on MS maintaining a release schedule that encourages fast upgrade schedules, which they have not done. Growth depends on firms growing enough to add machines, which has happened. Growth depends Windows providing enough value so that large firms double license at least some machines. Growth depends on new machine running Windows, and not *nix, unless of course Dell is so cheap that even with the MS license the machine is a good value.

That is to say Dell has little control over it's future. It may decide to risk the MS gravy train and set out on it's own, but no one at Dell sounds that creative. At some point someone else will do MS Windows machines better, perhaps MS, or the desktop PC may become a thing of the past, and we will see how Dell does on low margins and low volumes. I mean, is anyone actually going to buy Dell at even a 10% markup?

Role reversal?

Is apple going to become the dominant player in the market? With Apple going x86 with Intel's processors it seems to be more likely than ever. I mean we could run GNU/Linux on a PowerPC but the _cost_ factor to own a Mac was too high. With Macs going x86 the users hopefully will see a large fall in the prices and a choice of more OSes than ever - Mac OS, GNU/Linux, BSD and Windoze (no flames please :P).

Shutting down apple

Is what would happen if Michael Dell tried to run a company that had to make quality products to stay in business.

We've got dozens of dell servers (hundreds of servers total) where I work, and the dell servers have a 100% failure rate. That is, each and every dell server experienced a hardware problem that required replacing something. Although usually non-critical, no other vender even comes close. They may make passable desktops and laptops, but their servers are from hell.

Re:Shutting down apple

I"ve noticed the other big computer vendors starting to have problems too, it's as if the units aren't fully tested before shipping anymore. Until last year I'd never seen an IBM or Sun or HP server with bad motherboard shipped from factory, but have seen all those now....qa going to hell

Re:Shutting down apple

The problem is that you don't have to be good. You just have to be better then your competitors. Like the old joke "I don't need to outrun the bear. I just need to outrun you."

We know how the movie ends...

This is the problem with CEO's and their big mouths:

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From: http://www.businessweek.com/magazine/content/01_16 /b3728067.htm [businessweek.com]

Q: What is the future of Apple Computer?
A: Silicon Graphics.

Q: That bad?
A: Maybe it's a little bit different. But if you look at proprietary computer companies, whether it's Digital or Silicon Graphics (SGI ) or Apple (AAPL ), I think the fates are all relatively similar. We know how the movie ends. It's just a question of what happens in the middle. Apple has a very little customer base. If you look at the economics, it has been extremely hard for Apple to get a return on its R&D with a shrinking volume base. It's not to say that Apple's products aren't innovative or cool, but the economic factors here are so overwhelming, it's very hard for them to swim against that tide.

Q: If you were running Apple, is there anything you could do to change that?
A: I would never take that job.

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I would love to hear his response to those questions today...

Re:We know how the movie ends...

So, wait... a very successful CEO who built his company from scratch to market leader, not a Carly Fiorina or some other overpaid asshole, makes an observation that Apple probably won't survive with its proprietary offerings and such a small market share, and he's got a big mouth? In April 2001 (pre-iPod, days after OS X v10.0, in the wake of the bubble burst) would anyone have disagreed very strenuously with this conclusion? The Appleatchiks might have been always faithful but the rest of the world could be forgiven for doubting.

In October of that year came the iPod, and in April of 2003 Apple opened the iTunes Music Store. Dell's failure was not that he was wrong in analyzing the fate of a company dedicated to making proprietary niche-market computers, but that he lacked the imagination to see that Apple wasn't always going to bank on proprietary niche-market computers. He says he would never take the job of Apple CEO. Honestly, would anyone have wanted Dell to head Apple? Would the iPod have come out under Dell? Would Apple have ever expanded into the media market under Dell? There's no way. He's just not that creative. So, thankfully, Michael Dell would never take the job of Apple CEO. So what?

Ego's

Style, flair, and innovation are Apple hallmarks with Steve Jobs at the helm. Dell is just another PC maker, nothing more. When Apple suffered through those other CEO's, the style, flair and innovation were missing. Apple never was, nor will it ever be just another personal computer company. Gil Amelio and John Sculley never really understood that.

Dell has no real style, flair, nor innovation. Michael Dell sells PC's, nothing more, nothing less. The most creative thing he has done is build an odd sense of customer loyalty where Dell owners believe that their computers are better than other Windows PC's. There is a place for that, but in the end Apple excites the consumer PC market, and Dell along with others ride the waves.

So what if it's the iPod that's doing it right now

I have to ask this question because I can point to a very similar company in design standards that has the exact same situation: Nintendo. Nintendo certainly takes a share in the home console market but their real money maker is, and always has been since the early 90s, their handheld systems. Yet, despite that, Nintendo is the only console company out there that makes a consitant profit. In fact in over 50 years of company existance they have only had one single quarter where they posted a loss(they still pulled a profit overall for that fiscal year too).

The comparisons between the two companies is also pretty similar when you look at it. Both companies are concerned about the user experience. Be it customer support, system design, interface, etc they both try to make it a special experience for the user. And, they use that positive experience to build a brand loyalty that helps to sell even more systems.

Anyway, the point is even if it is the iPods that are helping to propel Apple right now, it isn't the first time this has happened to a technology company. And, the profit they make due to the iPod success can only help them to expand slowly into other markets as well as evidenced by the heightened interest in the new intel powered Apple computer platforms.

This is an illusion

Apple is like the housing market. Just because their stock is 50% OVER-VALUED does not mean they are actually worth that much money... it's all on paper. And when a price correction occurs (and it will, it always does), you'll see how much they are actually worth.

Apple is near a breaking away point

Any mature company with a price earnings ratio of 46 in normal times, ie not during a market panic, is overvalued. The chances of making money in it over five years are tiny. The chances of making a risk adjusted rate of return that exceeds that available from Treasuries is even smaller. Doesn't matter if its called Apple or anything else. Doesn't matter if its in tech or coal.

If you doubt it, do the homework and count the cases. Then compare to the number in which you would have lost money. Compare. Figure the odds.

This is not investment advice.

But by comparing pure numbers blindly you are ignoring the dynamics of the situation.

Apple's computer share is growing year over year. They are very, very near an infelction point in that graph - where suddenly enough users have Macs that people start buying macs because lots of people they know have them.

And that was before the Intel macs, which seem to be drawing a huge amount of interest - not to mention that undoubtedly some people will want the ust to run Vista on. That could lead to a huge spike in Mac sales for the next few years, and there still is a lot of sales room in the iPod and the expanding vido market (where Google has released an unconvincing competitor).

So if every space they are in has the prospect for almost exponental growth, who is to say they are overvalued? I think that is ignoring the exceptional position Apple has managed to put themselves in. I don't even think it's because Apple is smart so much as other companies have been stupid. But that's exactly how Microsoft got where they are. What if Apple is the next Microsoft? Is it then so overvalued?

Dell selling apples?

If Apple was smart, they would license Dell as their sole and only re-distributor, or heck, license the Mac OS to Dell. Dell has mass production, customer service and tech support **down** and is years ahead of apple in these catregories. Dell says, "Sure I'd sell Mac OS X on a Dell", Apple says, "No friggin way": http://www.infoworld.com/article/05/06/16/HNmacdel l_1.html [infoworld.com]

"Should have bought stock"

If you ever feel you should have bought a specific stock, print the story up and stick it on your "Thank God I didn't buy stock" wall.

Buy a stock when it is priced at 6-8 times earnings and seems to have a productive, profitable product line that isn't a fad.

Buy a stock when the SEC and the IRS turn back regulations and taxes regarding dividends -- so you can earn an honest profit from honest work instead of earning a "profit" from selling the overpriced stock to some other sucker.

Buy a stock when the Federal Reserve lets interest rates change based on the market, not based on fantasy. Once interest rates are allowed to fluctuate freely, savings accounts will return a very nice and very safe return on your money. This is where most savings should go.

The stock market isn't for long term savings but for risk taking and profit making -- both of these things have been destroyed over the past 25 years, and if you feel your 401K and your private accounts are "safe," they're not. Give it a little more time, and everything tied to the dollar will have a very nice price soon. Including foreign stocks on any market governed by a government that invests in US dollars as part of their reserves. You can't make wealth on inflation, friends.

Size doesn't matter

From the shareholder perspective, size (or more accurately, market share) doesn't matter.

Take Toyota, for instance. It is not the world's largest car company in terms of sales. But it is by far the world's most valuable car company in terms of market cap. Why? Even though GM sells more cars, Toyota has been perfecting the world's most efficient production system for the past 3 decades. Shareholders know this, and expect that for every dollar of sales today, Toyota generates more profit than any other company. And they extrapolate this into the future: for every dollar of profit made today, Toyota will make even more profit compared to other companies. That's because the benefits of continuous improvement are cummulative - you can't just decide over night to have a world-class production system. It has to be developed over time.

A similar thinking applies to Apple. Even though Apple sales are miniscule compared to Dell's, the market sees Apple products as giving greater profits per unit of sales, and sees those profits as more sustainable than any other company. Why is this so? Because Apple has a much simpler product range than Dell's (reducing the cost base), because it's average prices tend to be a bit higher (increasing margins), because it has products like the iPod that are truly unique and valuable from the consumers' perspective (increasing margins, both now and in the future), and because Apple products are addictive - after using an iPod or a iBook, it's damn hard to move back to a generic MP3 player or a commodity PC (increasing sales and profits in the future). Few other PC companies have such a magic mix, and that is what makes Apple so much more valuable compared to larger companies.

Go Apple Go!

How many times has Apple been on the mat and down for what seemed like the last time only to rise up and start fighting again? I don't know but it seems like a lot. I'm only familiar with Apple products in passing, I've never owned one and never had to do any real work on on so I'm obviously not an Apple fan but, I have a very real and healty respect for them.

It really looks like Apple is making all the right moves. Their iPod product line has a lot going for it and their new computers sound really sweet too.

Frankly I'm wondering what took them so long to join forces with Intel, from a marketing standpoint this sounds like a slam-dunk. In a short time I think we can see a lot more software running on the Apple platform (you can read this as Apple will emulate the Windows platform or actually run Windows or whatever you want). With more software availability, they will find a home in more business environments.

For Apple, the business world isn't where it is all at. They seem to market to consumers, especially younger consumers very well. This means more Apple products in homes and dorm rooms too. In some ways, the iPod product line is a "taste" of the Apple world and since they like the taste, it isn't such a big step to move up to bigger products. This is especially true if the marketing mavens at Apple make sure their products work better with the iPods than Windows machines do -- this means that Apple will maybe offer very easy to use software for their computers to interface with the iPod as a standard feature. I would at least.

Apple is posied for some great things to happen in the next few years. Steve Jobs is the right guy and this is the right time. I think it is pretty easy to say "Apple is back and here to stay."

Hardware Sales?

I think what's interesting is that with the move to Intel, it really opens the door for a whole new market for Apple computers. Previously, if you bought a Mac - you bought a Mac. You're locked into Mac software, games, etc.

With these new machines - you've still bought a Mac - but I guarantee by 2007 you'll be able to dual boot with Windows. Apple says they won't stop people from doing that - so what's stopping people in 2007 from buying a Mac and just running windows. They're basically making their market the ENTIRE computer audience where before you were limited to Mac OS, Linux, Unix (Windows on VPC is barely usable).

Like the iPod - people LOVE Apple hardware - both Mac and Windows users. If I were an analyst looking at Apple I would see a HUGE upside on their hardware sales.

That's nice, but...

...it means absolutely nothing if you don't tell me what method was used to calculate their market value. There are at least three ways I can come up with off the top of my head that are accepted methods for calculating market value and each will give you quite different numbers that may favor Apple in some and favor Dell in others. Also, when we're talking billions on billions, 72.13 vs 71.98 billion is a pretty damn small (read: meaninglyess and negligible) difference. we're talking less than a 0.25% difference between the two. And yes, I know "...but 0.25% of a billion is a LOT OF MONEY" - it's still a quarter of a percent and if you have the money to buy either of these companies, that quarter percent is NOT going to factor into your decision unless you feel one of the two is undervalued.

AAPL P/E=53, DELL P/E=23

I guess Apple investors are willing to pay more for the company. I vote "irrational exuberance" :)

Can Apple buy Dell now ?

Can Apple buy Dell now, sell off its assets and redistribute the wealth to the shareholders ?

Makes sense...

... since Apple is selling the exact same computers as Dell now.

More importantly?

"...expect Apple to continue to outperform competitors, citing 2006 as 'poised to be the year of both iPod growth and, more importantly, Mac market share gains,

I'm sorry did you say MORE importantly? I know Apple is SUPPOSED to be a computer company first and foremost, but I'm having a hard time with this sentence given the ridiculous number of iPods they're selling. Anyone have a figure on what % of 2005 sales were iPods vs. "macs"?

Re:Formula For Success?

FYI. prices are competitive with Apple Products with DELL. I was wondering on the Price difference. So I matched similarly specked (I had to customize both to make them similar) laptops

Dell Inspiron 9400 $3,302
MacBook Pro $3,248

Now to be fare the Dell Inspiron did have a 17" display while the MacBook Pro was only 15. So I added the cost of the apple care program which is about the same as a size upgrade, when comparing older powerbooks of equal specs at different sizes.

Granted that with Dells and other PC you have a wider selection of options that allow you to customize them more closely to your budget. Vs. Apples one size fits group of people. But the Price of Apple Systems are about the same with as its equally match PC brethren.

Re:Formula For Success?

Dell 9400: 1.6" Thick
Mac Book Pro: 1" Thick

Dell 9400: 7.94 lbs (3.60kg)
Mac Book Pro: 5.6 pounds (2.54 kg)

I'm not sure which Dell Screen you picked but:
Dell 9400 17" Screen Res: 1440x900
Mac Book Pro 15.4" Screen Res: 1440x900

Dell 9400: 4 Pin IEEE-1394 (I'm guessing)
Mac Book Pro: Powered 6-pin IEEE-1394

Dell 9400: Windows Mandatory
Mac Book Pro: OS X

Both can dual boot Linux, so that's not really an issue.

I've had my TiBook for 2.5 years now, and was shocked when I saw colleagues getting these huge, fat Dells. Maybe I'm a weak person, but when you can be carrying around a laptop that's 1" thick in place of a laptop that's 1.6" thick, and about a pound and a half lighter, why wouldn't you? I suppose if you like cheap looking plastic, you might prefer the Dells, though, and making sure Redmond gets their tax, and a nice big, low-res screen. I'll take the MacBook Pro ;)

Re:Formula For Success?

Apple's hardware prices are generally in line with market rates in the 'not cheap tat' market areas.

For example, the PowerMac is competitive price wise with any 4-core system you can configure from the major PC manufacturers.

And now the MacBook Pro is similarly competitive, price wise. The parent poster did rightly point out that you have many more options on the PC side however.

You can either save money on the PC side by going with a lesser manufacturer, building it yourself, or making use of a wider range of customisable options. For example, Acer's Core Duo laptop is supposed to be significantly cheaper than the MacBook Pro. OTOH IBM's ThinkPads are roughly on par.

Also don't forget that many people are fed up to the eyeballs with Windows XP, and hell, that Mac OS X keeps getting recommended, and there's all those applications, and my iPod is easy to use, hmm, maybe it is worth a couple of hundred dollars on its own to not get the XP stress.

It does show how overpriced previous PowerBooks were. I wouldn't have liked to buy one in the past few months just to have this come out.

Re:Poised to bite the hand that fed it?

Truly an interesting slant on the situation.
Redmond does have a stick to swing against Cupertino: MS Office.
Will Redmond let MSO die like IE?

Re:Poised to bite the hand that fed it?

At Macworld Microsoft stated that they have signed an agreement to continue for at least 5 more years. So it doesn't sound like it is going to die any time soon.

Re:Poised to bite the hand that fed it?

This will be good for MS up to a point because it cuts against the argument that MS is a monopoly.

Re:Market Value

Simply, Market Cap = Number of Shares x Price per Share.