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Apple - What A Difference Eight Years Can Make
Posted by
Zonk
on Fri Nov 04, 2005 02:58 PM
from the company-with-a-tight-turning-radius dept.
from the company-with-a-tight-turning-radius dept.
conq writes "It's been eight years since Michael Dell was asked after a speech at a Gartner conference in Orlando what he would do if he were in charge of Apple Computer. His answer: Shut the company down and give the money back to shareholders. BusinessWeek in its new Byte of The Apple Blog looks at how the tables have turned since then. For example, over the last four quarters Dell has been coming in with a net profit margin of about 6.5%. Meanwhile Apple just finished its fiscal 2005 with a profit margin just shy of 9.6%."
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Apples to Apples (Score:5, Funny)
Re:Apples to Apples (Score:5, Insightful)
Apple has certainly come a long way since then. I think it's safe to say that we are comparing Apples to Apples in this case, since Apple was on the track to commoditization in the mid to late 1990s. However, when Jobs took over, they made a conscious decision to move away from commoditization and towards innovation as their primary driving force. What I think we're seeing here is the results of that decision. Had Apple continued down the path they had set out during Spindler/Amelio, they would have ended up like Dell -- perhaps a larger market share in the short term, but a much more dismal future outlook. Instead, they are a vibrant company that has great promise to grow its market share in a far more sustainable fashion.
Parent
Re:Apples to Apples (Score:5, Insightful)
While I ponder what you mean by the word, let me interject my views here. Yes, Apple has turned down a path of trying to sell innovation... but only sort of. Apple is more in the buisness of selling "little and cute."
I don't mean that in a derogitory fassion. Little and Cute seems to be making them buckets of money. I think that Apple's revenue stream comes from a fundamentally different viewpoint on the same basic idea. Apple sells brand name consumer electronics. They have a look and feel to them that says "I'm an Apple." Like many consumer electronics, they do exactly what they're billed as doing and little else. In the case of the iPod line is this restrictive, but appropriate.
In the case of the G4 line, this is less restrictive (though still somewhat limiting for those who don't fall into the Unix poweruser category). Fundamentally though, I think that Apple's success stems more from their successfull attempts to brand their systems as more of a appliance than a tool. There is a fine line that they are walking with the desktop/laptop products they make, but even in that case, there is definately a feel to them as being less generalized than a pc.
Apple has definately hit on something here, but they have to keep running. The question for the next eight years will be this. Can Apple summon the willpower to keep running?
Parent
Re:Apples to Apples (Score:5, Funny)
Dell does R&D? To them it must mean 'ruin and destroy'. We haven't had a dell server that hasen't had some kind of hardware problem - out of dozens. Our Apple servers haven't had any problem at all.
I guess by 'shut it down', he meant what would happen if he ran a company that had to make good hardware to stay afloat....
Parent
Re:Apples to Apples (Score:5, Informative)
Pretty soon? R&D is the first thing they cut when things go bad. Heck, I even watched a television show about Dell that explained precisely this as their corporate strategy.
I was offered an R&D job at Dell when I graduated from college years back. I am so glad I didn't take it; I would have been layed off in less than a year when the 2001 recession took effect. Instead I work for a company that invested in R&D through the recession and is now reaping those benefits.
Parent
R&D??? (Score:5, Interesting)
Parent
Re:Apples to Apples (Score:4, Interesting)
Yeah, that's working out terrible for both Dell and Walmart. There will always be a market for the cheapest major vendor for any product. Always has been.
In general, I'd say Dell's future is at least more stable because the market for computers is stable and certain. Apple's fortunes are completely tied to the iPod right now, and that's a market that's less certain. For Apple to maintain their fortunes, they need to either hit another home run, and/or keep up their 75% market share in the portable player market. Both are tough, though not impossible.
Parent
Re:Apples to Apples (Score:5, Informative)
In a perfect competition game, low costs are EVERYTHING. You stick to open standards and off the shelf components. With high volume from having the best price, you get the volume you need to improve your costs even further through economies of scale. Not alot of profit per box, but LOTS of boxes.
Apple's strategy has been what economists call "monopolistic competition", where products are imperfect substitutes for one another, and buyers are willing to pay a premium to buy a product that better suits their needs. Apple's high quality, feature-rich, very fashionable product is a luxury item.
Apple's costs are high, but their prices are even higher-- giving them those very nice profit margins. In a luxury item game, your only challenge is when others try to imitate you at the top end of the market-- something that Apple's proprietary software helps protect them from. You don't need alot of market share to win at that game.
I'm a big fan of Gil Amelio-- his reforms helped get apple back on track, and I think Jobs took much of the credit because he was around when Amelio's reforms started to pay off. But Jobs and Jobs alone deserves credit for building the boutique business that took Apple from "no longer in danger of collapse" to "no longer in danger of mediocrity".
Parent
Re:Scoreboard, tough guy (Score:5, Insightful)
Actually, no. The legal obligation of a company is to do its best to obey the wises of its owners. Those owners usually want the company to concentrate on increasing its share price; however, no law whatsoever forces them to. For example, if the majority of shareholders agreed that the companys number one priority was to provide humanitarian help to catastrophe zones, then that would be the companys number one priority.
Parent
Dell was right. (Score:5, Insightful)
Apple makes money by doing everything that is supposed to be suicidally stupid. It sells hardware and software tied to each other. It tries to do many things well instead of concentrating on one area of strength. But it breaks the rules because it sees the opportunity created by others following the rules, which is that things built by this kind of cross corporate ecosystem just don't work that well together. But even seeing this possibility is a long way from taking advantage of it: there are plenty of contrarian schemes that sound good on paper but never succeed. You need actual leadership which is connected to realities of consumer behavior.
I detest Steve Jobs' personality. I think he's a self-centered, manipulative bully. But he's also got the brains to match -- I'm just grateful he's not in politics. Bastards who think they're geniuses are common enough, but bastards who are geniuses, who are way out on the right hand of the bell curve on both scales, those are rare. If Apple didn't have Jobs or somebody alike to him as two peas in a pod, they'd have been bought out by some far east PC manufacturer by now.
Parent
Re:Brown Apples ... (Score:3, Informative)
R&D (Score:5, Insightful)
Although I just yesterday placed an order for two $379 commodity boxes from Dell that I will run headless behind OS X boxes for security reasons, almost all of our purchases have been going to Apple. From the Mac Mini to iMacs to dual G5s with 30in Cinema Displays, Apple has been building systems around an operating system, OS X that meets our needs. In addition, the security issues make them easier to administrate, freeing up time to get work done that we are actually interested in.
Re:R&D (Score:5, Interesting)
Comparing Apple to Dell is comparing apples to oranges. Saying one company is more innovative than another is just plain silly. They have totally different business models. Then trying to back up your opinion by saying your organization is buying more Apples than Dells is totally irrelevant. Who cares? I really don't get the emotional attachment to tools. Apple systems are a tool. PCs are a tool. Just like any tool, there is a right tool for the job.
Parent
Re:R&D (Score:5, Insightful)
Problem is, Dell's innovation wasn't something they could patent and protect, whereas, with Apple, some of their innovation is very protected (OSX UI, iPod interface, iTunes, iTMS exclusive contracts, etc).
Taking a look at Apple's supply times and online ordering capabilities, they have not only copied Dell's direct-to-customer innovation, but even gotten some of Dell's efficiencies of scale in effect. Problem is, Dell relied on:
Leaving them to really innovate in the supply chain area...
However, now that both MS and Intel are no longer the innovation leaders, and they have their own troubles to deal with, Dell is stuck without any way to push those companies to do that innovation. It remains to be seen whether this will mark a slow decline in Dell's fortunes, or they make a bold move to re-establish themselves as not only a market leader, but innovative and interesting.
Parent
Re:R&D (Score:3, Insightful)
That is exactly where Dell's innovation lies: in being able to produce on the fly boxes in large or small volumes customized to the user's designs at a very low cost. Their innovation is in logistics and supply chain, not necessarily computing technology. Still, it is a genuine innovation, and one that has made them piles of cash.
Re:Its against the Geneva convention (Score:4, Interesting)
See here:
noun : verb
calucation : calculate
articulation : articulate
demonstration : demonstrate
even the hideous
dissertation:dissertate
is technically correct.
However, this stuff isn't:
administration : administrate - wrong, administer
amplification : amplificate - wrong, amplify
multiplication : multiplicate - wrong, multiply
indemnification : indemnificate - wrong, indemnify
The only difference is that words like "multiplicate" are totally hilarious, whereas most people think of administrate as a an accepted part of the language. I wouldn't get out my red pen if I saw administrate, personally, though I to avoid using it in official materials.
Parent
Michael Dell is really crying (Score:5, Insightful)
As a wise man once said to me about allowing investors in my company, "Would your rather have all of a grape or a slice of watermelon?"
Re:Was that really so wise? (Score:3, Interesting)
Apple is dying! (Score:5, Funny)
With Dell's recent quarters slipping and Apple's recent quarters showing growth there can only be one conclusion:
Apple is dying!
Re:Apple is dying! (Score:5, Funny)
Don't you mean beleaguered ?
Parent
Which would you rather? (Score:5, Interesting)
No seriously, Dell is an amazing company when you consider they are competing in one of the most cutthroat market segments in high tech. IBM sold the last bits of their PC business a few months ago. Gateway is now pretty much irrelevant... even the Japanese titans can't compete with Dell.
Re:Which would you rather? (Score:4, Interesting)
A number of years ago, Dell built it's business up on quality parts and service- winning numerous awards for customer service, and were recommended all around. The beige box Dells in particular, which went for over $1500, were pretty solid machines. Back when profit margins were high enough to cover the costs of quality support. Now the conditions of the market have changed, and Dell has to trim the fat off what's already become an anorexic business model to stay competative. People who once came in to my shop swearing by Dell now swear AT Dell, and promise to never buy anything Dell again, after their 6 month old Inspiron 1150's LCD inverter burnt out, and Dell refused to replace it, even though it had a year warranty. Despite numerous calls, all the call center would say is insert the recovery CD and reinstall the operating system.
Bottom line- Dell became the bohemoth it is now based on reputation of quality machines. Take the quality out, and they are just another retailer. They still enjoy brand recognition, and the higher end systems aren't too bad. But they grow marketshare by offering $299 PCs, and $699 laptops to anyone who thinks any Dell is a good Dell, even if on the cheap (without understanding that You Get What You Pay For). As a result, it's userbase will slowly erode away.
Parent
He may have been right anyway. (Score:4, Insightful)
At the same time, the fact is that most stockholders are reasonably intelligent adults, and (IMO) it's perfectly fine that it's been left up to them to decide to keep their money there instead of investing elsewhere. If the investors had all agreed with Michael Dell, Apple would simply be gone -- or perhaps, like SGI, being de-listed for having too low of a stock price.
--
The universe is a figment of its own imagination.
Re:He may have been right anyway. (Score:4, Informative)
Actually, if you look at any period in comparing their stock up to today, unless you bought Dell nine years ago or earlier, Apple's stock has performed better. Plug in whatever time period you like.
http://money.cnn.com/quote/chart/chart.html?shown
http://money.cnn.com/quote/chart/chart.html?shown
etc.
Parent
Stock market is flawed (Score:4, Interesting)
Sure, it's a treadmill that everyone wants to get on, but it wears down and kills all but the strongest. Not to be outdone, it drives competing companies against one another to the point that now, a little over a hundred years later, companies are little more than rabid beasts. Clawing and looking for any way to get a little larger piece of the pie. If they slip in the slightest they are injured. If they slip a few more times they can be ripped apart by other competing companies- broken apart by others more ruthless.
Anyone wonder why the laws and regulations are changing so much in favor of the big corporations?
They might not be able to get off the treadmill, but it doesn't stop them from coercing others to come to their aid.
Does that make sense?
Check out their stock performance (Score:5, Informative)
Buying Apple five years ago would have netted you a 450% profit. Buying Dell five years ago would have netted you...a small loss.
Crow T. Trollbot
Low profit margins intentional (Score:5, Insightful)
The reason is that the higher the profit margin, the higher the price. The higher the price, the lower the market-share. Dell is more interested in gaining market-share than in maximizing price. For a commodity such as PCs, the way to achieve long-term success is high volume with a more modest profit margin. Undercutting competitors is more valuable than earning more on each sale.
The key is that total profits are a second-order curve as a function of price. Too low a price results in too low a total profit. To high a price means lower sales volume and lower total profit. The optimum price foregoes some profits per PC, but makes it up in volume.
Perhaps the big lesson is that Dell and Apple are NOT in the same business. Dell is just one more PC maker that sells a commodity that is strongly subject to price competition (Dell is very good at competing on this). Apple is a sole-source for an intrinsically valued product. Sure, some people do avoid Apple because of price, but many buy Apple (and don't even consider buying a PC) because of the unique value provided by Apple.
Re:Low profit margins intentional (Score:5, Insightful)
Parent
Michael Dell shut down Dells Rep by outsourcing IT (Score:3, Informative)
In a race to the bottom, Dell's stock has suffered. It is now just another PC Maker, with little or no excitement or fun. Yes they are cheap, but they are not very innovative.
Read this article, it talks a bit about Dell:
http://edition.cnn.com/2005/BUSINESS/11/01/dell.m
On a personal note: NEVER buy a DELL printer, unless you enjoy a beeping misfit that jams intermittently during times it is needed most.
More importantly... (Score:3, Funny)
Trends are even more important (Score:3, Insightful)
Okay, Dell's revenue is higher, but it's not that much higher. Also, Dell's profitability is falling while Apple's is rising. Del's profit was 749 million last year. I think it's premature to rub anything in Dell's face but I do think that even thought they are percentages, they are significant. The percentage is even more significant since Dell's revenue and expenses over all are higher than Apple's. This means that they are more severely effected by slimming margins.
The article might be premature, and it's most likely hype, but there is a valid point here, and that is 8 years ago Dell wrote off Apple, and now Apple is trending up, while Dell is trending down.
Making all the "do you want a whole grape or a slick of a watermelon" analogies you want, but If the watermelon slice is dried out and sour, and the grape is perfectly ripe, I'll take the grape. (see I can make analogies too!)
To hell with Dell (Score:4, Funny)
Corporate Market? (Score:3, Informative)
Dell can afford to sell its home computer stuff so cheap because it's making more money on the high-end stuff. Don't forget, Dell produces (or at least brands) backup systems, storage solutions, servers, racks, etc. You name it, Dell makes it for your business. They have captured a ton of that market, and their sales structure for businesses of all sizes makes it easier to buy there again.
So I think financially, Dell is doing very well...when you consider that solid corporate market.
Re:Could have been lucid advice at the time.. (Score:5, Insightful)
etc etc.
If "lucid advice" just means
Parent
Re:Profit Margins (Score:4, Funny)
Case in point: A soda costs $0.05 at Taco Bell. It costs you $0.99.
Yet how much value is there for you in:
1) Lugging around syrup
2) CO2 canisters
3) Mixing equipment
Myself, I drink water, but the point stands: If Apple offers more value, Apple can effectively price higher and not be over-charging.
Another example would be the $0.99 burger at Wendy's. In raw part it would cost you only $0.25
Do you want to lug around a fridge, fresh lettuce, a package of buns, a grill, ground beef, and cheese whenever you feel like eating a burger for lunch?
Parent
Re:Got some bad news for you Mr. Dell... (Score:3, Informative)
Err hello, Macs historicly where completely homogenized, there was only 1 producer (Apple) and only 1 case style. Even now, sure, you can get a different color plastic bit, but all Macs in their product line will have the same case.
I don't understand why so many people are anti-microsoft and pro-apple. Apple is just as evil as Microsoft, just not as successful.
-Rick
Re:Got some bad news for you Mr. Dell... (Score:5, Insightful)
Microsoft is very successful at aggressively marketing poor quality products. Apple markets high quality products to a niche market (whether they do so successfully or not is a matter for debate).
Therefore, if we are to define "evil" as proportional to the amount of pain a company inflicts on the world through its products and practices, Microsoft wins hands down.
I think where you are going wrong is that you are attempting to define evilness by guessing at the companies' intentions -- but intentions are impossible to ever really know; you can only infer intention by looking at the companies' actions and statements, and those are always open to interpretation and thus endless, pointless debate.
Parent
Re:Got some bad news for you Mr. Dell... (Score:3, Informative)
My last car was a Ford Taurus. A bad fitting caused the radiator hose to pop off one day, which caused all the coolant to drain out, which caused the engine to completely overheat in fairly short order. Result: a few weeks later, the head gasket went. It would have cost about a thousand bucks to repair. That car had just shy of 100K miles on it.
170K suddenly doesn't sound so bad.
Re:What Self Expression?!?! (Score:3, Interesting)
Re:Got some bad news for you Mr. Dell... (Score:4, Insightful)
Pros have *always* been willing to pay for their tools and to reject the low end. I have a hard time understading why so many people working with computers have a hard time with this concept. But clearly I'm serious about my tools. This is why a mix of high end PC gear and Macs are my tools of choice.
Apple is the Dewalt of the computing world.
Parent
Re:Got some bad news for you Mr. Dell... (Score:4, Interesting)
I do. I would never buy an Intel box because I prefer building it from the parts myself. But I like Macs. Not only do they have style (which by itself is not a reason to buy them), they also come with an extremely great operating system. On the desktop I'd probably pick the Intel box, simply because of the computer's easy upgradability, but I'd never buy an Intel notebook. Most of them are heavy, loud, huge and ugly - not to forget the lousy *nix compatibility. The ones that aren't are expensive. iBooks are pretty cheap and come with a Unix with a great window manager. And it's as modifiable as many Intel notebooks - hardly.
Parent
Re:What was the total profit for those quarters? (Score:3, Insightful)
http://www.itmanagersjournal.com/blob.pl?id=42448
pwned.
Re:What was the total profit for those quarters? (Score:3, Informative)
Try again.
Re:Glad to see Apple turned around... (Score:3, Insightful)
I only use Macs, and I was sorry to see the Amiga come to a bad end. I was sorry that Be didn't make it. I applaud when Linux makes gains. I don't wish for Windows to disappear.
Re:Profit Margins (Score:4, Insightful)
Depends on who I am. If I'm Michael Dell, probably the 6.5%. If I'm a stockholder or an employee, who has the same absolute amount of income or stock riding both percentages? I'll take the 9.5% thanks.
Parent
Re:It's not going to last... (Score:3, Informative)
Apple has made $1.6b from it's computers and $1.2b from it's iPods. Maybe this next quarter won't see the same relationship; but we may be surprised yet again!
Failure to learn from VHS vs. Betamax (Score:5, Insightful)
The thing that really killed Betamax wasn't so much the licensing issues as the fact that you for early US models, you couldn't put a 2 hour movie on a betamax tape, but you could on a VHS.
That's huge. Being able to ship movies on a single VHS tape is what estabilshed the distirbution channels for those tapes and is what encouraged people to buy in to the VHS technology, in turn creating the demand for more VHS tapes, and so on.
And that's the big lesson lurking behind it all: pay attention to what your customers actually need, and what aspects of the technology will support the distribution and consumption models. It doesn't matter if your product will do a thousand things more cheaply than the other product, if most people can't easily get it to do the one thing they really buy it for. That's why the iPod has been so successful, even though there are tons of cheaper, more feature-rich products out there.
Parent
Re:It's not going to last... (Score:5, Insightful)
in the end it only does one thing -- play music (and videos now -- poorly).
Uhhh... what should it do? I mean, besides play music, video, store contact info, calendars, photos, play games, work as a stopwatch, and work as an external hard drive, what is the iPod supposed to do?
The cost of entry to use a *nice* Apple is just too damned high
$500? Geeze...
There will be an iPod killer at some point -- when the iPod isn't as 'cool' as it is now.
Sure, *eventually* people won't be buying iPods, but when is that going to happen? Who's to say Apple won't be prepared? And what product won't become old and obsolete at some point? I'm sure Apple is shaking in their boots that the iPod won't be so trendy in 20 years.
The day Apple decides to put OS X onto a DVD and let you install it on your whitebox built computer is the day the grave is dug for Microsoft.
Maybe, but it's also the day their current business model is ruined. Apple is basically a hardware company that also makes the software to run their hardware. That's kind of how they work-- selling the whole package. I'm not saying being a software company, selling OSX, couldn't be a profitable business, but it would damage their hardware sales, which is, right now, their bread and butter.
Parent
Re:It's not going to last... (Score:5, Insightful)
One of the reasons OS X works so well is because Apple knows exactly what hardware it will run on -- their own. Apple doesn't want to deal with the nightmare of having to support OS X on a generic PC box. Besides, what kind of support do you expect for $99? Do you really expect that a Mac Genius at an Apple Store is going to spend time diagnosing OS X on your PC?
Not really if you compare it to a comparable PC. That aside, apparently Apple doesn't care that some people can't afford their computers just like BMW doesn't care that some people can't afford their cars. Yet you don't hear people bitching about the price of BMWs. A Mac is simply better (not to mention more stylish) hardware that "just works" with a killer OS. Better things tend to cost more. Get used to it.Parent
Re:Not Apple Computers (Score:3, Informative)
Actually, I'm going to take my comment back. It's not that the apple computers aren't selling well. The point I wanted to make is the turnaround in company performance has MORE to do with the iPod peformance. Not just from a sales standpoint, but an image standpoint.
FWIW, from the latest 10-Q, sales this quarter compared to the same quarter last year show that desktop sales increased 65%, laptop sales increased 8%, and iPod sales increased 616%(!!).
link to the 10-Q: http://media.corporate-ir.net/media_ [corporate-ir.net]