Apple - What A Difference Eight Years Can Make

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%."

Check out their stock performance

[Cr0w T. Trollbot]

Here's a comparison of Apple's stock vs. Dell's stock over the past five years. [cnn.com]

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

Michael Dell shut down Dells Rep by outsourcing IT

[digitaldc]

Dell shut down Dell's good reputation for service (probably its only strongpoint beside price) when it offshored its support services to foreign countries. I have heard numerous complaints about their new support being not very helpful. Apple, on the other hand, has produced new, highly popular products that many people seem to enjoy and actually use. People get excited about new products that are fun and well-designed. Dell seems to think that people only care about cheap PCs.
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.ma in.reut/ [cnn.com]
On a personal note: NEVER buy a DELL printer, unless you enjoy a beeping misfit that jams intermittently during times it is needed most.

Re:Got some bad news for you Mr. Dell...

[RingDev]

" Not everyone is content with the same uniform workstation at home that they have to use at work / school."

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:Brown Apples ...

[MightyMartian]

The fact is that Apple is still around despite the idiotic pronouncements of a decade ago. Apple has shaped the computing landscape, and while it's still a small player, in the last few years it has done some pretty darn impressive things.

Re:Got some bad news for you Mr. Dell...

[sammy baby]

I feel compelled at this juncture to point out that your Civic has 170,000 miles on it.

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:It's not going to last...

[2nd Post!]

Financial data [apple.com]

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!

Re:Not Apple Computers

[Itchyeyes]

That's not true at all. Apple's last earnings report showed a 47% increase over last year in Macintosh sales. While that's not quite as impressive as the nearly 200% increase they showed in iPod sales, it's still incredibly good, especially when you compare that to the computer manufacturer growth rates and take into account the coming transition to Intel.

Re:What was the total profit for those quarters?

[MyLongNickName]

The comments made were from eight years ago. If you are trying to do an analysis on whether the comments were correct or not, you'd have to look at eight years... not one.

Try again.

Re:Not Apple Computers

[eqkivaro]

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_files/irol/10/ 107357/reports/10QQ3FY05.pdf [corporate-ir.net]

Corporate Market?

[SpasticThinker]

Apple may be doing well in the home computer market. But if you're going to compare the two of these companies, consider the corporate market as well.

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:Apples to Apples

[SydShamino]

Pretty soon, cutting costs comes at the expense of things like customer service, R&D, and other things that are required to maintain a viable, growing business.

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.

Re:Where Would Apple Be

[painandgreed]

If they hadn't gotten a $150 million cash infusion from Microsoft in 1997? That kept the company afloat when it was about to go down for the third time.

I have points and would mod you Flamebait, but assuming that you actually don't know what you're talking about: at the of MS's buying of non-voting stock, Apple still had about $5 billion of cash reserves. $150 million was nothing even at Apple's worst and never "kept the company afloat". If it did anything, it was tell investers that MS had no intentions of attacking Apple and give them confidence in buying Apple stock, but as far as the money goes, it was a token amount.

Re:Apples to Apples

[Wellspring]

Dell moved in the direction of building a commodity product-- that is, he wanted what economists call "perfect competition" where products are interchangable and people are cost-sensitive. Then his excellent supply chain let him undercut everyone on price and still make a tidy profit.

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".

Re:Innovation vs. raw profit (Re:Apples to Apples)

[CptNerd]

Well, I'm about as conservative as they come, and I've been a Mac owner since '91. I was a Mac programmer for two years before that, thanks to a DARPA project I wrote code for. From then on I've appreciated the ease of use and general trouble-free nature of Macs. I tried to go Linux for a while, but I was spending most of my time just keeping up to date with kernel patches, new versions of applications, and just trying to keep XFree86 recognizing my graphics card/monitor. I'd much rather spend my time just using the computer than trying to maintain it.

Gee, I've stayed with the same platform for nearly 15 years. How... radical.. of me.

    ^======^

Re:R&D???

[NutscrapeSucks]

In terms of actual $$, Dell does R&D than Apple, at least last time I checked. Of course Dell is supporting a huge line of hardware, while Apple only has about 6 models.

The theory is that by going with Intel, Apple can offer a broader range of models without spending additional money on R&D.

Re:He may have been right anyway.

[MasonMcD]

It may sound arrogant, but it's entirely possible that Mr. Dell really had it right -- Apple's making 9.6% profit margins today, but certainly hasn't for that entire eight years. The real question isn't "how well is Apple doing right now?", but "would the stockholders be better off if they'd invested elsewhere?"

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?showna v=true&pg=ch&symb=AAPL&time=8yr&compidx=aaaaa~0&co mp=DELL&ma=0&maval=60&freq=1dy&type=2&uf=0&lf=1&in d_compind= [cnn.com]

http://money.cnn.com/quote/chart/chart.html?showna v=true&pg=ch&symb=AAPL&time=7yr&compidx=aaaaa~0&co mp=DELL&ma=0&maval=60&freq=1dy&type=2&uf=0&lf=1&in d_compind= [cnn.com]

etc.

Wow, really?

[FredFnord]

I'm actually surprised. I mean, I'm not a big Dell fan, and our failure rate on their laptops at my company approaches 100% per year. (60 laptops, nearly 60 failures per year, though of course not every single one fails... some fail several times.) But as for my (14) rack-mount servers, mostly Dells, I have had only two problems in the last two years: one was on a Dell which had one drive, which I bought myself, fail (fortunately it was in a RAID), and one was on an xServe that had its memory (which I had also bought, from Crucial) die spectacularly. Aside from that, everything has been rock-solid, and I've never even had to use that 8-hour-response-time service contract I got from Dell.

What do you see failing? What are the worst models?

-fred