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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%."
Fundamentally, Apple Computer has invested in research and development and has come out with revolutionary products that functionally make things easier while Dell has simply operated as a reseller and box builder. Where is the innovation coming out of Dell?
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.
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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?"
Sometimes it's best to just let stupid people be stupid.
True, but in terms of a financial future, Apple's is certainly brighter in spite of their smaller market cap. Dell's business model inherently undercuts its financial stability. In order to stay competitive, they need to continue to cut costs. 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.
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.
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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.
The universe is a figment of its own imagination.
If everyone followed what something looks like at the time, because of their fiscal or market share position, all the PC companies should have shut down in the face of IBM, or even before that IBM should have not started a PC division because Apple ruled that world. TWA should have sold out to Pan Am. Torvalds should have joined Microsoft. T-Mobil would fold up in the face of Verizon. The Bell's would never have formed Cingular.
/;the company looks like it's doing badly," we'd never have half the innovations or companies of the world.
etc etc.
If "lucid advice" just means
-Daniel
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.
Two wrongs don't make a right, but three lefts do.
Which would you rather have?
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.
Only if you consider some random store brand of tool to be comparable to Dewalt. Granted you *can* and I have and do build high end PCs that a pro would be proud to have for a tool. You can also buy Macs (12" iBook in my case) that will take your breath away and make you glad to compute again.
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.
Cypherpunks: Civil Liberty Through Complex Mathematics. Those who live by the sword die by the arrow.
I think you're using the term "Commoditization" in a different way than I would.
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?
Killfile(TGK)
No trees were killed in the creation of this post. However, many electrons were inconvenienced.
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.
I don't care if it's 90,000 hectares. That lake was not my doing.
People really like to repeat that VHS vs. Betamax canard, while completely missing the important lesson.
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.
"It is our blasphemy which has made us great, and will sustain us, and which the gods secretly admire in us." - Zelazny
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.
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.If you reply, do so only to what I explicitly wrote. If I didn't write it, don't assume or infer it.
Just because he was proven wrong doesn't mean that what he said wasn't justified. I have friends who were Apple fanatics who in those days had stock in the company for sentimental reasons. They've done way better than they had any reasonable right to expect.
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.
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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.
Forget magic. Any technology distinguishable from divine power is insufficiently advanced.