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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.
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.
__ Someday, but not this morning, I'll finally learn to use the preview button.
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.
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
...is Ipod and Itunes.
The huge looming threat to Apple is Sony. Its management has refocused Sony on innovation and (if I recall correctly) hired a non-Japanese outsider to be Sony's CEO.
iPod is a cool gadget, its innards are mostly built outside of Apple. Sony is an R&D and manufacturing juggernaut and could outengineer Apple to build a better iPod.
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?
Business Week... April 16th 2001:
6 /b3728067.htm
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_1
You're still thinking that there's more money to be made in expanding your market than there is is catering to the customers you already have. Once you've bought an iPod, you're hooked. I bought a 1st Gen 5gb when the first came out, and now have a Photo and a Shuffle. Apple's got a cash machine for years to come with the iPod, and unlike Microsoft, by replacing the Mini with the Nano, they've shown they have the guts to kill them when needed. :-) with the iPod and Jobs' connection to Pixar.
Apple has set itself up to be the Sony of the next 25 years (hopefully without the malware DRM
"Only two things are infinite, the universe and human stupidity, and I'm not sure about the former."
Most of my friends do not have iPods either....between family and friends that do not have iPods, that is a potential of 100+ iPod sales right there.
Will I buy one this year? Don't know. That MacBook is looking like it may be my next purchase to replace the venerable Powerbook G3/500 (Pismo) that I am currently using as my laptop for school, which, if I buy that, means I am not able to purchase an iPod again this year...
What iPods will come out this year? Maybe there will be something along the lines of the Nano but even better, or maybe there will be that rumored Apple Cell Phone (which will surely be an amazing piece of hardware)..These are all things that I have to consider when I look into buying an iPod. How much do I need it compared to say the new MacBook or maybe a Cell Phone that I know will be better than the (mostly) junk that I get from verizon...
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
Hey, Michael Dell, does it feel good you'd lied to Congress* about your relationship with Microsoft? Or is that just a price of doing business?
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* Not that Congress cares about lying, as we all now know after last week's CAP Alito hearings.
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.
Remember when Microsoft settled with a company (I believe AOL) back in the 90s and part of the settlement was a cut of all Internet Explorer sales/profit and then Microsoft turned around and reduced the price of Explorer to free? Remember?
Same song, new verse. To wit: commit for the next five years and reluctantly, sluggishly, incrementally release (buggy!) updates to Microsoft Office for Mac OS on Intel. I hope this is not what happens, but if Microsoft gets nervous you can bet this is exactly what will happen.
blog
Ever seen Jonathan Ive or Phil Schiller in an interview? Jobs has got Apple's upper management filled with lots of competent, interesting people.
"Sufferin' succotash."
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?
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Great idea.
Write up a business plan.
Get some investors.
Make billions.
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I'm not a Troll, it's reverse psychology.