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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.
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
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
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.
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
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?'
a sh/neoflash-review.htm
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-fl
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.
https://www.gnu.org/philosophy/free-sw.html
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.
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