Dell vs Apple – Apple Makes Mo Money


Dell just came out with its fiscal first quarter 2006 results. One word: spectacular. Sales of $13.39 billion, and a net profit of $934 million (37 cents a share.) Dell’s gross margin was huge $2.491 billion. Dell results show that you need to be massive in post bubble technology world to make some serious cash. Right? ….. Wrong. Just for the heck of it, I decided to compare Dell’s results with Apple’s fiscal 2Q 2005 results. (PS: I know Dell sells many more products, but the product mix is still pretty similar!) Apple had sales of $3.24 billion, and a net profit of $290 million (34 cents a share) and had a gross margin of $938 million. Apple’s net profits are 8.96% of its sales, and gross margins are around 29%. Dell’s net profits are 6.98% of sales, and gross margin is about 18.6% of sales. (Ironically, Dell spends about $4 million less on R&D.) In other words, size isn’t everything. Now when you look at those numbers, you know you can be small and occupy a small niche and yet make more money than the giants.



Dell will be gone within 10 years – either absorbed or vaguely remembered. When you are the low cost producer, your customers abandon you like droves when you lose the only reason they purchased from you … because only Windows Pc’s are purchased by price, when Dell moves out of their cloistured world and has to compete in every other market – they lose such as in routers, portable mp3 players, TV’s, etc … they think having the lowest price is the right formula for selling everything. As all their failures prove, it’s clearly not.

At the rate Google is going, they will release a Google linux based internet surfing machine where gmail, picassa, google and a few other ‘dashboard’ like widgets (plus a Google browser) take care of all your needs. This won’t appeal to everyone but for 30% of internet users, a PC is just wasted and now that PC’s no longer have cachet – why bother with a virii infected machine when the Google machine is like a toaster oven, plug it in and twist a few knobs. You can produce it now for under $200 bucks and internet/DSL providers can give it away for free with a contract (cable set top boxes cost $300 now so there is a precedent). Monitor extra – $100 or buy your own.

Corporations will still buy cheap PC’s for office terminals, wedding kiosks and cash registers.

Linux will still be thriving for servers and other power users.

Consumers and people who still need the power of real computer will still have Macs and Pc’s though the home Windows market will lose most of its users to Google and a console gaming machine.

But Dell knows this – why else would they invest in Red Hat …


And, of course, you are talking about the ONLY two profitable computer manufacturers in the US.


I’d look at this a different way than big vs. small.

Dell sells computing devices as utilities. Apple sells lifestyle products, and the demand (and consumers’ willingness to pay) is linked to the degree to which those products are “in.”

Apple will not be able to float those numbers once ipods are out of favor. Dell will likely be able to sustain its numbers regardless of consumer whims.


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