BusinessWeek: How can Apple be worth more than Dell?

“I’m still digesting the news that Apple’s market cap has exceeded Dell’s. Given that Dell was for darn near twenty years the PC company doing all the exceeding from a stock market perspective, this is clearly an occasion worth thinking about (for that matter, it’s also pretty shocking that HP now trades at a higher P/E ratio than almighty IBM, but I’ll think on that over at the Tech Beat blog some time),” Peter Burrows writes for BusinessWeek. “So what does Apple’s market cap ascension mean?”

Burrows writes, “As I listened to the Apple call with Wall Street analysts the other day, I kept thinking it comes down to one thing: runway. For me, that’s the metaphor that best describes the difference between the firms. Apple is roaring down its runway at a blazing clip, yet it’s got miles ahead of it to grow just by pursuing its current plan and exploiting its current capabilities. But Dell, which has been the poster child for this kind of analysis since George Bush Sr. was prez, is suddenly looking like it’s running out of room.”

“Suddenly, Apple seems to have bumped Dell out of its traditional role as ‘company-most-likely-to-gain-boatloads-of-share.’ OK, no one is talking about Apple zooming from its current 3.3% of the world market to double digits anytime soon. But every point of the $250 billion PC industry is worth $2.5 billion. So if Apple gains a point of market share this year–not a pipe dream by any means, especially given the Intel transition–Jobs & Co. will have already found the fuel for that 15% revenue growth year. And that’s without any iPod sales growth,” Burrows writes. “I’m not saying Apple’s shares aren’t overheated. They may well be. But while Apple’s smallness was formerly a life-threatening problem, it suddenly seems like a big advantage. I guess that’s just how the math works these days, when Steve Jobs’ reality distortion field seems to have morphed into something else: reality.”

Full article here.

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MacDailyNews Note: For the moment, Dell is worth more than Apple, $70.5 billion to $64.1 billion respectively.

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24 Comments

  1. Exactamundo. Apple is just setting off down the runway and as it takes off in about 18 nonths time it’ll look down and see below it the wreckage of Dell and Windows Vista et al.

    Fasten them seat belts guys and gals..

  2. Doubling marketshare in 10 years time is not bad! 1996 2% 2006 4%
    Double DOuble DOUBLE
    What if they double in 5 yrs, I will bet they will double that in half the time

    10 y 2x 4%
    5 y 2x 8%
    2 y 2z 16%

    Momentum Baby!!!!

  3. Surely it’s the difference between a company that manufactures a commodity product more cheaply than anyone else (and has a very efficient sales/distribution model) compared to a company that creates/defines the way entire markets will function in the future?

    Remember, somebody somewhere will alway be able to make something cheaper than you’re making it…

    MW – amazingly – heart. As in Apple has one, Dell doesn’t

  4. “BusinessWeek: How can Apple be worth more than Dell?”

    Simple. Apple is an innovator, Dell is a repackager. Talent is worth more than boxes.

    “But while Apple’s smallness was formerly a life-threatening problem, it suddenly seems like a big advantage.”

    Life-threatening is relying on third-parties for both your processors and OS. Life-threatening is letting your brand be identified with “low cost”. Eventually you cut too deep, and “low cost” becomes “cheap junk”.

    Dell is on their way out. The next market champs will be HP and Apple.

  5. How can Apple be worth more than Dull?

    Hmm, let’s see…

    Dull is a commodity “box assembler”. They don’t design the core (no pun intended) hardware or software. Intel and Mafiasoft so that for them. Dull’s margins are based on their famous “direct to customer” and JIT logistics to cut inventory cost. May have been unique in 1985, not anymore.

    Apple invents and manufacturers most of the essential hardware, software and services that are offered to the end user. Apple creates “value” and their margins are huge (relative to Dull). Apple’s market share is increasing at a rate double that of the industry. Apple has successfully transformed their computer only business into computer AND consumer electronics (media to come).

    Still wondering?

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  6. Actually, kerrazyjoe, Apple’s computers had 5.3% worldwide share in 1995, and 7.4% in 1995.

    http://www.bizjournals.com/sanjose/stories/1996/08/19/newscolumn3.html

    The real point to Apple’s share valuation is:

    1) Exploiting new markets: iPods, digital music, internet services, software. There’s a reason we now pay for iLife and .mac when it used to be free.

    2) All aspects of Apple’s business are profitable: They don’t sell iPod at a loss to enourage people to buy music, they don’t run the music store at a loss to drive iPod sales, they don’ t run the retail stores at a loss to encourage traffic and they don’t develop software at a loss to boost Mac sales.

    3) All aspects of Apple’s business are growing and growing profitably. It’s easy in business (GM, Ford) to increase sales by cutting prices; effectively buying growth. Apple doesn’t do that.

    4) The trajectory looks oh-so rosy. Digital hardware devices need intellegent software to make the user experience positive. After years of telling Apple to choose whether it wants to be a hardware company or a software company, some anal-ysts are FINALLY getting it that it pays to be really good at both.

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