Dell burned by selling machines at bargain-basement prices last quarter, pain may not be over

88 Comments

“In recent weeks, Dell has held a virtual fire sale, offering many PCs at rock-bottom prices. That may be a bonanza for the tightwad consumer, but the super-low pricing once again is taking its toll on the world’s largest computer seller,” Louise Lee reports for BusinessWeek online. “On May 8, Dell said it would post fiscal first-quarter revenue of $14.2 billion, at the low end of its earlier projection of $14.2 billion to $14.6 billion. Worse, Dell said it expects earnings of about 33 cents a share, falling short of a projected range of 36 cents to 38 cents, including an estimated three cents of stock-based compensation. The announcement sent shares down by almost 6% in extended trading.”

“The earnings warning is the latest in a year-long string of financial disappointments for the Round Rock (Tex.) company. Just two years ago, Dell was posting quarterly sales growth rates of more than 18%. By contrast, the current $14.2 billion projection represents a growth rate of only 6% over the year-ago level,” Lee reports. “And analysts don’t believe Dell’s strategy of bargain-basement pricing will change any time soon. ‘We expect more of the same, limiting the near-term upside in margins and profits,’ says Brent Bracelin, analyst at Pacific Crest Securities.”

“The trouble for Dell is that unit volumes aren’t compensating for price reductions. Besides hurting Dell’s sales and profit, sluggish unit growth is also eroding market share, another key measure of overall health,” Lee reports. “Dell’s key rivals, including Hewlett-Packard and Acer, meanwhile, saw market shares increase, according to IDC. The gains reflect competitors’ growing appeal as they’re increasingly able to match or even beat Dell’s prices to steal sales. ‘Those companies have gotten more price-competitive,’ says Cindy Shaw, analyst at Moors & Cabot Capital Markets. “Dell doesn’t have the price advantage any more.'” Lee reports. “And compared with some of the competition, in particular Apple Computer’s machines, Dell’s products simply don’t stand out, further eroding its appeal to customers. While Dell’s computers are mostly still plain, neutral-colored boxes, ‘when you look at an Apple Mac, you want to touch it and bring it home,’ says Shaw. Dell’s big challenge now is getting more shoppers to swoon over its products before its longtime domination over the PC industry slips away more.”

Full article here.

MacDailyNews Take: If you think that we just can’t get enough of this story, well, you’d be right. Dell makes nothing special or unique. Dell assembles dull boxes that try to run Windows, just like everyone else’s dull boxes. Dell’s bait and switch website is a maddening morass of mediocrity with coupon codes. Dell’s high point (like Microsoft Windows’) is in the rear view mirror. Why would anyone in their right mind — or not locked into a contract — buy a Dell when Apple Macintosh runs the world’s most advanced operating system plus Linux and even Windows (if need be), too?

Advertisements:
• Get the new iMac with Intel Core Duo for as low as $31 A MONTH with Free shipping!
• Get the MacBook Pro with Intel Core Duo for as low as $47 A MONTH with Free Shipping!
• Apple’s new Mac mini. Intel Core, up to 4 times faster. Starting at just $599. Free shipping.
• Apple’s brand new iPod Hi-Fi speaker system. Home stereo. Reinvented. Available now for $349 with free shipping.
• iPod. 15,000 songs. 25,000 photos. 150 hours of video. The new iPod. 30GB and 60GB models start at just $299. Free shipping.
• Connect iPod to your television set with the iPod AV Cable. Just $19.
• iPod Radio Remote. Listen to FM radio on your iPod and control everything with a convenient wired remote. Just $49.

Related articles:
Dell warns 1Q earnings will miss mark; shares tumble – May 08, 2006
Apple passes Dell in market value – May 02, 2006
The Motley Fool: Apple ‘may be the next Dell’ – April 07, 2006
Dude, you got a Dell? What are you, stupid? Only Apple Macs run both Mac OS X and Windows! – April 05, 2006
Payback? Wall Street didn’t like Apple passing Dell in market value – February 09, 2006
Apple Mac is #1 in European education market, pushes Dell down into second place – February 03, 2006
BusinessWeek: How can Apple be worth more than Dell? – January 20, 2006
Steve Jobs emails Apple team: Michael Dell not the best prognosticator, Apple worth more than Dell – January 16, 2006
Apple now worth more than Dell – January 13, 2006
Apple primed to pass Dell in market value – January 12, 2006
Corporate IT buyers fuming that Apple has Intel Core Duo Macs shipping while Dell and HP wait – January 12, 2006
Financial Times: Dell and Microsoft can never hope to attain Apple’s Mac aura – January 10, 2006
Struggling Dell has lost its mojo while Apple shows rapid growth – November 07, 2005
Apple growing faster with more innovative products, better support than ‘one-trick pony’ Dell – November 01, 2005
IDC: Apple shows rapid growth, holds 4.3% U.S. market share on 48% growth – October 17, 2005
Michael Dell say’s he’d be happy to sell Apple’s Mac OS X if Steve Jobs decides to license – June 16, 2005
Why buy a Dell when Apple ‘Macintel’ computers will run both Mac OS X and Windows? – June 08, 2005
Apple Macs are less expensive than Dell PCs – April 25, 2005
Dell CEO: Apple can’t just have one product and then say they’re the innovative leader of the world – February 22, 2005
BusinessWeek: Rather than dismissing Apple products as fads, Dell should try starting a few – January 31, 2005
Dismissive Dell CEO not impressed with Apple Mac mini, calls iPod a ‘one-product wonder’ and a ‘fad’ – January 17, 2005
Michael Dell owes Apple an apology; Apple up 176 percent vs. Dell’s 13 percent in past 12 months – January 15, 2005

88 Comments

  8. The problem for Dell is that they rely solely on a business model: selling large volumes of dirt cheap boxes at low margins. A business model is not protected by patents or copyright laws. Therefore, it is simple and legal for competitors to copy the business model and even undercut Dell’s prices. For innovation, Dell relies on Microsoft and its Windows OS. So basically, they’re f*cked.
    Apple, on the other hand, relies on design and innovation, both protectable by copyright laws and patents. To compete, someone would have to out-innovate Apple, and that’s a tough thing these days.

    Reply

  9. could some one please tell me the point in writting first post? ? ? half the time people who do it come in second and the other half usually have nothing useful to say – very sad

    Reply

  11. “If I were running Apple, I would milk the Macintosh for all it’s worth — and get busy on the next great thing. The PC wars are over. Done. Microsoft won a long time ago.” — Fortune, Feb. 19, 1996

    Hmmmmmmmm

    Reply

  12. Mackie Dell should “sell all the stocks and return the money to the rightful shareholders”! The quote came from his own mouth years ago when he was being sarcastic to Apple. Eat your own words and foot Mackie!! Ah… haha….

    Reply

  13. “he problem for Dell is that they rely solely on a business model: selling large volumes of dirt cheap boxes at low margins. A business model is not protected by patents or copyright laws. Therefore, it is simple and legal for competitors to copy the business model and even undercut Dell’s prices. For innovation, Dell relies on Microsoft and its Windows OS. So basically, they’re f*cked.
    Apple, on the other hand, relies on design and innovation, both protectable by copyright laws and patents. To compete, someone would have to out-innovate Apple, and that’s a tough thing these days.”

    Yeah, and this brilliant strategy has yielded them a whopping 4% market share

    Reply

  15. JIM, nothing is forever, windows did win the battle, but the war is never ending. a bloated and insecure operating system like windows will cripple under its own weight! i forsee 1 set of programmes with a variety of operating systems in the future, with osx leading the way, especially if apple makes leopard compatible with windows apps.

    Reply

  17. The article says:

    “when you look at an Apple Mac, you want to touch it and bring it home.”

    It’s true, but what some analysts don’t understand is that a Mac is a beautiful computer in the outside as well as in the inside.

    in the outside, the industrial design of Apple is better than a Dell. But some PCs had also a great industrial design, like, for example, the first Sony Vaios. Other computers also came with pretty radical design, like NeXT and Silicon Graphics, but never had the success of the Mac, even though they were amazing computers.

    The beauty of the Mac is not only the case, but the operating system. When I looked at the Vaio, is loved the design, but to see Windows running just said what it was: Just a good looking PC, but a PC after all.

    So, I don’t think changing the way Dell looks will change anything. Dell is not really an ugly computer. It’s plain, yes, but not ugly. I’ve seen uglier computer cases at computer shops.

    But, what makes Apple appealing is the way the computer PLUS the OS look. That’s where the Mac is elegant. A Mac running Windows would be like the Vaio: very good looking, but a PC after all.

    It’s not the looks what gives a Mac its value.

    Reply

  19. No koolaid here:

    Marketshare isn’t everything. Comparing the financial health of Dell versus Apple makes that much clear.

    The “brilliant strategy” of innovating produces excellent products for the consumer and earns the company enough money to keep innovating and producing great products. Everyone wins. If the other 96% of the computing world doesn’t want in on the fun, who cares? That certainly doesn’t mean Apple has failed.

    MDN Magic Word: “Trade” = I would never “trade” bigger marketshare for less innovation and quality.

    Reply

  21. Nick,

    Perhaps, but there’s (again) one thing Dell does not have, and Apple does:

    Mac OS X

    I read not long ago the definition of a “killer application”: a “killer application” is an application that justifies the purchase of the hardware to run it. The first “killer application” was VisiCalc, which lead to massive purchases of Apple II computers before the IBM PC Era.

    Today, Apple’s killer application is Mac OS X. Apparently, some people (like me) finds reasonable to pay more for a laptop, to be able to run Mac OS X. The reasons why Mac OS X instead of Windows are a different story. I have very good reasons to prefer Mac OS X over Windows (and they don’t have to do with looks).

    So, again, it’s all about what you can run. If you don’t feel Mac OS X is worth the investment, I would not suggest you to buy a Mac, but go for a Dell.

    And the discussion might start out of this I just said, but the fact is, people choose their computers for what they need to run, not for how they look like.

    If you are a Windows user, go with Dell. If you don’t like Windows and want a good UNIX station without the lack of drivers headache, go for a Mac. If you like Linux and to experiment with a really cool OS,… well, in that case, any will do, hehe!! And if you like Windows, but would like to see what Mac offers, you can go with a Mac Mini and Boot Camp.

    So, the choices are there. The choice is about machine AND applications.
    The “whys” based on price and looks are not close to what reality is.

    Reply

  22. Nick, When I tried configuring the Dell to match the MBP specs I came up to about $2500 and it would not let me put on 802.11g wireless. So the cost differential is not as significant as you proposed. Also, this thing is a large brick and UGLY compared to the MBP. Not to mention that the MBP gives one complete freedom of operating system, while the Dell does not. It is worth $300 more.

    Reply

  27. “carpe talus”:

    To hit $2291, configure with:

    2.16Ghz CPU, 1GB RAM, 120GB HD, bluetooth, NVidia 7800 graphics, larger battery, DVD burner.

    Was there something I missed?

    (ps – I’m just playing devil’s advocate here – I’m happily using my MacBook Pro 15″, $1699 refurb)

    Reply

  28. Hey Dell only has a 32.3% market share in the US computer business. Terrible. Absolutely terrible.

    Sales last quarter of over $14 billion. Terrible.

    If we all would stop buying Apples for a bit, maybe Apple would lower its prices to us consumers.

    Reply

  29. Nick,

    You’re math and specs are wrong…

    Best match is a minimum of $2445 for the E1705 and that does NOT include antivirus software, it does not include 6 pin firewire 400 (crucial for a lot of things) and does NOT include Firewire 800 also crucial for video editing etc.

    Adding $100 for antivirus software (yes there are “free” versions but they are risky and you can’t afford risk on a Windows computer…) brings it very close to the Mac price. Over the 3 year lifespan of a laptop [and when has a Dell laptop made it to it’s thirde birthday without reformating, driver issues, and so on], the total cost of ownership (antivirus renewals, problem solving, etc) and the Dell becomes much more expensive and frustrating.

    Oh, I am writing this from a MacBook Pro using the Parallels Virtual XP machine…. Can the Dell run MacOSx?

    Reply

  30. “You only live once™”:

    Ummm… I disagree. As a MacBook Pro user, I call it a luxury tax. I was happy to pay it, of course.

    Mac OS X is quite luxurious. Windows XP is crappy, but it gets the job done if that’s all you can afford.

    Reply

  32. Ka-Ching!

    Yes I have XP as a virtual machine on my MacBook Pro. Unfortunately, some businesses use Windows specific applications and my company is one of them. XP is still running in the background so that when I need it, I can access the ONE (1) application that is PC specific (ironically it is a “security” feature…. ” width=”19″ height=”19″ alt=”smile” style=”border:0;” /> ). I’ve hit apple-tab and I am now using Safari to send this. Try that on an XP machine-even using a virtual machine of a different operating system (e.g., SUSE linux) and see how successful you are without hours of problem solving (I know, I’ve had the “honor” of having to do it…).

    OPTIONS are always a good thing.

    Reply

  33. At least Nick admits that MacBook Pro of his is better. And by the way, since the total cost of pwnership is higher on a pC, PC users are the ones paying the “luxury tax” and paying for a lesser machine in the process.

    Reply

  34. Yo ” no stock”, Mercedes, BMW, Maserati, Porches, Ferrari, Lamborghini, Bentley, etc have been around for decades and yet their market share is single digit, so what’s your point?

    Reply

  35. -No Stocks,
    Marketshare is somewhat overrated, no need to trot it out like a substitute for penis size.

    Quality of the machines, OS & my professional apps are the best they’ve ever been. So what does that have to do with marketshare.

    Mac marketshare was tiny when they made the first commercial graphical interface for me to use. I suppose marketshare was small when Abobe came out with postscript, & Aldus came out with PageMaker, so that i could set my own type & print my own comps, years before the Windows boxes could do these things.

    Marketshare was small when they made the iMac & ipod.

    Need I say more?

    And no, marketshare of Microsoft’s OS doesn’t compensate for any size deficiencies you have.

    Reply

  36. Mark:

    “You’re math and specs are wrong…

    Best match is a minimum of $2445 for the E1705 and that does NOT include antivirus software, it does not include 6 pin firewire 400 (crucial for a lot of things) and does NOT include Firewire 800 also crucial for video editing etc.”

    I am math? I don’t understand!

    But seriously, can you explain how you got that $2445 number? What else did you add?

    6 pin wirewire? dude, nobody needs that, now that iPod uses USB 2. FireWire 800? There are more Red Hot Chillipepper fans than FireWire 800 users. Come on.

    Reply

  38. Nick,

    Don’t forget to include the cost of software, like iLife, to the Dell. You can’t get the quality apps contained in iLife for $79 on a Dell or other Windows machine – it will cost you significantly more. And as others have pointed out, software for

    However, I do think the MacBook Pros are somewhat overpriced. They seem a couple hundred dollars more than the PowerBooks they replaced.

    Reply

  39. I was at a Unix User’s group meeting last Thursday nite and someone had a Dell XPS laptop. 17″. Hideous. Had XPS lit up on the back of it on both sides. The sound system did sound pretty good on it though. At least he was running Linux on it.

    But it was at least twice as high as my 17″ MBP that will be here on Thursday. And it must have weighed 10 lbs.

    Reply

  42. botox,

    …have been around for decades and yet their market share is single digit, so what’s your point

    Be careful with your comparisons.

    Most of those brands represent over-engineered, under-reliable toys for the rich.

    Kinda hate to see Apple fall into that category…

    Reply

  43. Well I’m back. I try to tell people in the past . You can only copy things so much. Now that windows have nothing on the table, Where Mary Dell and Kate Rollin now. Where are they now. All that big talk in the past about Apple needs to give money back. Look what the cat is about to bring in. Two little bottomfeeders. Pay your bills Mary and Kate.

    Reply

  44. Yeah, none of you computer wizards here would want to have a 30+% market share like Dell. Hell no, nobody wants more than 4% market share for Apple. It´s profits man….what do mean Dell makes more profit in one quarter than Apple in 4? Who gives a ratz butt about profits?!!!?
    How come Apple stock went down about a $1 today?

    Reply

  46. botox: “Yo ” no stock”, Mercedes, BMW, Maserati, Porches, Ferrari, Lamborghini, Bentley, etc have been around for decades and yet their market share is single digit, so what’s your point?”

    Dude, cars are not computers. In its class each car you mentioned owns a large market share.
    And you couldn´t afford any of the one´s you mentioned.
    And Mercedes own Chrylser – to get some lower priced product in their mix; BMW owns Mini – cheaper cars. Volkswagen owns Lamborghini (and Audi). A large portion of Porsche stock is owned by Volkswagen.

    Maybe Dell should buy Apple or vice-versa.

    Reply

  48. Rory,

    that link you provided is to a total Mac web site. They add hundreds of dollars of software to bring the cost of the Dell up – total joke of a show down.

    Open Office is free and works great on Windows, unlike Intel Macs.

    Google’s picassa is free and better than iPhoto, and iTunes works great in Windows.

    Antivirus software is usually about $40.

    No need to rack up hundreds of bucks of unnecessary software to make the MacBook Pro look like a better deal than it is.

    Reply

  49. One of the reasons that I am so excited about Apple as an investment, and I own a bunch of it, is that Apple’s market share in computers is so low. The upside potential is vast. And with its superior operating system and user interface, along with Microsoft’s hitting the complexity wall with its kludged os design, Apple is getting set to eat Microsoft’s lunch. Yum.

    Add to that Apple’s victories in the consumer entertainment business and the way they are creating an inter-operating Apple defined ecosystem, I can think of no better investment. My money is where my mouth is.

    Reply

  52. Apple is now worth more than Dell in terms of total value and is more profitable on a per share basis. Apple also carries no debt. I think that is the point of a business. Maybe the Death Knell Counter can be put out to pasture.

    That’s my point

    Reply

  53. “30 years now and Apple´s market share is near the lowest it has ever been. 30 years.”

    People seem to miss the point that market share has bottomed out and is now on the way back up.

    Re: the price comparison, the Dell also doesn’t have Apple innovations like light-sensing backlit keyboard, MagSafe power connector, scrolling trackpad, sudden motion sensor and iSight camera integrated with software like iChat and Photo Booth.

    Reply

  54. At the stupid Mac page where they compare the two laptops, they add the following software to the Dell only to jack its price up:

    Corel Office — $79 (OpenOffice 2.0 is better and free)
    MusicMatch — $16 (iTunes is better and free)
    Adobe® Acrobat® Elements upgrade: $31 (Google Picassa is better and free)
    Corel Photo Album Premium: $31 (again, Google Picassa is better and free)
    PC-cillin Internet Security upgrade: $95 (just get Symantec Antivirus for $39.95)

    So they’ve added on at least $200 of unnecessary software, not to mention the extra $40 for the graphics card that surpasses the underclocked x1600 of the MacBook Pro. Kind of silly.

    Reply

  57. Nick,

    I would say “luxury tax” would apply, for example, to a Dell vs. a Vaio, where the Vaio costs more for being better looking than the Dell, but the bottom line is, they are both the same kind of machine, with the same capabilities.

    With the Mac, you pay for something you can not get for the PC (well… not legally, hehe!): Mac OS X. I’m not paying a “luxury tax”, but I’m paying for a computer that can run the operating system of my choice.

    If you show me an ugly Dell, and a beautify Mac, BOTH running Mac OS X, and BOTH with the same capabilities, then I would agree with you with the “luxury tax” statement. But to compare Dells and Macs by the hardware specs is to compare oranges and -funny enough- apples.

    Now, the question would be “is it worth to pay $500 more just for the operating system?” I can’t answer for the world, but I can tell you, in my case it’s a big “yes”: The OS to me is well worth the price difference.

    So, again, the biggest value of the Mac is not the looks or the hardware, but the OS and the functionality.

    Reply

  58. Nick, no offense, but if we talk about “luxury tax”, it would be cheaper to buy a PC at “Next Door’s PC Store” with no OS and install Ubuntu, and that will run great too. And you can have OpenOffice, GIMP, Inkscape, Firefox and Thunderbird.

    And I’m not trying to diminish Linux. I’m still a Linux user (I have 2 boxes, and I’ve been using it as my main OS before I got my Mac, and I think Ubuntu is great), but my point is, the combination also works and is cheaper than Dell/Windows.

    So, wouldn’t you be paying also a “luxury tax” for a Dell, just because it offers a better looking machine than a generic PC and Windows XP?

    So, the “luxury tax” is paid in any case, I would say.

    Reply

  61. Hey “No stocks, no money Sam”: not sure what your point is. AAPL is trading at a pretty healthy $71+ post-split today. Given where Dell’s market share is, and where Apple’s is, and how the latter is currently valued by the market higher than the former, it suggests that a little bit more analysis than contained in your simple-minded post might be in order.

    Reply

  62. Those price discussions are oh so boring…
    Please people, move on. Who f*cking cares if the initial Mac purchase is costlier than a shitty Dell?
    I have a 6 year old iMac running Panther smoothly, a 2 year old G4 running Tiger and have been setting up a lab with 3 new Macs for an experimental computer lab at a local college, including a PowerBook G4, a G5 QuadCore and a Mac mini and those machines all rock and will last forever.
    Only an idiot who trades his shity Dell box every other year would say a Mac is costlier…

    Reply

  63. Nick,

    “6 pin wirewire? dude, nobody needs that, now that iPod uses USB 2. FireWire 800? There are more Red Hot Chillipepper fans than FireWire 800 users. Come on.”

    You sound like a creationist. You ignore things you don’t like. For many people, Firewire (400 and 800 and powered) is important. If your are trying to compare the MacBook Pro 17″ to a Dell 17″ the Dell may be a couple of hundred dollars cheaper (after excluding the software added on in the cited comparison) but you then ALSO want to simply discount any specific hardware advantages (e.g., Firewire, iSight) of the Mac.

    If you want to go to a TRUE Premium PC go to Alienware (now owned by Dell).
    http://www.alienware.com/product_pages/notebook_all_default.aspx

    Compare the price of the MacBook Pro 17″ to a Alienware (ultra high end hardware) and the Mac is a real steal but probably not equal (hardware wise but it still runs Windows). A Huyndai is cheap and gets you from A->B but it is not equivalent to a BMW which also gets you from A->B and a BMW is not equal to a Rolls Royce which also goes from A->B.

    For an inexpensive Windows based PC, the Dell is fine… (But I’ll take the Alienware) if you want to do windows full time.

    Reply

  64. Nick,

    You’re 100% correct. The Dell is definitely cheaper–I went through, configured it as best I could, and got just about the same you did.

    Though, I’d point out two deficits with the Dell:

    10/100 Mbit Ethernet — the MacBook Pro has Gigabit.
    Weight: 7.61 Pounds–almost 1 pound heavier than the MacBook Pro.

    On the other hand, you do have more buttons on your remote control.

    So, the entertaining question: Is gigabit ethernet, smaller size & weight, iLife, and Mac OS X worth $500 extra.

    By the way, did you include the antivirus subscription?

    Reply

  65. Here’s one reason why people might choose Dell:

    1) Apple MacBook Pro 17″ standard config – $2799
    2) Dell E1705 with same or better specs – $2291

    http://configure.us.dell.com/dellstore/config.aspx?c=us&cs=19&l=en&oc=E1705S3&s=dhs

    UMM, to get the specs even close, I seem to come very close in price, I guess the boxes are similar, but I don’t see an iSite on the dell box. The 2291- model doesn’t seem to come close. The entry level Dell has a 1.6 ghtz core duo- didn’t know they made one that slow.

    Reply

  67. Since no one seem to have point it out:

    “In recent weeks, Dell has held a virtual fire sale, offering many PCs at rock-bottom prices.”

    Now whatever we think about Dell computer, Michael Dell and Dell management are not stupid. No company would hold a fire sale, unless they saw need to do so. In another words, can you imagine what would have happen to Dell’s bottom line, if they did not have fire sale?

    Reply

  68. >No koolaid here

    “AAPL Market Cap $ 60,276,910,360
    DELL Market Cap $ 59,308,754,400

    AAPL Earnings/Share $ 1.98
    DELL Earnings/Share $ 1.46

    >Any Questions?”

    Yes, do you know that Apple’s shares are about 3x the price of Dell’s and Dell’s number of shares outstanding is about 3x the number of Apple’s?

    I’ll let you do the math as to what those earnings per share cost you and who’s doing better compared to the dollars you pay to own the shares.

    >Yeah, question: what’s your freakin’ point??

    You can probably work it out yourself. But in case you can’t, my point is you know nothing about finance or valuation of companies.

    Reply

  70. Guys, I am on YOUR SIDE, I was being sarcastic with that post. The War is most definitly NOT OVER!!!! Long live Apple!!!!

    Sorry, sarcasm is not a worldwide thing, in Liverpool you can’t get by without it!!!!

    Rock On SJ!

    Reply

  71. Fail to understand why people are so bothered by Dell.
    They are based on volume model, as soon as you want to change from basic configuration you get stung (plus endless “free” extras that you do not want e.g. printers).
    So on many “cheap” models “standard” config uses onboard graphics, has no DVD writer etc, all stuff most users will want to change.
    Adding extras ramps up the price a lot (each item normally way above cost of the hardware and fitting time) – which alienates casual visitor to web site as they can easily see a “cheap” PC double in price…
    Worst thing (in my view) is no easily availiable option to have it without windows (if going via consumer purchase route) as I (and doubtless many others) do not want a PC with Windows installed as that is an extra cost. If I am getting a PC I will install Linux and so do not want to pay a “Windows Tax” via preinstalled OS.
    So, a typical Dell website browser may (assuming they are happy with Windows) hit lucky on occasion if a “standard” model has the hardware they need as their “standards” are usually price competitive, but if need to tweak an order then well worth shopping around as a good chance of getting something cheaper.
    In my view – as they are volume based – they should make a few more decent spec “standard” models as little to tempt those who do not want a basic box but do not want to go for the most expensive boxes – their current mid range bad deals cuts out a lot of potential customers.
    Add to that their refusal to deliver to most workplaces (if a personal purchase) then its no surprise people go elsewhere.
    Note based on UK experience, US etc may differ.

    Reply

  73. >Does this mean that MSFT is 4x better than Apple? hardly. so again, your point about having bigger market cap means nada.

    Again, that wasn’t my point. I wasn’t making any comment about market cap.

    Lets say for a second eps is a reasonable proxy for free cash flow. (but it’s your mistake using eps to compare stocks, not mine)

    Guy walks up to you on the street, says give me $25 today, I’ll give you $1.46 a year for life.

    Guy walks up to you on the street, says give me $71 today, I’ll give you $1.98 a year for life.

    Which do you take. Clearly the first one, unless you’re stupid.

    Now the second guy says to you, wait a minute, my deal is better, because each year, If things go well, I’ll be making 18% more money compounded each year and I’ll grow the amount given to you by 18% each year compared to the year before. Then you have a choice to make. Do you believe him? Is he optimistic, a realist, will that growth actually happen?

    The first guy comes back and says, look, I can make you the same offer, but I only need to grow things 4% a year, not much more than inflation to match that bozo, given the much lower amount of money you give me up front.

    Now lets not argue that I don’t actually recieve that cash in the Apple vs Dell because one way or another I do. If we’re talking free cash flow I eventually get it in stock appreciation if the market fairly values the stock or a dividend.

    So coming back to the basic point what you buy with Dell is a company with modest expectations.

    What you buy with Apple has a much greater expectation of growth to justify the value. If the growth occurs, you do OK (but not stunningly because remember you already paid for it today by way of higher price). If that high growth expectation is disappointed, the price will drop very quickly.

    >Yeah, question: what’s your freakin’ point??

    In case you didn’t get it the first time, my point is you know nothing about finance or valuation of companies.

    Reply

  74. “when you look at an Apple Mac, you want to touch it and bring it home…”

    If ‘you’ is an average person, this continues like so:

    “…and then you look at the price tag and end up actually bringing home another cheap computer, a windoze PC.”

    I’m convinced that Jobs and the rest of ’em could take the world by storm if they were willing to risk it. Down with those prizes! Once switched, a negligable amount of users will ever switch again.

    Damn, every dumb drug pusher in NYC does a better ‘introduction to the warez’ than Apple!

    iPod? Halo-effect? Nah. You don’t get people hooked on crack by selling them grass. Sell ’em the real dope for cheap.

    Reply

  76. The thing about Dell – as alluded to in MDN’s take is that their website is such a mess of offers and packages that sometimes a MBP comparable machine will be cheaper, sometimes it will be more but those prices can come and go like the wind. Bottom line though is that even if it is cheaper a Dell still doesn’t run OSX which to most people who’ve tried it makes it not worth the money regardless of the saving.

    Reply

  79. I think Dell’s market share is where it is because of those nifty glowing red lights on their high-end laptop, matching the garish colors in XP. I know I’d rather have those night-lights any day over a built-in camera, back-lit keyboard, OS-X, etc. Yup, racing stripes and spoilers are always impressive.

    Reply

  81. s says: “Now whatever we think about Dell computer, Michael Dell and Dell management are not stupid. No company would hold a fire sale, unless they saw need to do so. In another words, can you imagine what would have happen to Dell’s bottom line, if they did not have fire sale?”

    You are on to the crux of the issue, and it’s not all good for Apple.

    THE reason why DELL is running into over-supply problems is because it is selling Intel-only PCs. THE reason why it’s Windows-based competitors are out selling them, at relatively similar price points across the board, is that they offer PCs with AMD CPUs. In other words, the Big Secret has been out for a long time, on the Windows side of the world – that AMD rigs are better/faster/more power efficient (yes, even on the laptop). DELL – being an Intel only shop – is suffering as a result. And the main drivers for this situation continuing into the forseeable future is AMD’s completely superior FSB/chipset architecture, as well as it’s better implimentation of 64bit technology. The latter is what’s pounding Intel now even more than the former – independent tests have verified that AMD 64bit CPUs on the 64bit Windows OS not only outrun their 32bit counterparts, but also 64bit Intel CPUs (the few that exist) on 64bit Windows OS.

    Now what could this possibly mean for Apple? Well, obviously, they are an Intel-only shop too. So if AMD’s superiority over AMD continues (as all sober analysts expect), Apple will eventually be tarred with the same brush as DELL is now. Further, while OSX has many advantages over Windows, the one area that it lags in is 64bit compatibility (it’s a 32bit OS with 64bit ‘extensions’ available to certain apps, not a full-fledged 64bit OS thats just backwards compatible with 32bit processors). Hopefully Leopard will remedy this problem that’s existed for way too long (Apple’s been using the 64bit G5 for years)! But that won’t address Intel’s rather cludgy 64bit technology, and anyone able to get a 64bit OSX to run on an AMD machine will most certainly see the difference.

    As an aside, Intel leveraged it’s exclusive relationship with DELL to strongarm them into buying a lot of unsold Intel CPUs at cutrate prices. They’ve since been warehousing the ‘orphan CPUs’ for months now, and likely this profit-killing drop in DELL prices is an attempt at getting rid of that albatross. I wonder how long it will be before Apple is similarly pressured, once AMD begins taking back the media limelight with the debut of their next gen CPUs early next year? Intel’s greatest strength – vast manufacturing potential – is any exclusive partner’s greatest weakness, since any unsold detrius coming from Intel has to go somewhere (whether the partners want it or not).

    No need to flame – I’m just trying to keep things in perspective. ” width=”19″ height=”19″ alt=”cool smirk” style=”border:0;” />

    Reply

  82. You can add what you like to get the prices higher or lower, but when I do a Dell comparison I add:
    T2600 CoreDuo
    XP Pro
    17″ UXGA
    1GB ram, but I’m not sure if this is a single chip, I suspect not.
    100GB 7200rpm
    DVD burner
    BT
    Nvidia 7800
    80 Whr battery
    MS Office Small Business (added iWorks to MB)

    I get $2845 for the Dell, spec’d as above. And, $2878 for the MacBook. YMMV.

    Reply

  83. … “So if AMD’s superiority over AMD continues (as all sober analysts expect), Apple will eventually be tarred with the same brush as DELL is now.”

    should read “So if AMD’s superiority over Intel continues (as all sober analysts expect), Apple will eventually be tarred with the same brush as DELL is now.”

    Reply

  84. Odyssey67–very interesting points. I’m sure a lot of us have been wondering along those lines.

    I do think it would be foolish to write off Intel for anything more than full click of the Moore’s law cycle. I doubt AMD is.

    But the other thing I wonder about, and maybe someone here knows: is the Apple/Intel relationship monogamous? Might we not see AMD Macs?

    And to all you Dell price fiends:

    http://www.wired.com/wired/archive/9.12/aqtest.html

    Reply

  85. i heart macdude: From what I know it is monogamous. Like all agreements, I’m sure it has a time limit, at which point both parties can reassess the relationship. However, as DELL’s experience bears out, once you’re in exclusive with Intel it isn’t always so easy to shake free. They tend to offer a lot of financial incentives that – in the short term – seem to make all the mediocity worthwhile, even when common sense and slipping marketshare say otherwise. DELL actually went out and bought Alienware – a specialty gaming PC maker that uses AMD chips extensively – just as an ‘out’ to wiggle free from Intel’s thumb.

    Regarding writing Intel off completely – I agree that AMD won’t do that. Pushing for excellence is too ingrained in that company’s DNA. However, taking shortcuts technologically, and relying on monopoly power and marketing BS is just as ingrained at Intel. They’re making some effort at rising above those tendancies, but I think it’s wishful thinking to think they will succeed to the extent necessary to unseat AMD. Lets face it; the Core technology had to be done – their major exclusive customers (i.e. DELL) were clamoring for an improvement and were too important to lose to AMD. But Core, for the most part, merely puts Intel on par with where AMD has already been for a while. And, as I said, the realities of Intel’s poor chipset and 64bit implimentation is going to hit them – and Apple – very hard over the long haul. That would be true if AMD never did a thing to make Athlon/Opteron/Turion better than they already are (i.e. relied on die shrinks alone to keep the CPUs themselves competitive), and that obviously won’t be the case.

    The problem that then falls into the lap of Apple is that it has to make OSX more than just pretty and stable to compensate. They’ll also have to make it so fast on x86 that it makes up for Intel’s hardware weaknesses. Of course, that won’t fool people for long, as the hackers will manage to get OSX86 running on an AMD machine long before any exclusivity arrangement with Intel runs out (assuming Apple more intestinal fortitude than DELL in walking away from it).

    It’s going to be a tricky problem for them for sure.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.