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10 years after Apple was doomed

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Great article in Ars Technica

Ars said:
Predicting the future is hard work, and probably best avoided as an off-the-cuff remark on how to save Apple in 1997.

"What would I do? I'd shut it down and give the money back to the shareholders," Michael Dell said before a crowd of several thousand IT executives.


A decade after Michael Dell won his race to the bottom selling PCs—only to find razor-thin margins cut both ways—Steve Jobs is laughing all the way to the bank selling high-priced, high-margin computers, music players, and phones. While Apple fans partake in a little shameful joy, it's interesting to consider the last ten years and contemplate the next decade.

Love the Michael Dell quote...

http://arstechnica.com/journals/apple.ars/2007/10/14/ten-years-after-apple-was-doomed
 
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People are coming to realize that Dell is the McDonald's of computer makers. Just because they sell lots of units doesn't make them the best. I've gotten pretty good use out of my 2-year-old Dell desktop, but I'm counting down the days until I buy my first Mac next month.

I think Apple's perpetual underdog status has forced them to be more innovative and perfectionist over the past decade, while the PC makers and M$ have been content to rest on their laurels and assume people will keep buying their product because they have no choice. To use another analogy, think Toyota versus General Motors. Looks like it's finally paying off for Apple, and I hope the company enjoys many more sucessful decades without losing sight of what makes them unique.
 
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Michael Dell is worth 13 billion dollars. I wouldn't say he had a bad business model.
 
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Michael Dell is worth 13 billion dollars. I wouldn't say he had a bad business model.

McDonalds doesn't have a bad business model either. However, given the choice, you'd rather get rich selling quality than junk, wouldn't you?
 
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McDonalds doesn't have a bad business model either. However, given the choice, you'd rather get rich selling quality than junk, wouldn't you?

First and foremost, i would just be happy getting rich.

Secondly, I think Apple's quality is slightly overrated. There software is awesome. But i have already had to have my macbook and iphone replaced.
 
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Ruminations on the Future of the Desktop Computer

The computer business is like any other technology business. It never stands still, always relentlessly advancing. The trend these days seems to be away from the desktop, whether it be Windows, OS X, Linux, whatever and towards the web. The web browser is becoming the new desktop, and the underlying OS just an enabler. In my mind I think of the old DOS and Windows 3.x model. Today's OS is equivalent to DOS - the Web browser is the Windows: the interface where all the action is happening.

IMHO, you will see more and more of the computing experience move out onto the web. Gmail, box.net and many others are examples of this. Eventually, does your desktop computer just become a "thin client" web browser that enables you to access your life on the web?

My crystal ball is no better than anyone else's, and perhaps worse, but bearing the above in mind, I wonder how many people WANT to have their life out on the web, where hackers, data miners and who knows who else may eventually gain access. This could lead to a backlash that keeps the desktop environment alive and well.

So, what does all of this mean to Apple, Microsoft and the various Linux vendors? Mainly I think it means that we are in for a period of turbulent development, with changing focus areas and unexpected inflection points. The company that predicts the changes most accurately, or adapts to them most quickly, will likely end up on top.

It is going to be a fun next ten years kids!!
 
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What make Apple unique is the same thing that stops them selling as many units as Dell does. They're well built, carefully engineered and consequently cannot be sold for the kind of price Dells can.

The result is that they're BMWs to Dells Ford. We'd all rather drive a 530i, but when you need them for people do do basic stuff, 100 at a time, you get the Ford.

I can buy a Dell fileserver for the same price as a Mac mini. As long as that's the case, there's no way I could ever justify switching to Macs, regardless of how good they are.


People are coming to realize that Dell is the McDonald's of computer makers. Just because they sell lots of units doesn't make them the best. I've gotten pretty good use out of my 2-year-old Dell desktop, but I'm counting down the days until I buy my first Mac next month.

I think Apple's perpetual underdog status has forced them to be more innovative and perfectionist over the past decade, while the PC makers and M$ have been content to rest on their laurels and assume people will keep buying their product because they have no choice. To use another analogy, think Toyota versus General Motors. Looks like it's finally paying off for Apple, and I hope the company enjoys many more sucessful decades without losing sight of what makes them unique.
 
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The thing to remember, regardless of the 'actual' quality, is that Apple computers are sold for huge margins... in fact most of Apple's gear is sold at margins of 40 - 50% per unit. Dell sells at tiny margins, despite having huge purchasing power in the market.

Why? Because Apple's customer base is concentrated in the mid-range of their market (high end MacBooks, low end Mac pros or mid-ranged iPODS or iMacs - there are no Apple machines for less than $1000 - because under $1000, there is no margin. The vast majority of Dells sold are low-end machines, or bulk bought corporate machines where the profit margin is truly tiny. Sub $800 laptops and $500 desktops.
 
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in fact most of Apple's gear is sold at margins of 40 - 50% per unit. Dell sells at tiny margins, despite having huge purchasing power in the market.
Almost any company will sell their product at a much higher margin... more like 60 to 70% regardless of what the end price turns out to be.

Use cheaper cost parts and your end cost goes down, but your markup percentage remains the same. This is evident in the higher-end Dells, which compare almost exactly in price to an Apple model with the same specs.

The less expensive Dells use less expensive parts, which in turn lowers the cost of the end product. However, you still still have a large markup. You actually gain more profit because you sell more of the less expensive machines. Apple, who doesn't always use the cheaper parts, still sells at a 60-70% markup but doesn't sell as much because the fewer cheap parts they use, the higher the end cost is.
 
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The less expensive Dells use less expensive parts, which in turn lowers the cost of the end product. However, you still still have a large markup. You actually gain more profit because you sell more of the less expensive machines. Apple, who doesn't always use the cheaper parts, still sells at a 60-70% markup but doesn't sell as much because the fewer cheap parts they use, the higher the end cost is.

I am not sure I agree with this. More expensive items nearly always reap higher margins, although of course there are exceptions. High volume, low priced items, almost always have lower margins. Therefore they are less profitable per unit and far more sensitive to volume changes - not only that, but the lower end of the market tends to be more crowded and therefore more competitive, again meaning lower margins. Dell's customer base is focused on the lower end machines: so most people who want to spend $4000 on a computer, don't go to Dell, whereas the majority of people who want to spend $500 on a computer, probably do consider Dell. I think this is an issue for them.

I read something recently that said if McDonalds sales dropped by only 3% globally, the company would no longer make money. That maybe BS, because I have no citation, but I remember being pretty shocked reading it (I think it was in the Wall St Journal). Consider how sensitive this makes the fast food giant to consumer taste changes or market conditions for things like beef and chicken.

I could probably explain myself better with a PowerPoint slide and a graph...
 

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First and foremost, i would just be happy getting rich.

Secondly, I think Apple's quality is slightly overrated. There software is awesome. But i have already had to have my macbook and iphone replaced.

Everything made by humans can have issues. EVERY hard drive manufacture has bad drives from time to time. Every motherboard manufacture has bad boards slip through, EVERY ONE and trust me I know as I work with Motherboards and have for 16 years now. Most of the problems with Apple Hardware are in the Minority. If you expect everything to be perfect from Apple or anyone else, you are expecting way too much.

If Apple bothers you that much maybe it would be better to sell off your apple products and go with another brand.
 
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The computer business is like any other technology business. It never stands still, always relentlessly advancing. The trend these days seems to be away from the desktop, whether it be Windows, OS X, Linux, whatever and towards the web. The web browser is becoming the new desktop, and the underlying OS just an enabler. In my mind I think of the old DOS and Windows 3.x model. Today's OS is equivalent to DOS - the Web browser is the Windows: the interface where all the action is happening.
Back in 1997, a powerhouse of a company called Netscape Communications was betting on exactly that.

Ten years on, Netscape is just a brand plastered on a cheesy Firefox clone, but the Big Two desktop vendors are still raking in the billions.

Steve Jobs said:
...You know, it's interesting. The PC has proved to be very resilient because, as Bill said earlier, I mean, the death of the PC has been predicted every few years.
 
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The thing to remember, regardless of the 'actual' quality, is that Apple computers are sold for huge margins... in fact most of Apple's gear is sold at margins of 40 - 50% per unit. Dell sells at tiny margins, despite having huge purchasing power in the market.

Why? Because Apple's customer base is concentrated in the mid-range of their market (high end MacBooks, low end Mac pros or mid-ranged iPODS or iMacs - there are no Apple machines for less than $1000 - because under $1000, there is no margin. The vast majority of Dells sold are low-end machines, or bulk bought corporate machines where the profit margin is truly tiny. Sub $800 laptops and $500 desktops.
Uh, the mini?
 
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dtravis7


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eeekk.

Good spot, I thought of it when I typed it and meant to change it to full systems or something clearer.

I have 2 Mini's here so don't leave that one out! :D

I just got a book from the Library called Second Coming of Steve Jobs. Lot of interesting stuff in there so far.
 
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More expensive items nearly always reap higher margins, although of course there are exceptions. High volume, low priced items, almost always have lower margins. Therefore they are less profitable per unit and far more sensitive to volume changes - not only that, but the lower end of the market tends to be more crowded and therefore more competitive, again meaning lower margins.

Agreed.... Back in a former life I worked at Circuit City, and it was certainly true of the stuff we sold. That $80 Sony CD player you'd see advertised in the Sunday flier? More often than not, that was actually priced below wholesale, and the store took a loss every time we sold one of those. The idea is to advertise certain items at absurdly low prices, and once the customers came in the door, it was our job to work them up to the higher-priced (and higher-margin) items. I actually got chewed out by my manager once for selling the el-cheapo CD player to a customer who came in an asked for it. The more expensive an item is, and the more "snob appeal" it has, the higher the profit margin. When you start looking at the high-end stuff, the margins go through the roof. I'm sure the same holds as true for computers as it does for other consumer electronics.
 
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I was browsing the Apple site and came across this page. I thought you'd all get a kick out of the photo. The page is explaining how to transfer data from an old PC to a new Mac. The photo is of a Dell (one of the $200 desktops) and it's connected to an iMac.

Linky Poo
 

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