AAPL tops $300: Still waiting on Michael Dell's apology

AAPL tops $300: Still waiting on Michael Dell's apology

Summary: The clashing values of quality vs. commodity, and hardware innovation vs. supply chain innovation can be seen in the historic feud of Apple and Dell. This past week, when Apple stock closed at $314, it's hard to remember the days when the "common wisdom" of the technology market was that Apple was toast, that anyone buying a Macintosh was crazy, and the best case for the company was to close up shop and send everyone home.

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TOPICS: Dell, Apple
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The clashing values of quality vs. commodity, and hardware innovation vs. supply chain innovation can be seen in the historic feud of Apple and Dell. This past week, when Apple stock closed at $314, it's hard to remember the days  when the "common wisdom" of the technology market was that Apple was toast, that anyone buying a Macintosh was crazy, and the best case for the company was to close up shop and send everyone home.

In Oct. 1997, Apple stock stood around $17 a share and Dell at $33. At the ITxpo, Gartner Group's long-running IT analyst conference, many technology CEOs spoke to the enterprise crowd, including Michael Dell. The question of the moment appears to have been Apple and Steve Jobs, who earlier that year had returned to Apple's board and taken over in the summer as interim CEO.

Michael Dell, among others, was asked about what he would do if he were CEO of Apple:

"What would I do? I'd shut it down and give the money back to the shareholders."

So, for the computer industry, especially in enterprise computing, Apple was a big joke. The company and its user base just didn't get it.

Dell's success was all about getting new models on the market quickly, keeping inventory low, avoiding the distribution costs of the channel through direct sales, and giving users what they wanted with build-to-order production.

Apple sold systems that ran counter to the increasingly commodity Wintel concept. Just as now, Macs came with a proprietary OS but worse to the rest of the industry, the Mac used a unique RISC processor (unique being another word for "expensive"). But like the rest of tech companies in the channel, Apple was susceptible to demand cycles, and problems with forecasting (so that there was an oversupply of the dog units in the channel and an under-supply of the popular models).

However, over the succeeding years, Apple (and everyone else) picked up on parts of the direct sales and build-to-demand model. At the same time, Cupertino focused on technology innovation in its OS transition, cutting-edge industrial design and materials, the use of Intel processors, increased support for standards, and increased quality controls.

Behind the scenes, Dell kept driving down cost in its boxes, much like Wal-mart Stores does in the consumer retail market. Each of its suppliers was expected to reduce costs on a regular basis, or some other contractor would be found to meet the lower price.

I remember attending a storage conference around 2002 (the exact year escapes me), where several hard disk vendors pleaded with their competitors to hold the line against such practices by Dell. Their concern was that quality would be impossible to maintain under such great pressure and such thin margins.

Check out: Dell and the Wish for Apple's Cool

And so it happened. From riding high in 1997, Dell tanked over the next decade. Its quality declined and its systems had nothing to distinguish the so-called "Dell Experience" other than failure. In 2006, Dell executives admitted that its support program sucked and that its products stank.

"We know we've not done this perfectly in the past," then CEO Kevin Rollins said at a press event in New York, referring to service and support. "The Dell experience is the number-one priority of the company. It is where we are going to invest this year and for the long term to provide the best customer experience, bar none."

Dell this month settled a lawsuit that it knowingly shipped millions of faulty computers and then concealed those problems from its customers. The primary cause of the problems were cheap capacitors. Or should we say, overly cheap capacitors.

Michael Dell and the company this month finally settled with the SEC on charges the company had taken hidden payments from Intel to not use AMD chips and used fraudulent accounting practices to meet analysts' targets.

In 2006, Apple market cap passed Dell's. In 2008, Apple cap was 4x Dell's.

At the end of the day this past Friday, Apple's market cap topped $287 billion. The same day, Dell's market cap stood at $28B. Apple's market cap is now more than 10 times that of Dell.

So much for the Dell business model and so much for the 1997 strategic advice from Michael Dell. Certainly, he hasn't taken his own advice for his company. Perhaps that's because he has the example of Apple and Steve Jobs to advise him, even when he is looking in the rear-view mirror.

Here's a prediction: More Apple products will be sold in the enterprise in 2010 than have ever been sold before. And 2010 will mark a new age for Apple in business computing and as a platform in the enterprise.

Note that at the same 1997 ITxpo conference, Scott McNealy, then chairman, president and CEO of Sun Microsystems, was asked why Sun might want to buy Apple (a rumor that surfaced several times in the 1990s).

"They're got a great building we'd love to have. It's right across the street from JavaSoft."

Oops, Sun doesn't even exist any more.

Topics: Dell, Apple

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60 comments
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  • Hindsight is always 20/20...

    Hindsight is always 20/20. Apple had a significant cash reserve, but a lot of people were still uncertain of their future. If everyone was as confident now of Apple's future as they were then, we'd be millionaires.
    olePigeon
    • Well I did purchase Apple stock when it cost me $12 per share.

      @olePigeon
      Also I agree with your statement and would add foresight in NOT 20/20 for most and I think Steve Jobs has foresight.

      Pagan jim
      James Quinn
      • Jobs' foresight was in understanding

        that when your product goes commodity, you have to differentiate on style.
        frgough
    • RE: AAPL tops $300: Still waiting on Michael Dell's apology

      @olePigeon Your statement, "Hindsight is always 20/20" is not the issue here. The larger issue to all out there is not to make crass judgments. Michael Dell should have never made a statement like that. Situations change and because Dell's statement is a blatant nail in the coffin attitude he was way off the mark. There was no counterbalance when the weight shifted against his statement. The counterbalance is an escape hatch to wiggle out of a situation just in case your stance is wrong
      jack of daniels
    • RE: AAPL tops $300: Still waiting on Michael Dell's apology

      @olePigeon

      There were many of us that saw their recovery back then, when Jobs came back, with the aggressive moves he were making. Streamlining their then messy product lines, killing failing products, partnering with MS. Read the book "iCon"
      dave95.
  • what a ridiculously simplistic article

    you could probably find two competitors in any industry you choose were one had done better than the other over the last few years. So what?

    I really don't understand what you are trying to tell us other than apple have done well, which we already know.
    RonanSail
    • Are you that dense? Everybody predicted that Apple would go bankrupt.

      But, Apple stuck to its knitting, and did some great designs, entered new markets, and blew everybody else away, passing HP, IBM, Microsoft, Dell, well, just about everybody, in market value.
      DonnieBoy
      • Really DB? As a matter of fact, Steve Jobs was so

        confident of Apple's future, he pretty much sold most of his stock years ago as he thought it wouldn't get much past where it was at the time.

        So even Steve Jobs was uncertain of the future of Apple.

        But don't forget, he doesn't have any competition when it comes to Mac sales, unlike the others you mentioned above, as they are competing with each other, so it's a much harder area to make money in, much, much more competative.
        John Zern
      • RE: AAPL tops $300: Still waiting on Michael Dell's apology

        @John Zern - Can you list your source for SJ selling most of his stock years ago? Inquiring minds want to know if you know what your write of or are just full of c.r.a.p.
        The Danger is Microsoft
      • Apple sells Personal Computers and competes with Dell

        @John Zerny<br>HP, and the list goes on and on and on. Apple sells Laptops and competes with those I listed above and others like Toshiba and Sony. Apple sells smartphones and competes with like everyone including Dell Apple sells tablets and competes once again with Dell and HP and others Apple sells MP3 players and competes with MS, Sony and others as well.<br><br>Sure Steve Jobs has sold stock over the years heck he's had plenty to sell and has for a number of years been paid in stock options. Not sure why this seems odd or faithless to you but I don't see an issue with it.<br><br>Pagan jim
        James Quinn
      • The Danger is Microsoft: I linked a few.

        http://news.cnet.com/2100-1023-202239.html

        http://www.appleinsider.com/articles/10/05/18/steve_jobs_missed_out_on_10_billion_from_stock_options_adjustment.html

        Should have done that before.
        John Zern
      • RE: AAPL tops $300: Still waiting on Michael Dell's apology

        @John Zern - A stock sale from 13+ years ago (equaling 10% of what he now owns) and a completely unrelated stock options transaction only prove that you are wrong. SJ did NOT sell MOST of his stock....not by any stretch of an Apple haters imagination. Sorry. You lose here.

        BTW: The stock he received back in '97 was compensation for the Next purchase, so he should have sold it to get his money from Next. Everything else after is just gravy. Smart move on his part.
        The Danger is Microsoft
    • Wake Up

      @RonanSail What you will not find is a company considered to be on it's last legs not just surviving, but thriving and eventually burying the competition. You won't find the Steve Jobs story repeated anywhere either. We have witnessed history in the making. Don't miss the significance because of your petulant dislike for Apple.
      His_Shadow
  • Rebalancing

    While one might be smug in hindsight about Apple's success compared to DELL's relative failure ... I think it would be more balanced to lament the dilatory nature of all participants. Agreed though, that Apple appear to be the only ones offering any innovation whatsoever.<br><br>And of course, in typical biased fashion, you forgot to mention that Jobs was investigated for securities fraud, didn't realise he was dying (despite having booked in for a rush transplant) and sees no problem with the latest iPhone antenna design. Remind you of any other companies beginning with D?
    [No need to apologise for your forgetfullness ;-) ]
    jacksonjohn
    • Come on, he was NOT commenting on Steve Jobs personal decisions on

      finances and disclosing his health situation. He was commenting on how Jobs ran the company. Yes, Jobs used poor judgement that got him into trouble, though, I think our health is our own business, even if it can affect stock prices.
      DonnieBoy
    • Nice Herring

      @johnfenjackson@... How did it come to be red? The article was of a singular focus. Jobs could have been convicted and fined and even gone to jail and that would be entirely irrelevant to the point of the story. Dell's race to the bottom got exactly the results expected. Apple's focus on quality and user experience got them the success they richly deserve.
      His_Shadow
    • RE: AAPL tops $300: Still waiting on Michael Dell's apology

      @johnfenjackson@... speaking of antenna design I have a three year old Samsung flip phone with a stuck on label on the back bottom that states "Phone reception will be compromised if held over this area." I don't think the antenna design of the iP4 is capable of rewriting the laws of physics. Deal with it. It was a tempest in a teapot.
      dheady@...
  • RE: AAPL tops $300: Still waiting on Michael Dell's apology

    When the moonies and other cults died off in the 70s, no one would have believed that in the future technology cults would replace them.

    Jobs has a messiah complex, but what is a surprise is that there are so many sheep willing to disengage brain at every publicity release from AAPL.

    The tech from Apple has some nice touches, but I personally like my 3 year old Dell laptop running Ubuntu.
    It is reliable, and I don't have to be following fads every quarter based on AAPL press releases.

    Apple has single handedly created an electronics waste pile in every country by fostering this 'one year then dispose' culture around all it's products.

    Dell, whilst not perfect, sells reasonable quality commodity hardware that does a job. Now that it has the Dell Streak slate, and is doing rather well with it's range of nettops, I think Dell is an okay investment today.

    The moonies 'ran their time' and Android is likely to shove all but the messianic followers of AAPL, into the real world, where a balance between cost and function, wins out over shiny products that are overpriced.
    gary2010
    • bs

      @gary2010
      apple products have the longest live circles of the industry and are the ones that are best recyclable with the least use of toxic materials. after their first use by the buyer, most of them will be sold or handed down to friends/relatives. unlike your cheap plastic, toxic piece of sh**.
      banned from zdnet
      • RE: AAPL tops $300: Still waiting on Michael Dell's apology

        @banned from zdnet - You are correct and gary2010 is way off base. Typical Linux/Windows user that hates Apple. Anyone wanting to see the details of the Green Apple can visit
        http://www.apple.com/hotnews/agreenerapple/
        The Danger is Microsoft