Dell: “Apple has become the conformist company”

As you may recall, company founder Michael Dell reacted rather definitively on CNBC’s Business Center to Apple’s announcement of retail stores back in 2001:

“No, you know, we figured out 10 or 15 years ago that you don’t need stores to sell computers,…We have stores; we call them online stores. Dell.com will generate close to US$20 billion in revenue for us this year. We think the best computer store in the world actually is at dell.com. Physical stores have been tried by a number of our competitors, and generally, actually I would say universally, that strategy hasn’t panned out.”  

Of course, Apple stores have become the fastest retail operation to reach $1 billion annual sales in history, with per-square profit nearly 70% higher than Tiffany & Co stores.

Last week, when Michael Dell and his lieutenants introduced “Dell 2.0” to the press in San Francisco, they were again asked about Apple:

“Apple has become the conformist company,” said [Dell chief marketing officer Mark] Jarvis, arguing that it’s now become so established as to demand an opposite. “I want Dell to be the different company,” Jarvis said, and when asked for the how, replied: “Watch this space.”  

This appears to be an interesting brand repositioning. First label your competition inadequate and misguided, then try to emulate it by letting catwalk models introduce laptops with gaudy veneers at Macy’s, and finally ask everyone to “think different” by imagining Dell as the cool, new anti-Apple. And simultaneously seek salvage at Wal-Mart shelves with under-$700 PC boxes.

On Sep 26, 2007, Dell had a market cap of $63.56 billion. Apple’s market cap was $132.85 billion, on fraction of Dell’s sales and revenue.

UPDATE: In October, AAPL gained 17.55% to reach $161.12 billion, DELL only 1.91% to reach $64.80.

oct-marketcaps.png

Could this be the reason?

25 thoughts on “Dell: “Apple has become the conformist company”

  1. Pingback: How successful are former Apple executives? « counternotions

  2. Pingback: Why Apple? Why Winbox PC? « ahmad.zidni.mat

  3. I’ve used Dell and Apple computers….. I gotta say that I like both, but I’m not very picky about my computers. As long as they work, I’m happy with them. I’ve had more technical problems with my laptop (Dell) but they are resolved and then everything is fine…. on the other hand, my iMac hasn’t had any technical problems and I don’t have to pay $50 a year for some annoying antivirus software. So I guess I like Macs more, but Dell isn’t that bad either when it comes down to it.

  4. . . . Apple will suddenly no longer be a niche or boutique product, but mainstream with a vengeance.

    (had to complete that thought!)

    JoeL

  5. Yes, that’s correct. Apple builds consumer products, not computers. Windows and box PCs are all DIY. You HAD to know how to tinker and get your geek on to get full use out of them. And in the beginning, geeks were the only computer owners. And as more people wanted to use them, they bought the idea that they “had” to use MS products to be compatible with work or the geek next door told them Macs were toys.

    Now people want computers to work like appliances, they don’t want to tinker, though Apple does leave the ability to tinker at whatever low level you want, in its Unix core. People want to use the thing for spreadsheets and letters and websites and photos, music, movies, you name it. And they don’t want to have to learn the 10,000 Word “secrets” to write a stupid resume!

    Apple gets that, Dell and MS has not. That’s why Apple’s market cap does matter and the reason why Apple has been bucking the PC maker stagnation trend and growing like crazy. Apple is making things that work and once that becomes clear to the PC lemmings out there still trying to figure out what a registry setting is and why they have to spend their time worrying about up-to-date virus definitions and having a hardware upgrade decertify their PC when all they really want to do is use the computer to create content and enhance their lives (not BECOME their lives!).

    JoeL

  6. Why does everyone forget that Apple does not want to make computers for people who want to tinker and build their own? In the old Soviet Union, everyone who owned a car had to know how to fix it. Everyone was a tinkerer, and the cars were basic enough to enable people to do so. But as soon as more reliable, and more expensive cars came on the market, people prefered those.

    A similar thing happened to the US television market in the 70’s. Zenith made color tv’s with a “works in a drawer”, that made it easy for a tv owner to do their own repairs. The Japanese made TV’s that were more reliable, and didn’t need to be repaired, and the owners didn’t need to know how to repair them. Guess who won that market??

    Apple doesn’t want the “do it yourself” computer market, and are very profitable staying away from that market. They don’t have to “win” at market-share to be profitable. They just have to have enough market-share to build an eco-system that sustains and grows their business, and their 3rd party developer’s businesses. They have that now.

  7. @HG

    Sorry, you’re right. I should have also said, Dell sucks, HP sucks, Lenovo sucks and Acer sucks. There, now it’s complete. If you want a computer that works, then build it yourself, as for the OS that’s your problem.

  8. Apple….sucks. In almost every article I’ve read about how well Apple is doing in the PCvsMAC world they always compare market cap. First, the market cap says nothing about how well Apple is selling their towers, laptops and all-in-ones. Secondly even if you compared the sales $’s of Apple and Dell/HP/whoever it doesn’t say anything about their market penetration. Apple has a very, very small consumer base by comparison. I’m not a Dell/HP/whoever fanboy, the only PC’s I’ve ever owned are ones that I’ve built myself. Looking at the recent problems with some of the new Apple gear it’s either more people are buying and the failure rates are just becoming more noticeable or the failure rate is increasing. Either way, no company produces a perfect product, PC’s are widely used and therefore there problems seem worse than what they probably are. A rate of failure can be calculated as a percentage of units shipped so the more you sell the more faulty units you have. Apple doesn’t sell much, by comparison, so there aren’t many bad units out there buy your percentages will be in line with the market average.

  9. I’ve owned Dells and I’ve owned Apples. Dell machines are the worst of both worlds – cheap junky hardware running poorly designed software (microsoft). Apple, on the other hand, has the best of both worlds. Superior hardware, and software that I can actually use – and I use a lot. Film editing on Macs is better than on PCs. Sorry, it is. Dell has no iLife, no Final Cut Pro, no Aperture, no Shake, and most importantly, no OSX.

    Michael Dell has a tough row to hoe these days. Fortunately for him, Steve Jobs isn’t quite so rude as to suggest what Dell might do with his company’s resources, i.e., return them to stockholders who must be wondering why the didn’t buy Apple shares two years ago.

  10. Naig: “Businesses offer love to get money; customers offer money to get love.”

    You say it like it’s a bad thing. :-)

  11. Dell’s a bottom feeder, just as Apple is a top feeder. Guess that’s a difference.

    Businesses offer love to get money; customers offer money to get love.

  12. “On Sep 26, 2007, Dell had a market cap of $63.56 billion. Apple’s market cap was $132.85 billion, on fraction of Dell’s sales and revenue.”

    It’s not about how much money you make (revenues) it’s about how much money you keep (net income).

    Apple has been more profitable than Dell for the last three reported quarters,

  13. Fran: “So now Dell is competing with hordes of lowball Chinese manufacturers for shelf space in someone else’s store.”

    So would you say this is “anti-Apple”? :-)

  14. Dell’s Wal-Mart move smacks of desperation. Everyone knows about how Wal-Mart get low prices: they beat up their suppliers to lower their prices. So now Dell is competing with hordes of lowball Chinese manufacturers for shelf space in someone else’s store. Not a recipe for success.

  15. Matthew: RIMM has a been a good performing stock in the last year or so. But the company is certainly not as diversified as Apple and its IP portfolio is dwarfed by Apple’s. The latter, for example, has its fingers in digital music, personal computers, mobile devices, digital TV, online services, applications, etc. In almost every market it plays in it’s got excellent traction and much potential. Any number of blockbuster hits could come out from one of those areas, as evidence suggests. I think this is what’s reflected in AAPL’s market value.

  16. Kontra: “Other than Google which other tech company has so much potential ahead of it?”

    Research in Motion (RIMM) has done well and looks like it has great potential. They doubled net income and revenue over the same period last year in their most recent earnings report.

  17. Bignumone: “Apple is a bit over-priced as a stock”

    There’s no way to prove that unless the stock tanks. I’m sure you recall this being said of AAPL about every six months, and yet it has been putting up outstanding performance quarter after quarter for a number of years now.

    Other than Google which other tech company has so much potential ahead of it? The company has been great on a lot of different fronts: component pricing, margins, inventory management, product design, retail sales, online sales, etc. That’s very difficult to pull off on a consistent basis. Sure, Apple can stumble, but that is true of any company.

  18. I like Apple computers, but lets not get ahead of ourselves, here.
    Market Cap doesn’t mean anything except that a lot of people paid a lot for the stock. It does not mean the company has good sales, profits, or is in good health. (Although Apple seems to have all of that as well). Apple is a bit over-priced as a stock, and I think people are getting a bit of the old “irrational exhuberance”.
    Comparing the company to Dell and saying it is great is like comparing the taste of raw lemons to cow manure. Shure you can eat them, and they taste much better than cow manure. But lemons are very difficult to eat like an orange.

  19. Mike: “Actually what Dell are doing is classic positioning strategy”

    Sure. Except that Dell has no discernible position to establish or re-establish at the moment, as you suggest. Some years ago, I worked with a partner of Al Ries (“Positioning: The Battle for Your Mind” http://tinyurl.com/2rrjly). So I can see the pain Dell will have to go through to grok mind share over market share. I’m not yet impress that they can pull it off.

  20. Actually what Dell are doing is classic positioning strategy (though I will not comment on their execution). If you cannot create a new category to own in the prospect’s mind then you must become the opposite of the market leader(s).

    Dell will have to find a position between Apple, HP and IBM. Dell’s position used to be “cheap” but they have obviously come to realise that to be cheap you have to shift an awful lot of tat – which comes back to bite you.

    Dell going bricks-and-mortar is a mistake IMO – they are squandering their biggest differentiator in a single press release!

    Who owns the word “reliability” in the PC/laptop category. No one I can think of, not even the Panasonic Toughbook (sure it’s tough but is it reliable?). Perhaps that is what Dell should have used as a starting point the live up to and exceed the marketing message. The fact that other products are just as reliable is irrelevant – once you own the word, you own the word (Volvo – safety, etc). Reliable and ugly is fine. They should stop trying to be Apple.

  21. “Also, other companies have Apple-like stores (Sony and other Japanese CE companies come to mind) that did not actually sell the merchandise at their stores”

    Excellent point. My most recent two Macs were stock “instant gratifications”: laid down the Mastercard; walked out with computer in a nice little bag.

  22. “to fondle the merchandise…”

    OK, Tom put the merchandize down and move away! :-)

    Also, other companies have Apple-like stores (Sony and other Japanese CE companies come to mind) that did not actually sell the merchandise at their stores. You could fondle it all you want, but you could never have the experience of walking home with them.

  23. Dell also said Jobs should shutter the company and return the proceeds to investors. This was around 2000, I think. Visionary guy.

    One reason the stores work FOR APPLE is that you can walk into a CompUSA or such and have a horrible shopping experience; maybe nobody there knows anything about Macs. Other companies may get different mileage (Gateway).

    Also, the stores ROCK. I go in sometimes when I’m near one just to fondle the merchandise, as it were. The latest and greatest hardware.

Comments are closed.