My Letter To Apple:

[posterboy81]

Apple vs. Dell

I'd also like to jump in here and say that I am tired of the freaking Apple vs. Dell comparison. Dell sells computers with less margin and still makes moeny because they are a factory direct dealer, a wholesaler, an OEM build your own shop, whatever you want to call them. They havae no distribution costs, they have no retail markup, they have no development costs.
Apple is a retailer, they have all of these added costs. It makes the comparison a little unfair for lack of a better word. Why not compare Apple to Sony (whom Apple considers the real competition anyway) or HP or at least another retailer?

--PB

 

[Shrek]

Originally posted by jelloshotsrule
. . .they sell fewer cars.

same thing here.

Of course, and that's the problem. In order to make more money Apple needs to lower prices to increase their market share; that will spread word-of-mouth advertising (the most effective advertising of them all), and they will make more money in the long run.

 

[oldMac]

The Numbers

-----------------------------------------------------
Apple (Quarter Ending June 29, 2002)

http://biz.yahoo.com/fin/l/a/aapl.html
-----------------------------------------------------
Revenue: $1.4 Billion
Cost of Revenue: $1.04 Billion
Gross Profit: $391 Million
Profit Margin: ~ 28% Gross Margin

R&D Costs: $106 Million
S&A Expense: $272 Million
(Selling General And Administrative Expenses)

Net Income*: $32 Million
After taxes, other income/ expenses, non recurring events, etc

-----------------------------------------------------
Gateway (Quarter Ending March 31, 2002)

http://biz.yahoo.com/fin/l/g/gtw.html
-----------------------------------------------------
Revenue: $992 Million
Cost of Revenue: $867 Million
Gross Profit: $124 Million
Profit Margin: ~ 12.5% Gross Margin

R&D Costs: $0
S&A Expense: $338 Million
(Selling General And Administrative Expenses)

Net Income*: ($126 Million)

*After taxes, other income/ expenses, non recurring events, etc

-----------------------------------------------------
Dell (Quarter Ending May 3, 2002)

http://biz.yahoo.com/fin/l/d/dell.html
-----------------------------------------------------
Revenue: $8.01 Billion
Cost of Revenue: $6.68 Billion
Gross Profit: $1.4 Billion
Profit Margin: ~ 17.5% Gross Margin

R&D Costs: $110 Million
S&A Expense: $691 Million
(Selling General And Administrative Expenses)

Net Income*: $457 Million

*After taxes, other income/ expenses, non recurring events, etc

 

[arn]

Re: Re: Re: Re: margins

Originally posted by Shrek


Posterboy, can you provide some links that tell us what Dell and Gateway's profit margins are, please.

I'm not sure what this will prove.

I bet I can find a company selling PC's with lower profit marings than Dell... and yet far fewer sales.

Lower margins doesn't automatically equal market dominance. If so, why doesn't gateway just drop their prices even more? Then, they will sell more computers than Dell.... right?

arn

 

[quanta]

Hot Rod

You want Porsche at a Pinto price? Dream on.

You want the best? Pony up. Apple is doing just fine as a business which is designed to do what it does best: make money. There aren't many of us who would willingly convert to WindowsXP. On a sarcastic note:

"I'm switching to a Gateway because it just looked so attractive sitting there in that cow-skin box. And besides, Macs only come with one mouse button... it's like I'm getting two for the price of one!"

By the way, out of all of the computers which are still usable which my family has acquired over the years, mine is the longest in the tooth. i got it in 1996 and i can run 9.2 with no problem. It's not even a G3. It's not as tight on the corners in P-shop, but it doesn't crash, it doesn't whine, and it does me just fine. i really would love to see the Pentium MMX (which came out the same time as my computer was being replaced by the line of beige G3's) take Windows ME for a stroll around the block while i watch the varnish dry on the cabinet i started sanding when it set out for its walk. To boot, we have a Mac SE with a 9 inch monochrome built in monitor and a 20 Meg HD which still kicks butt and even went so far as to be my girlfriend's full time word processor for school last year.

The point is that you get what you pay for. If you invest in a quality machine, in a few years it won't be the fastest, but it will definitely be steadfast. Besides, a mac is like a dog... if you treat it well it will reward you in ways you never knew a computer could. It's your best friend, a companion for life. It's not something you salvage parts from when you fry the damned motherboard because some penny pinching jack-ass decided that they could save ten cents by using an imitation architecture, or you burn the CPU cause you overclocked it to get the Quake 3 frame rate up to 60fps. A mac is to be respected and treated with care, to be understood and even coddled. Take it from me, i have to baby 45 of them every day, and i've seen the devlish little tricks they play on people who don't "know." They can smell fear, and in conjunction with a printer, can smell a deadline too. But now you know. And knowing is half the battle.

So just go ahead and drop the "potential" from potential mac buyer
and become a man.

A Mac Man.

You'll never have to see a .dll file again.
And that in and of itself is worth it.

 

[posterboy81]

Financial Info:

You can find Dell's Q2 results at this address: http://www.dell.com/us/en/gen/corporate/press/pressoffice_us_2002-05-16-aus-001.htm

You will have to scroll down quite a ways to find the gross margin, but it as of may 3rd this year:

Gross margin 17.2%

For another comparison, here is Compaq (pre merger, Q2):
http://www.compaq.com/newsroom/pr/2002/pr2002041801.html

excerpt from Compaq Q2 financial press release:
First quarter gross margin, as a percentage of revenue, was flat sequentially at 20.6 percent,

I will find Gateway later, but if you really wanted you could just go to Gateway.com and search up investor information and find it yourself too.

--PB

 

[arn]

Originally posted by Shrek

Of course, and that's the problem. In order to make more money Apple needs to lower prices to increase their market share; that will spread word-of-mouth advertising (the most effective advertising of them all), and they will make more money in the long run.

Ah... a simple concept... lower profits, and sell more machines... but wait! Gateway's margins are lower than Dells'. Yet Dell out-sells them... obviously there are more variables involved shrek.

arn

 

[quanta]

You do it.

i think Shrek should go and net 32 million and then come back and tell us what would work and what wouldn't.

 

[oldMac]

Reading the numbers...

As you can see, Apples margins are currently keeping them "floating" in the economic downturn. They have kept revenue flat over the past 4 quarters and managed $176 million in profits. (Between $32 million and $66 million per quarter.)

Gateway, on the other hand, has had 4 straight quarters of diminishing revenues (ie, they're probably losing a lot of marketshare). They have lost about $656 million in that timeframe.

Dell is maintaining a higher profit margin and kicking butt in the PC market.

 

[quanta]

numba foetee one

This is my forty first post and it's only the thirty fifth post that was part of a pointless discussion speculating on how someone some day could get their mac cheaper.

 

[quanta]

but it's still highly entertaining.

 

[quanta]

An Aside to Arn

Hey Arn, are you a network type of guru? i have a coupla ?s that i outlined in the Help section under "Network for 30+ macs" or something like that. If you have some time in the next few days, could you take a look?

thx.

 

[oldMac]

Further Analysis...

Assuming that Apple had a 17% gross margin (similar to Dell) and didn't manage to sell any more computers than they sell today, they would have lost $107 Million last quarter.

Assuming that Apple had a 17% gross margin and increased revenues by 10% (unlikely), then they would have lost $153 Million last quarter.

(Yes, this is an over-simplification. It assumes that Apple would not spend any money to sell 10% more machines.)

It's definitely a chicken and egg problem. Right now, Apple's strategy seems to be to "wait out the poor economic climate" while investing their margin in R&D.

 

[Shrek]

What exactly is R&D by the way? What does it stand for?

 

[posterboy81]

R&D

Originally posted by Shrek
What exactly is R&D by the way? What does it stand for?

Research and Development, IE all the time and money invested in Apple developing cool new technologies such as FireWire, SCSI, Quartz Extreme, Rendezvous, etc.

--PB

 

[vniow]

Research & Development. One of the reasons Apple needs that 30% profit margin right now.

 

[posterboy81]

Gateway

If you are still interested, Gateway's Q2 report for 2002:
http://gateway.com/about/ir/qtrly/20020718.html

excerpt from Gateway.com:
POWAY, Calif. (July 18, 2002) - Gateway, Inc. (NYSE: GTW) today reported second quarter 2002 revenue of $1 billion and a net loss attributable to common stockholders of $61 million, or $0.19 per share.

and their margin was:

Another excerpt from the same page:
Pre-Tax Loss

Gateway's gross margin for the quarter was 14.3 percent, compared to 14.1 percent in the previous quarter, which excludes first quarter special charges. This increase resulted primarily from product mix changes and cost reductions.

--PB

 

[rainman::|:|]

Okay, nothing personal, but anyone that doesn't know what R&D stands for (it's pretty widely used) shouldn't be talking about profit margins. That simple. Sure, I wish i could buy an iMac for $700-- and i'd like to buy a lexus for $14,999. Neither is going to happen. Lexus isn't going out of business, neither is Apple. And you know what? If a lexus cost $15 grand, it wouldn't be a luxury car anymore. And Lexus wouldn't have the resources (or the drive) to build a better, smoother-riding, more high-tech car next year.

Secondly, this thread is kinda cool, cause it's the most i've seen Arn post...

pnw

 

[jelloshotsrule]

Re: Hot Rod

Originally posted by quanta
You want Porsche at a Pinto price? Dream on.

You want the best? Pony up.

exactly

it's a matter of sales and margin. i'm pretty sure that apple has business folks working on the numbers and they know just a bit more than you do... sorry to say, but i agree with paul here. if you don't know what r&d is, no need to embarrass yourself by trying to tell a profitable, cult followed company what to do....

 

[quanta]

if anyone who is reading this thread (excepting Shrek) knows a little bit more than average about the workings of the Macintosh System and it's relationship to the HD (that's Hard Drive for the acronymically impaired) and the HD's name, please check my thread about the network issue i am having.


https://forums.macrumors.com/showthread.php?s=&postid=140592#post140592

Much Thanks in Advance. And there's a cookie in it for the winner. Mmmmm.

BTW (By the way), how old are you Shrek? There might be some leniency in the degree of our scorn if the number is right....

 

[Shrek]

Originally posted by quanta
BTW (By the way), how old are you Shrek? There might be some leniency in the degree of our scorn if the number is right....

Too young to be true
Put two and two together my friend
And you'll be ridin' smooth

 

[quanta]

i guess you're doing pretty good for a four-year-old....

i like the spirit of your letter, and with a bit of editting you should send it, but maybe just stick to supporting Apple's pressure to drive down production costs rather than asking Apple to make such a drastic change in it's profit margin.

i was also wondering....

have you seen .... the Muffin Man?

 

[posterboy81]

The Muffin Man?

Yes, I know the Muffin Man, who lives on Drury Lane?


--PB

 

[Shrek]

Originally posted by quanta
have you seen .... the Muffin Man?

Quanta is missing someone. How embarrassing?! How embarrassing?!

 

[jefhatfield]

Re: My Letter To Apple:

Originally posted by Shrek


Sound reasonable?

excellent, i could not agree more

in mba school, apple with it's high profit margin and its exclusivity, is unmatched for its financial stupidity

great innovation, but not always good business decisions