“Late yesterday, Dell reported second-quarter results that show profit fell almost in half. The company earned $502 million, or 22 cents per share, on $14.09 billion in revenue. A year ago it earned $1.02 billion, or 41 cents per share, on $13.43 billion in revenue,” Ed Stenson reports for Schaeffer’s Investment Research.
Full article here.
“Dell Inc. (DELL : $20.70, -2.10, -9.2% ) saw its shares fall as much as 9%, to $20.74 Friday… Dell also said it has been under informal investigation by the Securities and Exchange Commission since August 2005 over past accounting practices. Goldman Sachs analyst Laura Conigliaro cut her rating on Dell’s stock to sell from neutal on the grounds that the company is likely to perform weakly compared to its main rivals over the next several months,” Rex Crum reports for MarketWatch.
Full article here.
MacDailyNews Take: We will dance on Dell’s grave.
Related MacDailyNews articles:
WSJ: Dell’s back-to-school business may be at risk – August 17, 2006
Dell cannot compete with Apple’s new Mac Pro price or feature set – August 15, 2006
Dell issues largest safety recall in history: 4.1 million laptop batteries due to fire threat – August 14, 2006
Dell warns of earnings miss; shares plunge 15% – July 21, 2006
Apple passes Dell in market value – May 02, 2006
Dell shares fall as Citigroup cuts rating two full notches from ‘buy’ to ‘sell’ – April 21, 2006
Dude, you got a Dell? What are you, stupid? Only Apple Macs run both Mac OS X and Windows! – April 05, 2006
Apple Mac is #1 in European education market, pushes Dell down into second place – February 03, 2006
Why buy a Dell when Apple’s Intel-based computers will run both Mac OS X and Windows? – June 08, 2005
Dell lost as well significant market share
Dell needs Mac OS X to stay alive. Steve Jobs should be getting a call from Mr. Dell soon.
I wonder if the factories making the Dell parts work over 60 hours a week.
Michael Dell should sell the beleaguered company and give the proceeds to the shareholders.
The original article does say “neutal.”
Is that a form of neutered?
To have you stocks listed as “neutal.” I wouldn’t know what to do with them had I any.
Dell’s market capitalization is now about $10 billion less than Apple’s ($47 billion for Dell vs. $57 billion for Apple).
Funny how the phrase, “Dude, your getting a Dell” has become a put-down rather than something cool or hip. I guess the fact that the actor who played that part got busted for trying to buy weed off an undercover cop didn’t help much either.
Anyone know what Apple’s capitalization is vs. Dell’s today?
Dell has been pinched off and has started it’s slow circle around the bowl.
This is where Apple’s decision to cater to only the middle and high end markets comes into play.
Because Dell devoted enormous resources to chase the low end market, they are saddled with it when the economy turns sour.
You see Apple will go tell a company to go fsck themselves if they try to lowball them.
But not Dell with it’s fleet of used car salespeople working on commission.
Apple has sacrificed market share for stability and profits.
If Steve is to liscense OS X to other computer manufacturers, he should choose someone better than Dell. Dell (with the possible exception of Gateway) makes the WORST computer hardware on the market. I’ve known people to have computer failures after not a year. He should choose someone who makes good yet affordable computers like HP. Or just not liscense the software and sell more Macs because of it.
“Dell reported second-quarter results that show profit fell almost in half”
Profit as cash:
0.502 billion vs 1.02 billion is a 50.8% reduction.
Profit as percentage of revenue:
0.502 billion on 14.09 billion is 3.56% profit
10.2 billion on 13.43 billion is 7.59% profit
3.56% vs 7.59% is a 53.1% drop
Almost in half?
Dell’s Trailing P/E is still less than half of what Apple’s is. That may mean nothing to market share, but this suggests – suggests – that Dell’s stock price is more closely aligned to its value than Apple’s is.
Dell’s market share has been weak, lately, and getting nibbled away at by HP and Apple. (Gateway and Lenovo have been static) This loss in profit likely means they have lost much of that share from the top end, rather than from the bread&butter; models that they sell so many of. Yes. From the models that compete with Apple’s models.
See you (MW=around), Dell
As I pointed out when I e-mailed MDN last night
Profits down to around 3.5% of revenue (getting close to Gateway territory surely)
Revenues up 5%
Profits down 46%
And to add to the pile of stats for today…
Dell is currently worth around $48 billion, which sounds all very well until you go back a year and realise that it was worth $88 billion. So not only are Dell stockholders being screwed by not getting a dividend, their investment is becoming worth less each day, which will come as a shock when Mikey and Kev have to shutter the company and give the proceeds to the shareholders.
Dell is now worth some $9.6 billion less than Apple on the open market, and is – if it’s not careful – going to become the fourth most valuable “manufacturer” after Sony.
You know, there really is nothing like the sweet feeling of schadenfreude mixed with karmic payback. Shameful joy, my ass.
It’s interesting. I read yesterday that Sony claims that their batteries don’t have issues in other manusfacturer’s computers (HP, Apple), and that Dell’s wiring is part of the problem:
“Sony has said it used the batteries in some of its Vaio notebooks.
A spokesperson for Sony said: “Some Vaio notebook series utilized the batteries in question, but at present we have not received any incident reports related to these products.
“Sony’s Vaio adopts its own design for safety technology, and Sony considers there is no danger of emission of smoke or fire from these products.
“The battery charging system that Vaio uses is different from that of Dell.”
She added that the fault was most likely linked to the way Dell integrated the battery into its laptop computers.”
<http://news.bbc.co.uk/2/hi/technology/4800947.stm>
One more thing: the egg is on Michael Dell’s face!
Not to mention their boxes are butt ugly. Worthy only to be hidden in the closet.
I got a catalog from them the other day. Those boxes have the design aptitude of a … well, I can’t think of anything that equates to how terrible they look.
A cow flop has more design sense.
Market Cap At Time of Posting
Apple $ 57,400,784,920
Dell $ 48,608,991,560
Earnings Per Share
Apple $ 2.22
Dell $1.42
If I were put in charge of Dell I would break it up, sell the components and give the money back to investors
DLMeyer >
Or it could be that Apple’s intellectual property has some value that the market recognises.
Dell could also have some IP, but given their paltry spending on R&D ($128 million against Apple’s $175, which in real terms [expressed as a percentage of revenues] works out as 0.91% to 4.00%), maybe they don’t have any.
Maybe the market realises that Apple is investing in its future, whereas Dell is paying for Microsoft’s future.
I don’t know, I’m just spitballing here – help me along.
I think Michael Dell should shut down the company sell the assets and give the money back to the beleaguered share holders..
ROTFFL!!!!!!
FINALLY people are beginning to see how much Dell sucks donkey. well, give the money back to the share holders…oh wait, I think I might enjoy watching the slow death….. so go ahead ride it out, you can listen to your dj ditties (if they work) on the way to the grave!!!!!!
HAHAHAHAHA
Michael Dell should shut it down and give the money back to the investors.
Wow, Dell sure did a good job with their purchase of Alien PCs.
Dude! I’m get’n an HP!
Drunk Cheney:
A cowflop would belong to Gateway. Dell’s boxes have the design of the dead.
“Dell has been pinched off and has started it’s slow circle around the bowl.”
Old Mac Dude LOL!!!!! and off my chair
I think the seeds for this development were sewn with HP’s purchase of Compac. It may be that “Fiorina’s Folly” is finally paying off.
There is another aspect of Dell’s death spiral that bodes very well for Apple’s future. Apple, Dell and other PC makers use an overlapping set of suppliers for their products. By Apple taking market share from the PC makers, it needs only to contract for more manufacturing for Macs from the same people who are already cutting back production for customers with declining sales. Yes, Apple will have to qualify the production lines as meeting their standards, but that is a whole lot easier and faster than trying to grow a market from scratch.
The key implication is this. Apple’s victory – which I predict — in taking huge hunks of market share away from Dell, HP, Lenovo and the also rans can occur very quickly. Mac sales will hit like a tsunami, rising up and smashing their competition. If Apple can get the iPhone right, the same dynamic exists. Starting from zero in a huge market is very difficult, but if you succeed, victory can come swiftly.
DLMeyer,
P/E’s are usually a metric for future value of a company. Apple will be growning way more than two times faster than Dell over the next year or two. This is why the P/E is higher; people are expecting Apple to grow faster (which it will). This is why small companies have high P/E’s and big companies have smaller P/E’s. It’s a lot easier for a company with 5% market share or a market value of $200 million to grow at a fast pace compared to companies with 70% market share and $100 billion market caps.
I’ve been aginst Dell and Microsoft because I think there is too much good coming from other places for these two companies to keep their huge market share. At least not without a huge change in the company.
Dell’s R&D is probably going to find out why their batteries explode. Apple’s R&D money is going to create an amazing product.
Who’da thunk that Apple would be one of the last name-brand PC makers left standing? That alone will boost its market share.
My Dell Inspiron 9100 is on the recall list. But my specific battery is not being recalled. For some reason, this doesn’t make me feel any safer. I have only my own poor judgement to blame.
Sorry I’m tardy getting in the Hell dying train.
Anywho, I predict AAPL buys DELL in the next 24 to 36 months (ala HP/Compaq). AAPL gets the market share they want, control of Steve’s proclaimed target and M$FT’s number one “partner”. With this move, the dynamics change in a revolutionary fashion in AAPL’s favor.
Result:
1. Dell goes to Hell
2. M$FT is fsked (more than even Balmer has managed to screw it)
3. AAPL stock doubles again in 6 months after the deal
Rock on Steve!
” width=”19″ height=”19″ alt=”raspberry” style=”border:0;” />
THis is when I sold my Dell shares (@ $42):
http://news.com.com/2100-1042_3-5540063.html
It was clear that they had no clue about the consumer side of the business.
Conor MacBook speaks the truth.
IBM has left the field, HP bought Compaq after Compaq bought DEC.
Apple is now the second most valuable PC manufacturer in the marketplace, and the only one that controls its own future with an OS that can run on PowerPC, Intel and – presumably with little work – AMD.
Admittedly, much of Apple’s value is tied to the success of the iPod but then much of HP’s value is tied to the success of inkjet cartridges and much of Sony’s value (well all of it really) is tied to movie, tv and music production and distribution whilst the CE part of the business is coughing up blood.
Every dog has its day.
“It’s interesting the iPod has been out for three years and it’s only this past year it’s become a raging success,” said Rollins, who is also Dell’s president. “Well, those things that become fads rage, and then they drop off. When I was growing up there was a product made by Sony called the Sony Walkman–a rage, everyone had to have one. Well, you don’t hear about the Walkman anymore. I believe that one-product wonders come and go. You have to have sustainable business models, sustainable strategy.“
From the article posted by Critic slightly earlier.
You couldn’t make it up.
Lots of good info and data posted. I would add that the 22cents/share was totally in line with lowered expectations, so that the drop in share price must be due to an expectation of upside surprise.
Also, I think the relative p/e’s of Apple and Dell, besides reflecting expectations of CAGR, also reflect that Apple’s gross margins were 30% last quarter, while Dell’s are in the range of 5%. This just illustrates that Dell is in a bind. It can’t seem to figure out how to grow market share without lowering prices, but lowering prices, squeezes margins. I guess the Dell Way in a a mature commodity market doesn’t really work.
Apple will not buy dell because they won’t want to mess with the shitty computers Dell has put out into public. Apple only sells quality computers. Their goal is not market share, their goal is a good computer experience. They are slowly going for that market, but Apple will have no interest in Dell’s mess. Plus a company that gross too big too fast fails. Dell is too big for Apple to buy, because integrating it would be a pain in the ass and probably not possible.
“Dell also said it has been under informal investigation by the Securities and Exchange Commission”
“informal investigation”? Like, what, the investigators wear shorts?
As was said in these forums many times over the last few years, Dell were always on the path to nowhere…
Ever cheaper.. ever poorer.. ever more bankrupt…
Can’t say they don’t deserve it.
Mike:
“Dell’s market capitalization is now about $10 billion less than Apple’s ($47 billion for Dell vs. $57 billion for Apple).”
So what’s all the fuss about market share? All the market share in the world isn’t exactly doing Dull any good.
Your Take, MDN, BIG SMILE (;-))))
Failures of companies with a large stockholder base does no one good, including Apple users.
There is absolutely NO reason in the world for Apple to buy Dell. You don’t buy the consumer when you acquire a company like Dell. You just buy the company mess.
Apple will let Dell die and then step up and offer a superior computer replacement.
Microsoft might buy them however.
No way will any established player buy Dell. If they go anywhere it’ll be to some Chinese Lenovo competitor with lower administration costs. But, the chinese being the chinese, they will wait until the company is virtually dead and snap it up for a couple of billion dollars. They know how to play a waiting game.
Apple, HP, and Sony meanwhile will continue pretty much as before, although each with slightly increased market share.
Apple might buy Dell specifically to prevent Microsoft from buying Dell. It’s in Apple’s best interest to not let Microsoft be selling it’s own Hardware.
The other option would possibly: If MS bought Dell, HP + Apple might happen…
Let’s face it, HP would not want to be going it “alone” as it were against MS.
This is what I have said since Day 1, if it weren’t for these PC manufacturers puting Windows 95, 98, 98SE, Me, 2k, etc. on their PCs for all these years, MS would not have such a monopoly.
I think Gateway is going to die off, slowly lose market share, and never innovate. Let’s be honest, anyone with a brain who’s going to spend “that” much on a PC is going to go probably to at least an iMac or MacBook Pro.
Sony in the future could very well go and create it’s own OS, some sort of Apple OSX/Windows XP hybryd.
Frankly, the key is that all of the key players right now have “backup”: Apple has iPod + iTunes, Sony has movie distribution etc., and HP has printers and cartridges. Dell & Gateway have nothing, which is why in this economy the two of them will die off, perhaps even after a merger together.
Be prepared for Dell to go the way of Packard Bell, or at least be acquired. It’s quite impressive to watch these companies that once had incredibly strong market share to completely die away.
The last excuse for buying a “cheaper PC” versus a Mac is withering away. Expect the average price of PCs to increase significantly thus finally destroying the myth of PCs having greater power/dollar or performance/dollar ratios than Macs.
It should be obvious now that the least expensive computer is often the least functional, least reliable, and least likely to be around in the future. One can’t continuously cut prices by cutting quality and expect good times to roll forever.