Apple makes money; Gateway profits down 25%

  • Posted: 10 January 2002 03:49 PM #16

    I wasn’t really into this topic at first.  If it were Dell having problems, it would be a different story.

    Upon further review, the story is very relevant.  It’s the latest sign that the PC industry as a whole needs to be reformed.  As Jobs said, only Dell is making money on that side.  IBM is pulling out of desktop manufacturing, and one of the primary objections of HP shareholders to the Compaq merger is that the deal would expose HP even more to the problems of the PC industry.

    As it stands, PC makers beat each other up through price wars, while Microsoft and to a lesser extent Intel clean up.  Apple also gets affected through market share.

    I’m hoping that the industry reforms and becomes more financially sensible.  Then Wintel would have to compete more on technical merit (though not entirely - the monopoly factors still remain, barring a miracle in the courts or some unforeseen market or technology shift) rather than on unsustainably low prices, and Apple and other competitors would have a fairer shake.

    Of course, Gateway could try building an all-in-one, flat-panel computer to reverse its fortunes… oh wait, they did that already.

    <font size=-1>[ This Message was edited by: algernon on 2002-01-10 21:01 ]</font>

         
  • Posted: 10 January 2002 05:04 PM #17

    Raena gagged:
    Dang. That was you that beat me to that damn cow!

    Bet it was chewy and stuff anyway.

    Indeed, it looks rather like a Holstein dairy cow (high milk volume, low cream, somehow appropos), certainly not good eatin’

     

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  • Posted: 10 January 2002 05:41 PM #18

    Actually there is a ranch just outside of one of my favourite resturants in Festival Walk (big hong kong mall) and to be honest it doesn’t exactly look inviting =] The apple stores we have here are sadly franchises but at least their mac only and their not too incompetant (apart from the first time I went to visit, I remember being quite dissiloutioned)

         
  • Posted: 10 January 2002 06:51 PM #19

    On 2002-01-10 16:03, Wilby wrote:
    In comparison to Gateway, Apple seems to have developed a very effective business model.  The only criticism I’ve heard of them is the price points of their computers.  DawnTreader, what do you think?

    Thanks for asking. In my view, at the time of introduction Apple models (with the obvious exception of the Cube), are priced well for their features.

    For example, the feature set on the new iMacs are outstanding and the free software (iMovie, iTunes, iPhoto, etc) only add to the value. They are attractively priced comapred to the products offered by other PC makers.

    However, I believe Apple keeps its products on the shelf without refreshes for too long a period of time. The current minitowers need a serious speed bump, especially in comparison to the new iMacs.


    If Apple accelerated the refresh rate on its products there would be less of a peak and valley sales cycle. Some of this probem may stem from the fact that Apple is the smallest of the major PC makers and manufacturing changeovers have to be very well planned. Also, Apple keeps a close eye on inventory, preffering to let sales slow on a model and exhaust inventory rather than risk having unsold product in the channel when new products are released.

    For whatever reason, expect high-end iMacs to attract buyers away from minitowers for the time being in the same way that the iBook took away sales from the PowerBook until the recent feature change on the pro portable.

    To answer your question more directly, I’d say when new Apple products are released they are priced well for their features. By the time they are retired they are expensive compared to products offered by its competitors.

    In my view the Cube was a really cool machine. The problem was the price. Had Apple shaved the price by a couple of hundred dollars at the time of introduction, it would have remained in production and sold significantly more units. I believe Apple has learned that lesson the hard way.

         
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    Posted: 10 January 2002 07:55 PM #20

    I agree with DawnTreader. The iBook has always been very competitive with similarly configured laptops, and the iMac has also been an excellent value. Just as the current iMac meets or exceeds the price/value flat-panel offerings from Dell and IBM, older models of the DV iMac have been equally as competitive with offerings from brand-name manufacturers, like Dell, Sony, NEC, and others. When the iMac DV models were released, I ran a feaure-by-feature comparison with the Sony Vaio on sale at the Future shop where I worked. The two systems had nearly identical features, and an identical price once feature parity was reached. Which you prefer is obviously a matter of both personal taste and values, but the so-called Mac Tax was obviously nonexistant.

    The last two days I’ve been having fun with the prices of iMacs (new and old) compared to the availale Dells, and have been amused to find them within $50 either way of a similarly configured Dell. The $599 Dells may look appealing to the pocketbook, but if you want the features of the $799 iMac, you’ll have to shell out $839 for them (Well, $889 before the $50 mail in rebate). I doubt Apple’s taking a loss on those models, either.

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  • Posted: 10 January 2002 08:22 PM #21

    We had a Gateway store here in Adelaide (South Australia)until quite a few months ago when it closed along with the rest of SE Asia. What amused me so much about this store was the hoodwinking going on. The prices on the machines looked attractive until you realised what needed to be added on to make the machines functional. A base model, for instance, would have no modem, firewire card, Zip drive, etc.

    Consumers don’t react well to this retailing approach. Certainly not Australian ones anyway, because when the true retail price is ascertained as opposed to the initial advertised price, the consumer develops a response of distrust.

    With a Mac, you buy a fully functional machine. It’s all there - although wise Mac buyers go for the options such as doubling RAM to add longevity to the resale value of their machine.

    It’s no wonder, really, that Apple outperforms Gateway. Machines that work, straight outta the box; that’s the key. Even despite the small market share, there remains more Mac buyers willing to part with a little extra cash upfront than Gateway customers happy about being fleeced.

    <font size=-1>[ This Message was edited by: coaten on 2002-01-11 00:40 ]</font>

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  • Posted: 10 January 2002 10:28 PM #22

    On 2002-01-11 00:22, coaten wrote:

    It’s no wonder, really, that Apple outperforms Gateway. Machines that work, straight outta the box; that’s the key. Even despite the small market share, there remains more Mac buyers willing to part with a little extra cash upfront than Gateway customers happy about being fleeced.

    <font size=-1>[ This Message was edited by: coaten on 2002-01-11 00:40 ]</font>

    Good points. But don’t let Apple’s small market share fool you. Apple isn’t in the market share game per se, they are in the game for high-margin market share.

    In the 3rd calendar quarter Apple averaged just over 30% gross margins. It’s the envy of the computer business. Look at it from Dell’s perspective. Apple represents not only $6 billion in sales, but also $1.8 billion in gross margin. That’s a lof high-margin business and cash for the Wintel cartel to lose.

    Just like the high volume general retailers are beginnng to learn, after they have put most of their traditional competitors out of business, what needs be done to continue to grow revenue and maintain historical levels of earning growth?

    Dell may put Gateway out of business. But what comes next?  A goodly portion of Gateway’s high-margin sales will flow to Apple, not Dell. Dell will benefit from increased sales at Gateway’s expense, but many of Gateway’s customer that purchased more expensive machines in the past will take a close look at Apple products before looking at Dell’s products.

    Even if Dell is the primary beneficiary of Gateway’s misfortune in terms of boxes sold, Apple will continue to frustrate Dell’s efforts to attract the most profitable segment of Gateway’s retail customers. 

    Apple will most likely sell over 3 million iMacs this year. The new iMacs will appeal not only to the millions of Mac owners who still use pre-G3 machines, but also appeal to Wintel owners who may have passed on the iMac the first time around. The increased sales will add at least an additional billion dollars in sales to Apple’s financial statements this calendar year.

    Dell will sell more boxes and continue to grow in size, but bargain buyers are fickle. They buy based on price, not based on brand. This makes it difficult for Dell to raise prices and maintain high levels of sales growth in the consumer market.

    Apple realizes that grabbing market share based on price alone does nothing for the image or value of the brand nor does it create a long-term realtionship with the buyer.

    Apple needed only enough market share to maintain critical mass while it rebuilt its high-margin buiness. This was the genius stroke behind the move to a UNIX-based operating system.  The market for Windows software has become overcrowded. Mac OS X opens the door for UNIX programmers and developers to enter the consumer market.

    That means there are many more companies and thousands and thousands more people who have a unique interest in the well-building of Apple and the success of OS X. Not Dell, nor Gateway nor HP/Compaq can offer them that opportunity. Mac OS X becomes a growth industry for the UNIX developer community.

    Just think how Windows developers must feel about Apple now. For years they have denied us. But they can no longer ignore us. We’ve just opened the door and rolled out the red carpet for their brand new competitors

     

         
  • Posted: 11 January 2002 04:29 AM #23

    On 2002-01-10 21:04, Sydde wrote:

    Raena gagged:
    Dang. That was you that beat me to that damn cow!

    Bet it was chewy and stuff anyway.

    Indeed, it looks rather like a Holstein dairy cow (high milk volume, low cream, somehow appropos), certainly not good eatin’

     

    Lets just say that it aint too cool when your steer screams for mercy when you send him to slaughter.   

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  • Posted: 11 January 2002 08:24 AM #24

    On 2002-01-11 08:29, Retro wrote:

    On 2002-01-10 21:04, Sydde wrote:

    Raena gagged:
    Dang. That was you that beat me to that damn cow!

    Bet it was chewy and stuff anyway.

    Indeed, it looks rather like a Holstein dairy cow (high milk volume, low cream, somehow appropos), certainly not good eatin’

     

    Lets just say that it aint too cool when your steer screams for mercy when you send him to slaughter.   

    But like I said to my friend Raena, next time don’t just eat the cow, buy the darn farm! I think this is part of the problem. Cow-patterned boxes from a company now based outside of San Diego

         
  • Posted: 11 January 2002 03:07 PM #25

    c551e025d4]

    On 2002-01-11 02:28, DawnTreader wrote:

    In the 3rd calendar quarter Apple averaged just over 30% gross margins. It’s the envy of the computer business. Look at it from Dell’s perspective. Apple represents not only $6 billion in sales, but also $1.8 billion in gross margin. That’s a lof high-margin business and cash for the Wintel cartel to lose.

    Dell may put Gateway out of business. But what comes next?  A goodly portion of Gateway’s high-margin sales will flow to Apple, not Dell. Dell will benefit from increased sales at Gateway’s expense, but many of Gateway’s customer that purchased more expensive machines in the past will take a close look at Apple products before looking at Dell’s products.

    Even if Dell is the primary beneficiary of Gateway’s misfortune in terms of boxes sold, Apple will continue to frustrate Dell’s efforts to attract the most profitable segment of Gateway’s retail customers. 
    r.

    Dell will sell more boxes and continue to grow in size, but bargain buyers are fickle. They buy based on price, not based on brand. This makes it difficult for Dell to raise prices and maintain high levels of sales growth in the consumer market.

     

    Excellent points.  And think about this further:  IBM announced that it would no longer make desktops.  HP and Compaq may take each other out in a two for one.  Sony’s not going anywhere, of course.  But the loss of those competitors will allow Dell to start to make some higher margin sales.  they’ll try to make higher end machines, but ya know what?  Their rep is for bargain boxes.  It won’t be that easy to suddenly say “Now we’re making high end stuff” 

    And as their prices and margin go up, even that perceived price difference between Macs and PCs will evaporate…and more PC users will look at Macs.  Especially if they’re curious about Unix, and they find they can’t even BUY a PC without windows on it.

    I think we will start to see dribs and drabs of people coming over, but like the ol’ hole in the dam, each passing minute enlarges the leak…

    Until suddenly one day, Apple has accounted for 25% of the worldwide new computer sales, and the pundits go “huh?”

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  • Posted: 12 January 2002 04:54 AM #26

    thin margin ,high cost of tech support, high rents,bag of air inventory,
    highly sopisticated logo,no demo units gee… what’s not to like?

    <font size=-1>[ This Message was edited by: otaojones on 2002-01-12 08:54 ]</font>

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  • Posted: 12 January 2002 09:00 AM #27

    On 2002-01-12 08:54, otaojones wrote:
    thin margin ,high cost of tech support, high rents,bag of air inventory,
    highly sopisticated logo,no demo units gee… what’s not to like?

    <font size=-1>[ This Message was edited by: otaojones on 2002-01-12 08:54 ]</font>

    Don’t mince words! How do you really feel?

         
  • Posted: 14 January 2002 07:22 AM #28

    On 2002-01-11 00:22, coaten wrote:

    The prices on the machines looked attractive until you realised what needed to be added on to make the machines functional. A base model, for instance, would have no modem, firewire card, Zip drive, etc.

    ...With a Mac, you buy a fully functional machine. It’s all

    Actually, I have no need for firewire or a Zip drive (which I do not believe is standard on the iMac).  Having the modem standard seems logical, but maybe the next guy does not need it.  I like choosing my video adapter, deleting the sound card, adding a CDRW, etc.  That is one of the main reasons I am on the PC platform.  I don’t need to be paying for technology I do not need, like another monitor, when I already have a 21” Trinitron that I am very happy with.

    I think Mac products appeal to a very specific market segment.  Expanding beyond this is not a bad idea, but continuing to be the best solution for that segment is the key to Apple’s success.  I, unfortunately, am not in that segment.

         
  • Posted: 14 January 2002 08:18 AM #29

    On 2002-01-14 11:22, Anonymous wrote:

    I think Mac products appeal to a very specific market segment.  Expanding beyond this is not a bad idea, but continuing to be the best solution for that segment is the key to Apple’s success.  I, unfortunately, am not in that segment.

    Be patient, my friend Evenutally we’ll get you. Maybe not with the today’s models, but with tomorrow’s innovative ideas made reality.

         
  • Posted: 14 January 2002 11:07 AM #30

    Be patient, my friend Evenutally we’ll get you. Maybe not with the today’s models, but with tomorrow’s innovative ideas made reality.

    Didn’t realize I posted anonymously.

    There is some real innovation there, just not suited to my needs yet.  It is good to have companies pushing the envelope, regardless of the platform.  Mac users seem to refuse to recognize any innovation anywhere else.  Those who live in glass houses, built by Xerox PARC, should at least be more careful when throwing stones. 

    There are also some very questionable business practices that brought some serious scrutiny when done at Microsoft.  iPhoto smacks of Internet Explorer to me.

    I love the new iMac design.  Now that I do not play games, it really does run all of the software I want.  But, the innovations I want are screens that rotate from landscape to portrait, 360 degrees actually, so I can hang it under the kitchen counter, dumb terminals, so I don’t have to buy a $2000 machine for every room, a card reader so I can easily load images and music from multiple sources and wireless connectivity to electronic picture frames all around my house, etc.  Otherwise, my PC will be fine.