Another Ill-Informed Journalist Says Dell Is The Only Profitable PC Company
by , 8:00 AM EDT, October 10th, 2001
We missed this in the excitement of last week's Mac OS X 10.1 release, but Observer Nick McGhie was a tad more observant. An article about Dell's financial fortunes last week once again dissed Apple. Dell met with analysts last week in an attempt to explain how falling profits and gross margins were a good thing in the face of slowing PC sales across the industry. Analysts ate it up, and in an AP article, Dell was said to be the only company making profits from the sale of PCs. The fact that Apple is also profiting from the sale of PCs apparently didn't matter. From that article:
Dell has not given a formal forecast for either the third or fourth quarters, but [Dell vice president Kevin] Rollins said in an interview with The Associated Press that Dell could get a boost from strong computer sales to government in the third quarter, typically a government-driven quarter.
The company replaced 10,000 computer systems just in the first two days after the attacks on the Pentagon and World Trade Centers, Rollins said.
Dell plans to continue slashing prices to gain market share even though it has hurt profits. Dell is the only company making money on PC sales.
In late August, a BusinessWeek article also made the mistake of saying that Dell was the only profitable PC company. That article was corrected to say that Dell was the only profitable company besides Apple to profit after The Mac Observer reported the slight. You can read more about Dell's guidance in the full AP article:
Thanks to Observer Nick McGhie for alerting us to the AP article.
Now let's dive into the love affair that the mainstream press and financial analysts have with Dell. The company is single-handedly destroying the PC industry (the Wintel PC industry in this case), and its own profits in its quest for market share. Consumers benefit in the short run from the falling prices, but in the end, no one but Dell will benefit fro the dearth of competition. To be fair to Dell, this could mean good things for the company's profits eventually, but the reality is that Wintel PCs are not likely to recover from the devaluation they are suffering from Dell's leadership. When all is said and done, Dell will be one of only a couple of monstrously large PC companies trying to figure out what happened to its profits.
This doesn't just impact Dell either as falling PC prices will eventually take their toll on Apple as well. Apple has consistently been able to maintain its gross margins in the face of falling Wintel prices (some say they have done so too well), but the Dell piper will eventually have to be paid. We think it safe to say that most Mac users would love for prices to fall, but most of us also want Apple to remain a profitable company. If the past 4 years is any indication, Apple will find a way to remain profitable while bowing to the inevitable. As long as they do so, it would be nice if mainstream journalists could get the facts straight and include Apple when they talk about profitable PC companies.