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How can Apple be worth more than Dell?

updated 08:55 pm EST, Fri January 20, 2006

Apple vs. Dell redux

Despite the enormous size of Dell, Apple's growth possibilities, tantalizing to investors, are probably the reason it has surpassed Dell's marketcap. A new BusinessWeek blog posting looks at How can Apple be worth more than Dell?, concluding that Dell is limited by its size, while Apple can achieve growth with relatively quickly: "But if you don't have big honking growth markets waiting to be harvested, size can be a heavy anchor indeed. The math is simple. To deliver 15% growth in the upcoming year, $55 billion-a-year Dell has to find $8.25 billion in extra sales. But Apple, at $13.9 billion in overall sales, would have to find just $2 billion....So if Apple gains a point of market share this year--not a pipe dream by any means, especially given the Intel transition--Jobs & Co. will have already found the fuel for that 15% revenue growth year. And that's without any iPod sales growth."

by MacNN Staff





  1. theKiwi

    Joined: Dec 1969


    It's not real money

    Apple can be worth more than Dell for the same reasons that Google is worth more than GM - they're reasons that I simply don't even begin to understand, but there you have it - a company with a few thousand employees producing nothing "tangible" is worth more than a company with a few hundred thousand employees that produces actual real things in actual real factories.



  1. Foe Hammer

    Joined: Dec 1969


    News How?

    Apple's always been worth more than Dell.

    It's just that Apple was only recently able to include marketcap in the long list of reasons why they're worth more than Dell.

  1. climacs

    Joined: Dec 1969


    psychology of the market

    the market is always trying to be ahead of the current reality.

    Why? Because if you have a crystal ball, you'll make more money than those who don't.

    And if my crystal ball is better than yours, I'll make more money than you.

    The future for Apple, in the eyes of investors, is much brighter than Dell's, growth-wise.

    That's why Apple is, on paper, worth much more than it seems reasonable to value it at. Expectations of future growth are factored in. If, relatively speaking, Apple doesn't meet those expectations (even if Apple does well in absolute terms), AAPL will come down. OTOH if Apple exceeds even those rosy expectations, AAPL will continue to rise.

    Market psychology 101.

    I bought at $19 pre-split. Kicking myself for not buying Pixar a few months back at $42, however...

  1. bigdawgh_11104

    Joined: Dec 1969



    dell is a commidity player. it sells nothing of added value. apple's products are all about added value much as Google's products are. adding value to one's work, productivity, or potential is what will drive capitalization

  1. Peter Bonte

    Joined: Dec 1969



    Dell is not much more than a small amazon selling dull little boxes, besides price and a good webstore there is no added value. How much good patents has it?

    Dell can't grow much thus making the stock not very interesting, Apple is on the verge of a big turnaround making it a wanted stock.

  1. itguy05

    Joined: Dec 1969


    Dell's price isn't good

    Their prices are not cheap either. Most companies can and do undercut Dell for better computers. When I was in the business of PC building, it was quite easy to undercut Dell by $50-100, deliver a superior machine, and have profit of $50-100.

    Do a little web surfing - compare a Dell to an Apple - remember to do a like for like. You will see Dell is about $50-100 cheaper than Apple. Not a big deal on a $1k-2k purchase.

    Dell likes to bottom-feed. And their computers are definitely the bottom of the barrel.

  1. freakboy2

    Joined: Dec 1969


    nobody has mentioned

    profits drive a stock price, not revenue.

    That's why apple and google are kicking butt right now. if you have revenue of 5 billion on 6 billion in sales, that's a better business than one that makes 1 billion on 60 billion in sales or like gm loses 5 billion on 200 billion in sales.

    it's the profits that matter.

  1. zachmanx

    Joined: Dec 1969



    I'm sorry, but can I just take a moment and ask how so many editors let c*** like this slide?

    "...while Apple can achieve growth with relatively quickly..."

    Hire a few more English majors. Intelligence, my anti-drug.

  1. kw99

    Joined: Dec 1969


    Not any more...

    Since that article was written, Apple's market cap has backed off to about $64B, while Dell is still at about $70B.

    Just goes to show that market cap is just one measure of how much a company is worth. Apple has always been "more valuable" to me then Dell, even back when they were "beleaguered."

  1. corsair

    Joined: Dec 1969


    A basic explanation

    Apple is "worth more" than Dell only in terms of market capitalization, or how much value shareholders have assigned to the shares. Value is extremely negotiable, like a popularity contest or a presidential election. It does not matter so much what the companies are actually doing, what matters is what the public/shareholders believe they are doing or will do. You can tell by the price/earnings ratio that Apple shareholders have a certain faith in how far ahead Apple can keep it up. In other words, today's share price already has an assumed amount of future growth factored into it. If you buy Apple stock today and Apple achieves the growth assumed by its current ridiculous price/earnings ratio, you win. If Apple does not achieve the growth it must achieve to justify its current ridiculous price/earnings ratio, you lose.

    My fellow Mac users are loving this moment of seeming to be "bigger than Dell," because they don't realize that high market cap, like Google's or eBay's, can sometimes mean the stock is way overvalued given current numbers, meaning it will take you longer to recoup your investment than if you had bought a lesser-known stock with a more sustainable growth curve.

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