Dell Macs
This is pure speculation. No inside info, no rumor. I was looking in the tea leaves and they said “Non-Apple Macs”. Oh wow! I’m so clever! Only like the three millionth person to predict that since the Intel announcement. (There now I’ve saved you the trouble of flaming me). But I do have a new idea to throw into the mix, so bear with me.
So hey, let’s look again at those tea leaves. Lets see if there’s any bits of jigsaw been left lying around.
Hardware or software?
It has been argued before whether Apple are a hardware or software company. The answer’s easy of course. Software. It is OS X that defines the Apple computing experience, not the Macs themselves. Look at it this way (and we will get the chance soon): If you ran a different OS on a Mac would you still think Macs were the best computer out there? Vice-versa, if you ran OS X on a x86 noname clone, would it still be almost as good as a real Mac? Certainly, the best combination is a Mac running OS X but we’ve had clones before and some of them stacked up okay - and Apple didn’t fall over.
Apple is without a doubt, first and foremost, a software company. Even the iPod is highly regarded for it’s user interface.
It’s quite possible that if Apple could find a viable alternative to making Macs themselves, they might consider it. And with the impending switch to Intel Macs, the options are greatly enhanced.
Reading the headlines
If Apple were to get someone else to build their Intel Macs, it would firstly be a company with enough clout to get excellent pricing on components, and a company with a long history of building Intel PCs. HP? Dell? These spring to mind. But lets look at a few headlines that have caught my eye recently:
From eWeek: Dell Sales Hit a Snag
For the first time since 2001, Dell missed analyst expectations in both the second and third quarters, forcing it to revamp part of its PC business and lay off about 1,000 employees.
The report lists some things Dell needs to do, including forging more partnerships, although Apple aren’t mentioned as a possible partner. So it’s probable that Dell would consider all possibilities, especially in light of the next headline.
From InfoWorld: Mac OS on a Dell? Dell in favor, Apple opposed
If Apple Computer ever decides to let its Mac OS X operating system outside of its confines, the company can count Dell founder and Chairman Michael Dell as a possible customer.
With the recent news that Apple plans to become a fellow customer of Intel (Profile, Products, Articles) for x86 processors, Dell has expressed interest in selling Mac OS X-based PCs, he said in an e-mail to Fortune published on the magazine’s Web site Thursday.
“If Apple decides to open the Mac OS to others, we would be happy to offer it to our customers,” Dell wrote in the e-mail.
Apple, however, is not keen on striking a deal with the world’s largest PC vendor.
“Mac OS X will only run on Macs. Apple has no plans to sell Mac OS X software to run on PCs,” an Apple spokeswoman said in an e-mail response to questions about Dell
Of course, Apple never reveasl their plans, so their denial is hardly worth the paper it could be printed on.
And from Digital Media Thoughts: Is the Dell/Microsoft Alliance Fracturing?
Recently, two things have made the news where Dell is not toeing the Microsoft line. First, was the announcement that Dell is trying out shipping desktop and notebook PCs in the UK with Firefox as the default browser, instead of IE. Today we have news that Dell is not going to support HD-DVD, despite reported incentives that recently induced HP to do so.
Dell have been supporters of Blu-ray for quite a while but the Firefox experiment does seem to be a toe in the water for looking beyond Microsoft. It also smells of “When your browser screws up the security and causes problems on the computers, the customer blames us, Dell, not you, Microsoft. It’s our tech support who have to take the call.”
So with their ties with Microsoft loosened, might Dell embrace Apple?
Dell Macs?
Now, armed with these tidbits, what do the tea leaves say about the upcoming Intel Macs?
a) Apple will stop selling Macs totally and Dell will sell them instead? Pfft! Nigh on impossible. The Mac stores - online and retail - would look somewhat silly without Macs but still with all the software and accessories. Even though hardware is not Apple’s core, it is dependent on it to maintain their image, credibility and standing in the marketplace.
b) Dell to become the manufacturer of Macs for themselves and Apple to sell? Reasonably possible. Apple sold about 1.2 million computers in it’s last reported quarter, and Dell around 9 million. That’s a lot leverage for Apple. Imagine Mr Corporate IT Manager jumping onto Dell’s website, or opening their brochures, and seeing Macs? Suddenly Macs would be in his line of sight. Dell could give Macs excellent exposure and credibility.
c) It’s time to take your medication Chris and go back to your room with the nice padding.
I know, I know, you’re all saying “c” but I’m saying “b”. I’m speculating that Apple just might outsource the manufacture of Macs to their former rival, Dell plus let them sell them. Unlike the last time though, these won’t be clones and Dell won’t be able to make up their own configuration. Whether you buy a Mac from Apple or a Mac from Dell, they will be the same machine.
Never say never
2005 was meant to be the Year of High Definition Video but turned out instead to be The Year of Anything’s Possible. We saw flash based iPods, a Mac under $500, a multi-button mouse, a video iPod and of course, the Intel switch. All at various times we were led to believe would never happen.
The idea that Apple would team up with Dell may seem far fetched and is pure conjecture, but we live in interesting times, and we should have learned now, to never say never.
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Comments
So, your saying dell might make some macs in the same way HP made some iPods?
Did HP make those iPods? Or just get special ones from Apple? I think it was the latter.
I’m saying Dell would build the Macs and both Apple and Dell would sell them.
Your reading of the role/place of software in Apple’s world is somewhat right and wrong. Where it’s correct is in the fact that the defining experience for an Apple user is one’s interface with the software/OS. This is what makes an Apple and Apple, whether it runs OSX or one of the previous versions of the Apple OS, and regardless of whether it uses an 860x0 chip, a 60x powerpc chip, or a Gx power pc chip. On the other hand, the success of the software is directly tied to its extremely tight integration with a single platfform, as we all know.
Moreover, and here’s where your argument is incorrect, hardware counts for a very large percentage of Apple’s profits. You can easily see this when you walk into an Apple store. Take a look at the price of OSX, and take a look at the price of the least expensive iBook. The margins that one can take out of the price of OSX are a lot smaller than those that one can take out of an inexpensive iBook. I don’t see Apple leaving the hardware business anytime soon as long as they can take margins that are well above the industry average. It doesn’t make any sense at all.
Your reading of what happened the last time Apple went the clone route is also somewhat flawed. When Apple went the clone route the thought was that the clone manufacturers would make low-end PC-like boxes that ran the Apple OS, and that Apple would eventually concentrate on the high-end products, where all the best margins are at. This was a huge error, and it wasn’t long before the clone makers were making high-end products that quickly began to cannibalize Apple’s market share. This is, in the end, why Apple cancelled the clone project--they were having their lunch eaten by the clone manufacturers, and had this continued they would have been seriously close to losing their share of the hardware market, and thus their chance at the high margins that their profits have and continue to enjoy.
About scenario B: Apple already out-sources their manufacturing to highly efficient companies located in Asia. The move to the Intel platform will allow both Apple and their manufacturing partners to enjoy greater efficiencies of scale and scope, and thus for Apple to either lower the price of their machines, or keep the price the same and temporarily enjoy much greater margins than normal.
Switching to Dell as a manufacturing partner in your scenario doesn’t make sense. Were Dell to sell Mac machines under its own branding the lion’s share of the profits would go to Dell, while some form of licensing fee would go to Apple. Dell, seeing an opportunity to manufacture a line of high-end machines for a market that expexts and purchases high-end machines would mean that the margins that Apple enjoys would certainly start to diminish, and I don’t see why Apple would want that to happen.
Postualting an agreement where Dell would manufacture and retail mac clones according to a strict limit on both hardware and pricing options would be a serious detriment to Dell’s ability to generate the higher margins that it needs, and thus unlikely from Dell’s perspective. Allowing Dell to build any type of mac clone (low end, high end, middle) would simply subject Apple to a price war, something that would not help the company at all.
I’m sure that Steve Jobs would love to multiply his market share. I’m also sure that he won’t do that at the expense of the company’s margins. He’s seen what that can do to Apple and what that has done to the PC industry, where even Dell has trouble generating anything resembling a high profit. I don’t think that he wants to go there, and that he’ll be perfectly happy to sell fewer machines as long as he can make a much higher profit on each one that he sells.
In the end, this is just another one in a long line of articles on this site that are nothing more than speculative drivel with very little actual analysis of where/how/when a company makes profits and what they are likely to do in light of how they make their profits.
Actually outsourcing manufacturing to Dell makes some sense. If Dell can’t keep the production lines full making Dells why not make Macs? It’s just another contract manufacturer. If Dell came in with the lowest bid Apple would do it in a second.
Allowing Dell to sell Macs on their website makes sense too. I’m sure apple would love it, they didn’t mind when Dell sold the iPod after all. I douobt Dell would so amenable to the idea. Every Mac they sell would likely have a much slimmer margin than they get for every Dell they sell cause they’ll have to kick back a healthy chunk to Apple and they won’t be able to undercut other sources for Macs.Plus, you’ve got the whole head to head comparison deal. Dell’s might look so hot if spec’d directly against Macs.
I’m sure Apple would love the arrangement but Dell, not so much.
And rogueproof I’m fairly certain that the margin on OS X is much higher than the margin on any iBook, mini, PowerMac etc. Software typically has a huge margin, whereas hardware runs (for Apple) slightly below 25%. I think you’re thinking of revenue.
> Take a look at the price of OSX, and take a look at the price of the least expensive iBook. The margins that one can take out of the price of OSX are a lot smaller than those that one can take out of an inexpensive iBook.
rogueprof, that’s completely backwards. Profits on software are *far higher* than profits on hardware.
Apple is a solutions company. They produce well-designed solutions to technical problems. Software and hardware are both their delivery mechanisms.
Would the iPod be just as cool without the hardware? Would the Mac OS mean much if installing any new hardware or expansion was a pain in the butt?
On the day where everything is standardized enough that the hardware could be completely abstracted from the software and offer the same integration Apple does, innovation will really have died.
Why am I seeing this *again*, I mean didn’t we discuss the matter of Apple products being the *whole* of hard- & software *combined* to excess last year?
For everything else: It will be as it pleases Steve to be. As always.
Rogueprof,
Your analysis of Chris Howards article was pretty insightful. However, even Chris himself admitted that this was just speculation, something that he thinks could happen or maybe is not opposed to happening. To insult the man in his own home and call the article “drivel” is very disrespectful and a bit snobbish.
There are things that all Mac users would like Apple to do to increase it’s market share and attract newer users. In many respects, I agree with Chris: The soul of Apple is its’ software. Without OS X or it’s Pro and Economic line of creative content software, an iMac, a PowerMac hell even a MacMini on the INSIDE IS NO DIFFERENT FROM ANY OTHER COMPUTER ON THE INSIDE. Sure, the outside styling and the durabillity of the casing is great, but really these are things that other computer makers could achieve if they put more time and effort into their designs. No the key has been and will continue to be great software and the nucleus of that software is OS X and it’s future siblings.
Let’s consider this for a moment. Steve Jobs, when questioned, has admitted that OS X 10.5 will be able to run on non-Apple hardware, but that Apple won’t support it. Now, ever since the Intel development machines have been out, people have been testing tiger to see if they can get it to run on x86 machines now. And we can see that it does. And you know that dell has more than likely had there engineers testing to see how well OS X runs on their machines now: Why else would Micheal Dell come out puiblicly and say that he would be willing to sell Dells with OS X as the OS? He knows that it works and save for a few programs that don’t run on SSE2 chips, that it pretty much works flawlessly. So I’m betting that Dell will likely want to ship start shipping units with the option of using either Windows or OS X 10.5 when it’s released.
“Yeah, but what about licensing lawsuits from Apple when they do try that?” Hold your horses, I’m getting to that. As I already pointed out, Apple knows that when 10.5 ships, people across the country are going to be loading it up on their non-Apple hardware. He doesn’t care: He already said that Apple won’t support it meaning “Attempt at your own risk: If it works out for you cool, consider buying an iMac. But if it doesn’t, well that’s on you.” already at this point in the game, anyone can walk into any Apple store and purchase OS X and use it for whatever because Apple doesn’t require a license or registration. So what will Steve Jobs do to compensate for the thousands of IT managers and college geeks that will be snapping up OS X 10.5 to load onto their x86 machine? He’ll likely RAISE THE PRICE OF OS X from this point forward.
Now, before you all start complaining, let’s think for a minute: Mac users have always enjoyed the second best way of gaining access to a great OS (I say second best because Linux is free...). Now we pay $129 per copy of OS X. If Apple raised the price of OS X to say $150 or even $200, it would still be cheaper than M$ Windows. And for Apple that’s a good thing. Think about this. Good profit on it’s hardware, greater profit on it’s software. Apple starts marketing Registration of products for it core stable of users who would receive a discount on software purchases, so that it can better see which group of buyers is larger. We already pay extra for customer support: Apple might consider a paid customer support program for its Pro line of software for users of non-Apple hardware. Ofcourse, this program would come with stipulations and probably not be as free ranging as current Apple users are used to, but hey one more stream of revenue for Apple. And let’s face it: While Apple is concerned with great user experience, they are first and foremost a company and the business of a company is to make money. This (hopefully fulfilled) vision of Apple will have them running to the bank: Steve would be first in line to cash his $1 per year check.
And what about Dell you ask? Of course, they’d offer OS X as an option to its’ customer base and happily so. This time when the customer support calls come in, it’ll be to schedule replacing their DVD burner with a Blu-Ray buner.
2 reasons you will never see this:
1) SJ is very protective of the ‘Apple’ brand
2) The corporate world buys Dells by the boatload for 2 reasons ... they are percieved to be ‘cheap’ and they run Windows ... which the corporate world is dependent on (whether they like it or not).
Honestly, at this point, I think Apple is not even concerned with the corporate customer ... they are targeting the home user ... maybe down the road they will target larger businesses.
I fail to see why this question of whether Apple is a hardware or software company continues to engage people. I fail also to see why it’s such a fertile debate and that people choose one or the other. Apple is NOT a software company. And Apple is NOT a hardware company.
Apple is both.
Now, really, why is this so hard to figure out, and why will we see yet another article a year from now expounding on this dreary subject?
To me Apple is a total environment. It’s easily seen in the iPod - the total environment is the iPod itself, iTunes software and the Tunes Store.
The same with computers. Hardware tied to the OS, a wide range of apps (like iLife and pro apps) and now Apple Stores as well as the online store. Delivering the total environment has delivered profits and a huge stash of cash for Apple.
While Apple has already outsourced the assembly of components they have designed and engineered those components - especially the visible ones - to set Macs apart from the PC world, and they have done a very good job in this area. Their outsourcing program can allow for gearing up additional production as their market share increases. The don’t have to invest in their own production facilities for increases (or decreases) in demand.
The other key is customer support. Dell used to be excellent in this area - local Dell employees that were aggressive in taking care of you. Then they went cheap. Now an outside company handles their support and it was bad enough for me to dump the last Dell in the office (which cost as much as an iMac) and make the final, total move to Macs. Dell can’t handle customer support at the level Apple is providing its customers and that is one reason why things are slowing down over there.
Finally, it’s time to forget market share. Look at sales growth over the previous year, look at profitability and look and the security provided by their cash holdings. That’s what counts. If you don’t think so then talk to the good folks at GM or Ford..
Apple is on a roll and the are growing at a rate that can be controlled pretty well - except when a new product is announced and the response is greater than the most optimistic projections. Let’s keep it that way. There are too many good things coming to change it.
viperteq,
uhm, did you ever actually peer inside a PowerMac, a Mac mini, an iMac G5… any Mac? Please do so. Then please come back and report which other computers you have found to be like it. Of course, you will find the same components, more or less. Processors, RAM… but Apple Design is not just skin-deep, be assured.
Quite so.
I like the booga’s description best: Apple is a solutions company.
It is an _engineering_ company. And one tied strongly (under Jobs’s influence) to brand. Past executive decisions re liscencing are not valid as premises because this occurred Sans Steve, and any shmuck can see that it is absolutely counter to His vision.
Noticing how pissed off people have got at this article, I’d have to advise not writing much further on the sincerely tired software/hardware argument!
I never found your quote of Dell’s particularly important. “If apple sells OSX for Intel, we want to offer it on our machines”. That doesn’t say anything about them liking the idea etc - simply that Dell wants to sell any product out there that runs on their machines.
As for outsourcing - Apple does this largely already. As someone said, using Intel may make construction cheaper (perhaps offset by the higher CPU costs for Intel?)
Personally I think Apple would do well to release OSX for HP and/or Dell. They would have a restricted set of machines to develop from, and that set would cover a large portion of the market. Apple can charge more for OSX to these users if they want - but if so I hope that they keep a $129 “upgrade” cost for anyone who already bought the last version (which includes all Mac users)
I’m really surprised how many people were distracted by the “Is Apple hardware or software?” It was just one point in the article to support my speculation but the article would have stood on its own with the HW/SW comment.
The gist is, (whether or not Apple are HW or SW), there is sufficient news fodder - no matter how thin - to speculate that Apple could licence Dell to manufacture and sell Macs.