Monday, October 18, 2010

You can't make money losing $10 per unit

If you count an iPad as a computer, Apple is now the #1 US computer maker. I would tend to agree with the idea: with iWork and a bluetooth keyboard, the iPad is now enough computer for most people.

Dell and HP dumped $400 crap on the market, and now they're paying for it. Dell and HP have reached the WalMart point: they can no longer undercut their competitors and drive them out of business. WalMart is now facing profitability issues, with Aldi and Krogers being very competitive here (and Meijers even pushing them hard).

Dell and HP are now stuck fighting it out in the junk market. Intel servers are now a commodity market, with IBM squeezing them on both the Intel and Power fronts. On a deal I saw, Intel had to basically tape money to the side of the Dell hardware to even get close to underpricing IBM Power7 hardware running DB2.

Apple chose to skip the under $1000 computer market, until it could release the iPad. Now it has the iPad and iPod touch in those markets, and both make money instantly. Instead of having a lineup where most of your sales lose money, Apple makes money everywhere. (For several years, Dell was a financing company paid by Intel to ship money-losing computers.)

The current stock valuations are insane. I wouldn't short Apple (the market can stay insane much longer than you can stay solvent), but a cheap put or 3 might make money. I wouldn't be terribly surprised if the Greater Depression 2.0 took Dell out completely.

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