apple inc nasdaqgs aapl and dell inc nasdaqgs dell engage in the design manufacture 599664

• Apple Inc. (NasdaqGS: AAPL) and Dell Inc. (NasdaqGS: DELL) engage in the design, manufacture, and sale of computer hardware and related products and services. Selected financial data for 2007 through 2009 for these two competitors follow here. Apple’s fiscal year (FY) ends on the final Saturday in September (for example, FY2009 ended on 26 September 2009). Dell’s fiscal year ends on the Friday nearest 31 January (for example, FY2009 ended on 29 January 2010 and FY2007 ended on 1 February 2008).

Apple reported a 53 percent increase in net sales from FY2007 to FY2008 and a further increase in FY2009 of approximately 14 percent. Gross margin increased 62 percent from FY2007 to FY2008 and increased 30 percent from FY2008 to FY2009. From FY2007 to FY2009, the gross margin more than doubled. Also, the company’s operating income almost tripled over the three-year period. From FY2007 to 2009, Dell reported a decrease in sales, gross margin, and operating income.

What caused Apple’s dramatic growth in sales and operating income and Dell’s comparatively sluggish performance? One of the most important factors was the introduction of innovative and stylish products, the linkages with iTunes, and expansion of the distinctive Apple stores. Among the company’s most important and most successful new products was the iPhone. Apple’s 2009 10-K indicates that iPhone unit sales grew 78 percent from 11.6 million units in 2008 to 20.7 million units in 2009. By 2009, the company’s revenues from iPhones and related services had grown to $13.0 billion and were nearly as large as the company’s $13.8 billion revenues from sales of Mac computers. The new products and linkages among the products not only increased demand but also increased the potential for higher pricing. As a result, gross profit margins and operating profit margins increased over the period because costs did not increase at the same pace as sales. Moreover, the company’s products revolutionized the delivery channel for music and video. The financial results reflect a successful execution of the company’s strategy to deliver integrated, innovative products by controlling the design and development of both hardware and software.

Dell continued to concentrate in the personal computer market, which arguably is in the market maturity stage of the product life cycle. Dell’s results are consistent with a market maturity stage where industry sales level off and competition increases so that industry profits decline. With increased competition, some companies cannot compete and drop out of the market.