In 1997, Apple's product line had turned to mush. The Macintosh operating system was showing bruises. In response, Apple's stock dropping to almost $10 a share. At that point, Michael Dell, founder and CEO of Dell Computers provided a terrific piece of advice. The historic money quote:
I'd shut (Apple) down and give the money back to the shareholders.
In short order, Microsoft invested (loaned? donated?) $150 million in Apple. The company drastically paired its product lines to four, established a good-better-best approach to pricing, and later, launched the Macintosh OS X operating system. This produce revolutionized and re-invigorated Apple's sales and stock price. The next 15 years or so have proved fruitful for Apple.
At Dell, the same time frame has been marked by lurching from one idea to the next in an effort to escape the low-cost, low margin, high volume market that Dell made famous. The company has tried several concepts, including:
- new hardware market offerings including printers, monitors and televisions, and miniframes;
- bought a competitor (Alienware) to move the product line up market;
- new markets such as enterprise;
- offered value-added market offerings including storage and IT systems.
Nothing has reversed its financial performance though despite trying every quadrant of the Ansoff strategy matrix.
Indeed, a sort of popular television advertisements could not improve Dell's financial performance.
Now, having tried almost every idea known to a consultant armed with an MBA, Dell appears to be taking his advice. At some point in the next month or so, he will take Dell's cash horde along with additional borrowed cash and return it to the stockholders.
It has been whispered that Microsoft is adding some of its cash to Dell's borrowed cash.
Yes, Michael Dell will heed Michael Dell's advice. He will take the company private and give the stockholders some realized value.
The move, though, solves nothing for Dell computer. The company has shown it cannot launch a new market offering. Its brand cannot be extended. The product line cannot be extended. The margins cannot get bigger.
In October 1997, when Michael Dell gave his historical money quote, Dell's stock closed at roughly $100. Apple ended 1997 at roughly $12. Nearly 15 years later, Apple ended January with a stock price at $455.49 while Dell finished January at $13.24. Perhaps karma should be included in the process model of competition.