Rotten Apples

Today, the financial press is abuzz with this: 

By now, everyone knows that Apple had a blowout quarter: Q1FY12 sales of $46.33 billion, profits of $13.1 billion, with gross margins of 45%, translates into EPS of $13.87.

Michael Dell once famously said of APple, when Apple was down thought on its way out: 

“I’d shut it down and give the money back to the shareholders.”

Interestingly, when faced with their own stretch of trouble, Dell decided they needed to cut costs — Amsterdam’s favorite strategy — which according to this Harvard Business Review article is “Dell’s Cost Cutting Is Not a Growth Strategy:

Can you make a growth strategy out of massively slashing costs? No? Are you sure? Better tell Michael Dell then, because reaching Dell’s stated goal of slashing $3 billion in annual expenses over three years seems to be the once-ambitious computer maker’s primary obsession.

Here’s the funny thing: today Apple is worth 13x more than Dell in market cap.

So what’s the lesson: strategy matters and growth matters. Plus a vision, a lot of innovation, risk taking and as always, a bit of good fortune helps too.Apple chose not to cut its way out of its difficulty; it chose a radically different strategy as, like the article said, cost cutting is not an effective strategy.

But don’t tell the demolitionists or the penny-watchers in the 12010 — we just need to cut, cut, cut and raze, raze, raze.

I think I can see how this is going to play out for us.

[Quickly scanning out-of-town real estate listings on his iPhone]


One thought on “Rotten Apples

  1. You lost me on the apple thing, I did not even bother to read down to the Amsterdam thing until I was fishing for something on the blogs and decided I better read it all after a week, I understand your thinking, but that is always a hard sell.

Comments are closed.