Apple and Dell Merger?
Friday, March 31st, 2006Is there an Apple/Dell merger in the near future? Although they have comparable market caps (approximately 55B and 70B respectively), most people would probably say no…why would Apple want to lose the premium they get from selling hardware? What would Dell gain out of the deal?
But I am not so sure that it would be a bad fit. The thing is, Apple is rapidly becoming a content company. Sure, they make a tidy profit on hardware sales such as their award-winning laptops and iPods, but their future lies in content distribution (iTunes, etc) and making world-class, easy-to-use software (Mac OS X, iLife, iWork, etc).
Now, Apple’s problem is that despite their raging popularity in the social sphere, they have yet to break into the business market. In fact, their worldwide PC market share over the last 10 years has declined significantly. This is where Dell comes in: they are tired of being tied hand and foot to Microsoft and would love to find an alternative Operating System and Productivity Suite.
Dell is the king of selling business machines. This is exactly the market segment where Apple has failed to make inroads (and a big segment at that!). Now, combine Dell’s powerful distribution channel and distaste for the Microsoft monopoly with Apple’s legendary software and desire for the business market and you have a perfect match.
There are a number of other factors which make this a good deal. The first is that Dell controls their own hardware. Apple’s software requires good control over the PC hardware to provide a seamless, headache-free user experience. Most often, this is voiced as “it just works” on a Mac.
The second factor is that Apple is currently making the switch of their entire codebase to Intel x86 hardware. This transition is somewhat painful, but will eventually lower the adoption barrier if they ever did want to work with Dell. In fact, hacked versions of Mac OS X run almost perfectly on modern Dell machines.
The third factor is that the next version of OS X (Leapord) will likely have the ability to run Windows applications natively without the need for Microsoft. My guess is that Apple intends to achieve this through some enhanced derivative of Wine. Having direct application compatibility would be critical for Dell to support its existing customer base while still being able to transition them to a new operating system.
Finally, if Sun and Google get together, it will add a serious new challenger to the PC market. Both Apple and Dell will need the support of each other if they are going to try and fight against this sort of competition.
The biggest negative in my mind is that it would be highly unlikely for both Michael Dell and Steve Jobs to enjoy holding the reins together. Something would have to give for a merger of the two companies to go through. Perhaps then we will not see a full merger, but rather we will see a strategic partnership where Dell sells business PC’s and servers running ‘Mac OS X Business Edition’ complete with the iWork productivity suite. Meanwhile, Apple still sells their hardware to the consumer market and tries to build the next-generation software needed to take on Google.