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The U.S. Personal Computer Industry: Analysis, Competition, and Future Considerations

This article provides a comprehensive analysis of the U.S. personal computer industry, including an overview of the industry, competition among major companies like Dell, Apple, and HP, market trends, key success factors, and future considerations. It also discusses the financials and stock performance of Dell and Apple and offers a recommendation for investors.

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The U.S. Personal Computer Industry: Analysis, Competition, and Future Considerations

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  1. The U.S. Personal Computer Industry Abdul-hadi Hamid Dan Dan Liu David Ng Lisa Berladyn Maya Rajani

  2. Agenda • Industry Analysis • Dell Inc. • Apple Computer, Inc. • Hewlett-Packard Company • Summary

  3. Industry Analysis I

  4. Overview • 1980’s • 1990’s • After the Tech Boom

  5. Nasdaq Computer Index:

  6. Dow Jones Computer Index

  7. S&P500 v.s. Computer Industry

  8. World Wide PC Sales ( in millions)

  9. US PC Unit Sales ( in millions)

  10. Geographic PC Sales ( in thousands)

  11. 2002 PC Sales

  12. World Wide Industry Growth

  13. US Growth

  14. Business Models • Big Box Stores vs. J.I.T. delivery • Continuous Innovation • Cost Leadership • Differentiation • Own Brand Retail stores • Consulting • Stripped Service – White Boxes

  15. Industry Analysis II

  16. PC Life Cycle • Computer industry is mature – customers want convenience and value for their money • The need for speed has tapered off • Software is at a much higher level than it was 5 years ago • Market for second hand machines (Ebay) • Replacement cycle changed from every 2-3 years to every 5 years • Machines upgradeable

  17. Market Competition • Transfer in demand drivers for PC components From To • Microprocessor - Wireless • OS - Mobile Entertainment • Memory • Inventory Risks • Product life cycle • Narrowing price gap

  18. 2003 Worldwide Market Share

  19. 2003 US Market Share

  20. Key Success Factors • Innovation – scientific research • Operating efficiency across supply chain • After sales service • Reputation, brand name, design • Competitive pricing • Extensive product and service lines

  21. Future Considerations –Threats • Longer replacement cycle • Decline in desktops • Saturated first time buyer market • Decline in average selling price => lower profit margins • Commodity like market

  22. Future Considerations – Growing Trends • Notebook growth • Lower prices, better performance, longer battery life, demand for mobility • Demand for wireless products • Bundling and compatible products • Elimination of intermediaries • Alliances and Mergers

  23. Future Considerations Con’t Diversification into • Servers • Consulting • Consumer electronics • MP3’s (iPod), Online Music (iTunes), TV’s, PDA’s

  24. Server US Market ShareJUNE 2003

  25. Handheld PDA US Market ShareJUNE 2003

  26. Dell Inc.

  27. Company Overview • Product • Desktops • Notebooks • Servers and Workstations • Consumer Products • Market share No. 1 World wide 17.4% • No. 1 position in US with 30.90% • Number one in all Major Computer product lines • Major competitor • HP, IBM, Sun Microsystems

  28. Revenues By Region

  29. Company Overview • Direct Sales Model • Flexibility • “Able to change prices like an airline changes airfares” • Industry Cost Leader • Number #3 Brand Name in America

  30. Direct Sales Model • Nearly all sales done by telephone or online • Online Sales of $40 million a day • JIT inventory system • Number of suppliers have dropped from approx. 1000 to approx. 100 • Experimenting with • Partnerships with VAR’s and solutions providers • Dell Direct Stores

  31. Revenue • revenue

  32. Revenue by Product Line

  33. Where to Grow? • Number One PC maker • Commoditized PC industry • PC sales depend on replacement cycle • Only spends 1.5% of Revenue on R&D

  34. Attempting Everything • Consumer Products? • Computer Peripherals? • Online Music? • Computing Services? • Expanding too much too fast???

  35. Current Financials

  36. Price to Earnings 2003 Industry – 50.1 Dell – 39.2

  37. Price to Book 2003 Industry – 9.7 Dell – 16.59

  38. Return on Equity 2003 Industry – 19.5% Dell – 43.30%

  39. Earnings per Share

  40. Income Statement • Income Statement (Annual)

  41. Net Income • Net Income

  42. Balance Sheet • Balance Sheet (Annual)

  43. Financial Statement Analysis • Cash Flow Statement (annual)

  44. 10 year Price Graph • 10 years stock price chart

  45. 1 year Price Graph • 1 year stock price chart

  46. Recommendation • Expensive Stock but… • Market Timer • A head of the Game in Online Sales BUY

  47. Apple Computer, Inc. Think Different.

  48. History • Invented low-cost PCs – Apple I • Ignited the modern PC industry • Financial crisis in 1996/1997

  49. Business Strategy • Continuous innovation • Pushing towards “Digital Lifestyle” • Upscale computing niche • Target education, creative, consumer, and business customers • Retail Initiative • 74 stores by end of this year

  50. Products • iMac, Power Mac, iBook, PowerBook • 72% of revenue in 2003 • Software • Music: iPod and iTunes

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