We all know the giant of computer hardware, Apple Inc. (NASDAQ:AAPL), but several other companies in the sector are often ignored.
The massive attention on Apple Inc. (NASDAQ:AAPL) could signify over-excitement for the company, and a lack of excitement over Dell Inc. (NASDAQ:DELL) and HP. However, the market caps at Dell and HP are significantly lower, with Dell at $22 billion and HP at $50 billion, making a higher trading volume understandable. Apple Inc. (NASDAQ:AAPL)’s market cap indicates the company is worth about $413 billion.
But is the massive attention over Apple Inc. (NASDAQ:AAPL) warranted? Let’s take a look at its two major American computer hardware competitors and see if investors are missing something.
Dell could go private
Dell’s founder, Michael Dell, raised his offer price for the company on July 24, saying his group is willing to pay $13.75 per share, which is $0.10 more than his previous offer. Given the stock’s price on the day, that represents a 6% premium. But before the company can be sold, shareholders need to give their approval. That vote is scheduled for Aug. 2.
The $0.10 increase comes with a catch: Shareholders who don’t vote won’t be counted. Prior to the offer’s price increase, shareholders who didn’t vote would be counted in opposition to the sale. That makes it much more likely for the deal to go through, but it isn’t enough for me to buy shares of the stock.
In case the deal isn’t approved, I need assurance that the company is solid enough to be profitable in the years ahead. That’s where things get murky. In fiscal 2014, earnings per share is expected to drop by 83%. However, it looks set to rise 24% the following year. But that is an ugly outlook, and I wouldn’t bank on picking up Dell shares on a hunch that the company could go private with a 6% premium to shareholders.
HP’s picture not much brighter
HP isn’t quite the sinking ship that Dell is, but its printing division has garnered about 5% less last year than it did in 2011. In the personal computer department, the firm’s sales fell by 8% from the previous year. These declining trends aren’t a good sign for the company, and I became even more bearish about this stock after seeing its plans to cut 30,000 jobs. Furthermore, revenue declined by about 3% last year, or $777 million.
All evidence supports Apple
It appears investors are correct to focus so much attention on Apple. Where there is bad news for other computer hardware companies, there is good news for Apple. After all, other firms are suffering because of Apple’s complete dominance of market share.
However, while Apple Inc. (NASDAQ:AAPL) has proven its dominance capabilities with American competitors, it continues to battle with Samsung for smartphone market share. But even if it fails to garner revenue from sales of smartphones, the firm has several other areas from which it can profit. Analysts predict the company will increase revenue by nearly 9% this year, and another 9% next year. That’s much more than what can be said for Dell and HP, which analysts predict will lose money in the next two years. HP is anticipated to lose as much as 7.4% this year.
As Apple continues to take away market share, the computer hardware environment will become even more controlled by the giant. The company’s expertise is difficult to match, and as the firm continues to roll in profits, it will further broaden its market scope, and those that find themselves head to head with Apple, will lose.
The article Is the Attention on Apple Justified? originally appeared on Fool.com and is written by Phillip Woolgar.
Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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