While noodling around with the charting tools on Yahoo Finance the other day, I noticed a surprising pattern: over the past month AAPL has done better than most other stocks.

This surprised me because from mid-December through most of January, AAPL underperformed most other stocks. Using the Yahoo chart-making tool, I created three charts that illustrate how AAPL went from dog to darling.

Rather than compare prices, the Yahoo charts compare gains and losses by percentage, making it easier to see how different stocks or stock indexes are faring relative to each other.

The first chart compares AAPL to its two primary hardware competitors, Dell and Hewlett-Packard. The second, three other tech sector giants: Microsoft, Intel and Google.

The third chart shows AAPL along with the three most-followed market indices, the Nasdaq, the S&P 500 and the Dow Jones Industrial Average (although I agree with Baltimore Sun business columnist Jay Hancock that the Dow may have outlived its usefulness).

The blue line representing AAPL looks okay until Dec. 16-17, when it plunges below all the lines on each chart, save struggling Dell, with which it dances over the next four weeks.

That was the week Apple announced CEO Steve Jobs would not deliver a keynote presentation at the Macworld show in San Francisco, setting off negative speculation about Jobs’ health. Apple’s additional announcement that January’s Macworld expo would be its last only added to the angst.

On January 5 Jobs issued a reassuring press release regarding his health, but followed that up 10 days later with the bombshell that he would take a leave of absence from his duties as CEO of Apple to focus on his recovery.

Note that AAPL drops almost straight down from Jan. 5 to Jan. 20 in the aftermath of these announcements as concerns over Jobs’ health peaked. Some really lousy days for the overall market didn’t help either, but it’s obvious AAPL felt relatively more pain in the days leading up to Jan. 20.

But then look at what happens. Within a week AAPL shoots up past its rivals and past the major market indexes.

Over the three-month period measured here, AAPL is down only 3.63 percent (as of Friday’s close at $89.31). That’s not good, but look at the others: Intel, down 7.68 percent; HP, down 17.72 percent; Microsoft, down 20.13 percent; Dell, down 23.63 percent.

Only Google takes off into positive territory, up 15 percent over the past three months.

A month ago I noted the change in direction of AAPL, proposing that perhaps Wall Street had collectively concluded that Apple Inc. could function without Steve Jobs at the helm every day.

AAPL’s continued above-average performance indicates fears over Jobs have indeed subsided (though any bad news or rumors could quickly reignite them).

I also think AAPL is benefiting from Wall Street’s consternation over where to put its money in such a dreadful market. It’s one of the few companies not going over the edge.

After all, Apple will almost certainly report profits throughout 2009 – perhaps not what it would have made in a better economy, but profits nevertheless. Add in that $28 billion rainy day fund (and zero debt) and you have an exceptionally sound investment.

With so many U.S. companies reporting losses of monumental proportions, some may even view Apple as a safe haven.

Imagine that.

Posted by David Zeiler at 3:21 AM in AAPL stock news | Permalink | Comments (1)
                       

After weeks of consternation about Steve Jobs’ health and the resulting hiatus from his daily duties as CEO of Apple, the company’s stock has recovered nearly all the losses it incurred since this unhappy episode started.

AAPL closed at $94.20 yesterday, up 3.82 percent for the day and close to where it stood on Jan. 5 – the day Steve Jobs reassured worried customers and investors that his gaunt appearance had resulted from an easily treatable hormone imbalance. AAPL rose 4.2 percent that day to close at $94.58.

Out of curiosity I averaged Apple’s closing stock prices for each day since Oct. 1 through yesterday. The result: $93.65. Despite the turmoil of Wall Street’s meltdown, a brutal retail environment, a disappointing Macworld Expo and even false rumors of a Steve Jobs heart attack, AAPL has remained surprisingly steady.

AAPL lost about 30 percent of its value to the initial wave of panic-related selling in September but has mostly bobbed up and down since.

During the four months since October, AAPL was as high as $111.04 (Oct. 30) and as low as $78.20 (Jan. 20, at the ugliest point in the most recent Jobs health tumult), but it was as low as $80.49 as far back as Nov. 20.

That the stock has climbed back to its average price of the past four months tells me that Wall Street now either believes 1) Steve will recover and lead Apple as before; or 2) Apple has a solid and accomplished senior management team capable of perpetuating the company’s success even without its charismatic leader.

I took the latter position at the time Steve announced his hiatus; Apple Chief Operating Officer Tim Cook’s masterful performance during the company’s earnings conference call last week further validated it.

Is it possible that Wall Street suddenly is behaving rationally? Is it possible investors suddenly realize Apple’s success derives from more than just one man?

What about the dizzy speculation over whether Apple would falter without its founder, whether it had mislead shareholders by not disclosing more details about Jobs’ condition sooner, whether shareholders would sue and – last but not least --rumblings of an absurd SEC investigation into the whole mess?

Never mind.

Posted by David Zeiler at 8:30 AM in AAPL stock news | Permalink
                       

The horrific economic conditions of the fall holiday shopping season slowed the Apple Inc. money machine only slightly, with the company reporting a record profit of $1.61 billion for the December quarter.

Apple had revenue of $10.17 billion, breaking $10 billion for the first time.

Although a few segments lagged, in general Apple did exceptionally well, particularly outside the United States.

Investors reacted positively. After having risen $4.63 to $82.83 during a bullish session yesterday, AAPL surged another $7.87 (9.5 percent) in after hours trading.

Yesterday’s earnings conference call -- conducted between analysts and the team of Chief Operating Officer Tim Cook and Chief Financial Officer Peter Oppenheimer --contained the usual smattering of informative tidbits and insights:

Steve Jobs Ben Reitzes of Barclays Capital, the first analyst up, wasted no time in asking about Steve Jobs. He asked whether Tim would run Apple differently with Steve on medical leave.

Oppenheimer delivered the party line about Steve remaining involved in major strategic decisions while Tim minded the store. No mention was made of Jobs’ health.

But Cook offered a much longer, more detailed response -- a virtual Apple Manifesto. He clearly intended to remove any doubt about Apple’s ability to function with or without Steve, and in doing so came off very much like The Man in Charge. His comments:

There is an extraordinary breadth and depth and tenure among the Apple executive team and these executives lead over 35,000 employees that I would call wicked- smart. And that's in all areas of the company -- from engineering to marketing to operations and sales and all the rest. And the values of our company are extremely well entrenched. We believe that we are on the face of the earth to make great products and that's not changing.

We are constantly focusing on innovating. We believe in the simple not the complex. We believe that we need to own and control the primary technologies behind the products that we make, and participate only in markets where we can make a significant contribution.

We believe in saying no to thousands of projects, so that we can really focus on the few that are truly important and meaningful to us. We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot.

And frankly, we don't settle for anything less than excellence in every group in the company, and we have the self-honesty to admit when we're wrong and the courage to change. And I think regardless of who is in what job those values are so embedded in this company that Apple will do extremely well.

Macs up or down? Mac sales overall increased 9 percent year over year, which only looks bad when compared to the 40 to 50 percent growth the Mac enjoyed in late 2007 and early 2008. Mac sales fell 3 percent from the September quarter.

It’s more illustrative to view the Mac’s numbers in the context of the overall PC market, which Oppenheimer did in his opening remarks. He cited IDC’s report last week, which showed negative growth (-0.4 percent) in the worldwide PC market for the December quarter.

Suddenly 9 percent growth looks pretty good.

Surprisingly, international sales propped up the Mac in December. Cook said Mac growth in the U.S. was just 2 percent, while international sales jumped 16 percent. He added that several countries, such as Italy, had Mac unit sales increases of more than 20 percent year over year.

Until now sales of the Mac internationally have not increased at the same pace as sales in the U.S. While the Mac’s U.S. market share hit 7.7 percent for all of 2008 according to IDC, its global share has remained stuck at about 3 percent.

So the Mac has plenty of room for growth in the global PC market. With the U.S. market looking grim for 2009, a boost in global sales would give Apple a good chance of maintaining at least some Mac growth.

Netbook Macs Cook reiterated the Apple stance that it is “watching” this nascent market of smaller, low-cost laptops. He’s not impressed: “From our point of view the products in there are principally based on hardware that’s much less powerful than we think customers want. Software technology that is not good, cramped keyboards, small displays.”

But Cook also repeated what Jobs has said about Apple having “ideas” for this segment. Stay tuned.

The iPod lives The iPod’s performance contradicts yet again those who believe the product is on its way out. Apple shipped a record 22.7 million iPods in the December quarter, a 3 percent increase year over year. Revenue, however, declined 16 percent. Apparently all those iPod Touches couldn’t make up for the scads of cheaper, lower-margin Nanos.

Oppenheimer noted the iPod not only retains its 70 percent share of the U.S. MP3 player market, but also dominates in other countries such as the U.K. and Australia (both 70 percent), Japan (over 60 percent) and Canada (over 50 percent). Cook said iPod sales in the U.S. actually fell 3 percent. In an echo of the Mac results, all the iPod growth came from the global market.

Recession hits retail stores Fewer customers bought Apple products from one of the company’s 251 retail stores; revenue per store slid 17.6 percent from $8.5 million to $7 million. Because Apple continues to open new stores, the retail segment managed a 2 percent revenue gain year over year. Oppenheimer said Apple plans to open 25 more stores in 2009, half of them internationally.

iPhone beats target Apple sold 4.4 million iPhones in the quarter, bringing the grand total for 2008 to 13.7 million, well over the 10 million-unit goal the company set back in 2007. Though lower than what some analysts had projected, iPhone sales came close to doubling last December’s 2.3 million units.

Cook expressed no concern when asked about potential iPhone competition in 2009, saying that Apple approaches the iPhone as “a software platform” rather than a hardware business. Both he and Oppenheimer seized every opportunity to trump the App Store milestones of 15,000 apps and 500 million downloads announced last week.

Cook said he welcomed competition but warned rivals to mind Apple’s patents: “We will not stand for having our [intellectual property] ripped off, and we’ll use whatever weapons we have at our disposal.”

Apple TV picture brightens While describing Apple TV as a “hobby” – Jobs’ exact term when he introduced the product two years ago – Cook noted sales of the device shot up threefold year over year. “We’re going to continue to invest in it,” Cook said, “because we fundamentally believe there is something there for us in the future.”

Fort Knox With an additional $3.6 billion to put in its piggy bank, Apple now has $28.1 billion in cash. Oppenheimer said Apple had “no new update” regarding plans for its stash, which means no dividends for shareholders, no stock buybacks and few if any acquisitions of companies. But he did say Apple would “invest our way through this downturn just as we did the last one.”

Posted by David Zeiler at 7:05 AM in AAPL stock news | Permalink | Comments (1)
                       

A few hours ago, Apple Inc. CEO Steve Jobs announced he’d be taking a medical leave of absence until the end of June to deal with health issues.

Less than 10 days ago (Jan. 5) Jobs issued a statement explaining how his doctors had finally discovered the cause of his alarming weight loss -- a hormone imbalance. Jobs called the remedy “simple and straightforward,” but did not indicate he’d require extended time away from Apple.

Today’s announcement, made shortly after the markets closed, dropped AAPL stock below $80, continuing a yearlong slide partly attributable to questions over Jobs’ health.

Jobs said Apple Chief Operating Officer Tim Cook would be in charge of day-to-day operations in his absence, adding that he plans “to remain involved in major strategic decisions.”

But what does this mean for the sexiest lion of Silicon Valley? Should Apple aficionados panic? What about AAPL investors? (Oops, too late, they’ve been panicking for months.)

While this certainly isn’t good news for Apple, neither is it a disaster. Cook ran Apple the last time Jobs took some time off for medical reasons – back in 2004 when he was underwent a procedure to treat his pancreatic cancer.

Five months without Steve Jobs at the office won’t change the way things are done at Apple Inc. In the decade since his return to the helm, the company has embraced and absorbed Jobs’ trademark philosophical principles: simplicity and elegance.

Tales of life at Apple inevitably describe employees keeping Jobs’ principles in mind as they go about their work. “What would Steve think?” may as well be engraved on every wall.

The critical ingredient Apple gets from Jobs is his ability to identify successful ideas and shepherd them through a long development process. His uncanny instincts for what consumers want resulted in such hits as the iPod and iPhone.

I suspect that’s why Jobs specifically said he’d continue to be involved in “major strategic decisions.”

Even when Jobs has left Apple for good (which has to happen at some point), the company won’t face instant catastrophe. The board of directors will choose a capable successor. Life will go on – but it won’t be the same.

Without its visionary leader, a post-Jobs Apple most likely will begin a gradual descent from an extraordinary consumer electronics company to an ordinary (though still successful) one.

Let’s think positively and hope that day won’t arrive for a long time.

Get well soon, Steve.

Posted by David Zeiler at 9:46 PM in AAPL stock news | Permalink
                       

Astute analysis of Apple Inc. among mainstream financial blogs is absurdly difficult to find.

Many bloggers and analysts alike recently have concluded AAPL is a "sell" based primarily on it being a consumer technology company, and as such vulnerable to the evaporation of consumer spending we’re likely to see in the coming months.

A few weeks ago I gave some reasons why Apple should get through the looming economic turmoil better than most companies, particularly competing consumer technology companies.

But yesterday I read a remarkable analysis by Andy Zaky on the financial news Web site Seeking Alpha. Zaky’s article also appeared on his own financial blog, Bullish Cross.

In a piece called “Is Apple More Undervalued than Other Tech Sector Stocks,” Zaky compares Apple’s price-to-cash ratio with that of other tech stocks. (From Investopedia: “Price to cash flow ratio -- a measure of the market's expectations of a firm's future financial health.”)

Apple has the lowest price-to-cash ratio of all the major tech companies, despite stronger fundamentals. The lower the number, the more negative investor sentiment.

To illustrate how irrationally low AAPL has fallen, Zaky says if Google were trading at Apple’s current price-to-cash ratio, its price would be $173.84. Google closed at $359.69 yesterday.

Though AAPL has recovered to $111.04 (as of yesterday’s close) from its lows of just below $90, it remains greatly undervalued.

Zaky argues that as of now “the market has already priced in a complete destruction of Apple’s business,” an unlikely turn of events. He also has a lot of well-argued criticism of analyst projections for Apple’s 2009 earnings.

As a long-time follower of Apple, I often have puzzled over the appalling inability of so many so-called “professionals” to grasp the winning strategies and vast profit-generating potential of Apple’s various business arms.

They fuss over gross margins, agonize over the cost of components and overestimate the impact of Apple’s competitors. What they forget to factor in is the power of the Apple brand as well as the value of building superbly designed and engineered products.

It’s not that hard to figure out, people.

Zaky’s article is a highly detailed, well-researched piece of analysis. I recommend it.

Posted by David Zeiler at 8:55 AM in AAPL stock news | Permalink | Comments (2)
                       

Showing surprising strength in a weakening economy, Apple reported an extraordinary September quarterextraordinary September quarter yesterday.

Mac sales up, iPod sales up, iPhone sales way, way up, and an uncharacteristic appearance by CEO Steve Jobs at the analyst conference call. It’s hard to know where to begin.

Jobs showed up in part to discuss Apple’s decision to disclose some alternative financial data from now on. Because Apple periodically issues free software updates for the iPhone and Apple TV, revenue from those sales is recognized over the two-year life of the product rather than entirely in the quarter the product is sold, as with Macs and iPods.

To help analysts and investors better “evaluate the company’s overall performance,” Jobs said the company plans to release “non-GAAP” financial results along with the usual earnings figures. (GAAP stands for Generally Accepted Accounting Principles.)

Tremendous sales of the iPhone 3G – 6.9 million units – prompted the change, Jobs said. The iPhone accounted for a whopping 39 percent of Apple’s 4Q revenue.

“The non-GAAP results are truly stunning,” Jobs crowed, and it’s hard to argue with the numbers. Including the iPhone and Apple TV sales in their entirety adds nearly $3.8 billion in revenue, a 48 percent increase over the $7.9 billion the company reported.

Non-GAAP adjusted income doubles from $1.14 billion to $2.44 billion, a 115 percent increase. For those keeping score at home, the $1.26 per share Apple reported balloons to $2.69 per share in the adjusted figures. Yowza!

Jobs probably has grown tired of AAPL’s slumping stock price – which had slid $6.95 to $91.49 yesterday before Apple announced its results. He wants the world to know how much dough Apple is really making.

Apparently investors got the message: AAPL rose $12.12 in after-hours trading and is up today in a down market.

More details from Apple’s earnings call, by topic:

The blockbuster iPhone 3G/App Store: The star of the quarter, the iPhone 3G blew away all expectations. Customers bought more iPhones in the September quarter than during the entire previous lifespan of the product (6.9 million vs. 6.1 million).

Oppenheimer said Apple has “already surpassed our goal of 10 million iPhone sales in calendar 2008,” but that claim must include some October sales. Adding the reported sales of the first three quarters of 2008, I get 9.3 million iPhones. At the rate iPhones are selling, Apple probably hit 10 million about a week or so ago.

Prospects for future iPhone sales also look good. Oppenheimer said Apple is now selling the iPhone 3G in 51 countries, with the number expected to increase to 70 by the end of the year. Apple has 3,100 iPhone distribution points in the United States and over 30,000 worldwide, he said.

Jobs pointed out that Apple beat Research in Motion’s BlackBerry in unit sales 6.9 million to 6.1 million this quarter. Furthermore, Jobs said, Apple is now the No. 3 mobile phone maker as measured by revenue, with $4.6 billion in sales (behind Nokia with $12.7 billion and Samsung with $5.9 billion).

The App Store, despite some grumblings from developers whose apps Apple rejected, has amply demonstrated the iPhone’s potential as a software platform. “Customers will download the 200 millionth application from the App Store tomorrow [Wednesday], only 102 days since its launch,” Jobs said, noting the availability of over 5,500 apps.

Jobs also said Apple’s strategy is not to build “a hundred variations” of the iPhone like other handset makers, but to use software as the differentiating factor.

The Mac hangs tough: Mac sales fell slightly short of last month’s optimistic analyst projections, but at 2.61 million units still set a record for most Macs sold in a quarter. The growth rate of 21 percent year over year wasn’t as impressive as March’s 51 percent or June’s 41 percent, but remains respectable.

Apple CFO Peter Oppenheimer said cutbacks in education budgets as well as rumors of imminent new MacBook models (which Apple did indeed unveil last week) probably hampered Mac notebook sales at the end of the quarter. Two-thirds of all Macs sold are notebooks.

Apple has its corporate fingers crossed the new models will boost notebook sales going forward. “We’ve had a very, very strong launch and we are anxiously awaiting to see the demand trajectory that will unfold during the quarter,” Jobs said.

When asked if Apple would consider “more affordable” Macs, Jobs repeated a long-standing Apple philosophy: “There are some customers we choose not to serve,” he said. “We don’t know how to make a $500 computer that’s not a piece of junk.”

If fresh iMacs appear in November as rumored, unit Mac sales could set another record come January.

iPod not dying: Apple sold 11 million iPods in the quarter, a record for a non-holiday quarter and an 8 percent increase year over year. Market share for the iPod remains at a healthy 70 percent. The iPod stubbornly continues to defy predictions of its decline.

During what could be a bleak retail holiday season, the line of iPods refreshed in September should keep it high on many shopping lists.

Apple TV on pause: Jobs reiterated his take that Apple TV is “still a hobby.” He said it would stay that way at least through 2009, dashing the hopes of those dreaming of a major Apple TV announcement at the annual Macworld Expo in January.

More stores: The growth of the retail chain continued unabated, with the addition of 31 new stores, bringing the total to 247. As always, Oppenheimer said half of all Macs sold in the stores were to people who had never owned a Mac before.

The stores saw 42.7 million visitors in the quarter, another record and further evidence that the ailing economy has so far failed to impair the lure of the Apple brand.

Rainy Day Fund pays off: Having generated another $3.7 billion in cash, Apple’s stockpile of money stands at $24.5 billion. Jobs brushed off a question about returning some cash to shareholders in the form of dividends. “It’s not burning a hole in our pocket,” he said.

But Jobs also said Apple’s unusual cash position “provides us tremendous stability and the ability to invest our way through this downturn,” which he said means more money going into research and development of future products. He wouldn’t comment, however, on the possibility of acquiring other companies.

Posted by David Zeiler at 1:06 PM | Permalink | Comments (1)
                       

After yesterday’s Wall Street carnage, AAPL stood at $89.16, down over 9 percent for the day and 55 percent for the year. It’s been an ugly month.

Of course, to a large degree Apple is caught up in the whirlwind of panic selling gripping financial markets the world over. But other information, particularly the downgrade of the stock by two analysts last week, hasn’t helped either.

Both Kathryn Huberty of Morgan Stanley and Mike Abramsky of RBC Capital downgraded Apple last Monday (Sept. 29), which contributed to that day’s 17 percent drop in the stock’s value. Both analysts pointed to slowing consumer demand as a primary source of concern.

Two weeks ago I wrote on this blog that AAPL was getting hammered unfairly. With its strong growth trends over the past two years and a good earnings report expected Oct. 21, I argued the company was well positioned to prosper in 2009 despite a bumpy economy.

A lot has happened in the past two weeks.

Consumer trepidation stemming from the cascade of crises on Wall Street has intensified, and retailers fear the worst holiday shopping season in years. While no one knows yet how hard “Main Street” will get hit, you can bet almost everyone will be cutting back on their spending in the months ahead.

Rockville, Md.-based ChangeWave Research added to the gloom with a report that its latest survey of consumer PC purchasing habits showed a significant drop for the Mac. Those who said they planned to buy a Mac laptop in the next 90 days dropped 5 points from August to September (34 to 29 percent), with those planning to buy a Mac desktop falling 4 points (from 30 to 26 percent).

Apple inevitably will feel some pain. Economic troubles overseas also will negatively affect Apple, as the company has worldwide operations. The iPhone faces competition from Research in Motion’s forthcoming touchscreen Storm as well as smart phones running Google’s Android operating system.

But I still think Apple will weather this recession (I know one hasn’t been declared officially yet, but it won’t be much longer now) reasonably well. Here’s why:

The stash Apple has $21 billion in cash stowed away. While other businesses may struggle due to the frozen credit markets, Apple has little need to borrow money.

Mind share Apple has an extraordinarily powerful brand, particularly in the music space and among young consumers. Piper Jaffray’s survey of teen consumers released yesterday showed 84 percent of those with an MP3 player owned an iPod. Of those who purchased music online, 93 percent use the iTunes Store. Of those planning to buy an MP3 player (about a third of the respondents), 79 percent planned on getting an iPod.

Apple also stands to benefit from having products – such as the iPhone 3G and new line of iPods – some people crave so badly even lean times won’t prevent them from buying.

Finally, the Mac has established itself as a viable alternative to Windows PCs in the minds of consumers. Though fewer PCs will be sold, more of them will be Macs than if the economy had wilted two years ago.

Commitment to innovation When the U.S. economy was in a funk in 2001, Apple CEO Steve Jobs rejected conventional wisdom: “We're not laying off boatloads of people,” he said in July of that year. “We're taking those talented people and saying that if we're going to get out of this, we're going to get out of it by innovating our way out of it."

Three months later Apple introduced the first iPod.

According to the 9to5Mac Web site, Apple on Oct. 14 will debut new MacBooks based on an innovative manufacturing technique that carves the laptops out of blocks of aluminum. It sounds crazy enough to be true. It could be that mystery product Apple CFO Peter Oppenheimer referred to in July's earnings conference call.

Regardless, Jobs and his lieutenants know innovation is Apple’s strength in both good times and bad. Bold new products keep the media -- and hence the public -- focused on Apple.

Unveiling compelling new products while its competitors retrench will give those consumers who are still spending one more reason to choose Apple.

Oct. 9 UPDATE: I just received an e-mail invitation to an Oct. 14 Apple Media Event in Cupertino. The teaser simply says, "The spotlight turns to notebooks."

Posted by David Zeiler at 12:27 PM in AAPL stock news | Permalink | Comments (4)
                       

Reflecting another lousy day for stocks, with the Dow down 372.75 points, Apple’s stock dipped $9.86 to close at $131.05 yesterday -- just $3.22 higher than last week’s low of $127.83.

Although Apple certainly is not alone in getting hammered in the midst of one of Wall Street’s worst crises ever, the company’s demonstrated resistance to the general economic slowdown should have provided some insulation. But not with a stock as notoriously volatile as AAPL.

AAPL already had been on a wild ride this year. After opening 2008 just under $200, the stock tumbled to a low of $119.15 on Feb. 26. By May 15 it had recovered to $189.73, but began to follow the general market slide through most of the summer.

Even so, AAPL stood at $174.67 as recently as Aug. 27.

Despite the prevailing sense of panic on Wall Street, the AAPL selloff makes little sense. The company has reported exceptional sales and profits throughout the year, and is expected to post more eye-popping numbers for the quarter that ends Sept. 30.

Consider: Apple had its best March quarter in company history, with revenue growing 43 percent year-over-year to $7.51 billion. Mac sales were up 51 percent year-over-year.

In the June quarter Apple revenue rose 38 percent year-over-year, led by a 41 percent increase in Mac units shipped. The iPod chipped in with a surprising 12 percent increase in sales year-over-year.

More importantly Apple appears likely to sustain its healthy growth with minimal impact from weakening consumer spending. It defies logic, but that’s what the numbers have been telling us.

Last week the NPD Group-owned DisplaySearch released data showing Mac notebook market share in North America rocketing 60 percent from the second quarter of 2007 to the second quarter of 2008 – from 6.6 percent to 10.6 percent.

As for the Sept. quarter, analysts who follow Apple have predicted yet more record-breaking sales. Last month Mike Abramsky of the Royal Bank of Canada predicted year-over-year Mac sales growth of 44 percent, which would translate to more than 3 million Macs.

Last week Piper Jaffray’s Gene Munster weighed in with slightly lower numbers (unusual, since Munster is typically the most optimistic Apple analyst). Nevertheless, he foresees year-over-year growth in the 30 percent range, with Mac sales hitting somewhere between 2.8 million and 2.9 million.

Though not as impressive as July’s numbers, Mac sales have grown so much over the past two years – 3 million Macs would nearly double the number sold in the September quarter two years ago -- that huge percentage increases will become ever more difficult to achieve.

In any case, Apple can’t help but break July’s record for the most Macs sold in a quarter when it reports earnings next month. I won’t be surprised if iPod sales are relatively flat, given that we just got the product refresh Sept. 9, but booming iPhone sales should more than make up for that. The iPod will make its greatest contribution in the December quarter, as usual.

In the current environment, few companies match Apple’s potential to keep raking in money. Throw in Apple’s lack of debt and staggering $21 billion in cash and you wonder why anyone would sell the stock, particularly as it gets cheaper.

But then again most Wall Street muckety-mucks aren’t looking particularly shrewd these days, are they?

Posted by David Zeiler at 8:17 AM in AAPL stock news | Permalink | Comments (9)
                       

On multiple occasions during Apple’s earnings conference call yesterday, CFO Peter Oppenheimer cited a “future product transition” as one of the reasons the company expected somewhat lower gross margins for the September quarter.

That any Apple executive would hint at an imminent new product in a public forum is extraordinary. It means whatever is coming will make a big splash, though probably not of the magnitude of the iPhone.

But what is it? It’s likely that the mystery product or products – or as Oppenheimer put it, “state-of-the-art new products that our competitors just aren’t going to be able to match” – will involve a touch screen.

I believe it could be the long-rumored Mac tablet PC. In any case, Oppenheimer’s remarks about it affecting the September quarter tells us it will arrive soon. He also hinted at other products in the pipeline that might shave gross margins in 2009.

As for Apple’s earnings, they were routinely spectacular. Apple made a profit of $1.07 billion in the June quarter on revenue of $7.46 billion. The earnings per share of $1.19 beat Wall Street estimates by 11 cents.

Strong Mac sales led the way. Apple sold nearly 2.5 million Macs, its highest quarterly Mac total ever. According to Oppenheimer, the 41 percent year-over-year growth is three times the overall PC market growth rate.

That would seem to jibe with last week’s market share reports from research firms IDC and Gartner, both of which showed Apple gaining more ground in the U.S. IDC had Apple’s 2Q share rising year over year from 6.2 percent to 7.8 percent; Gartner’s data had Apple increasing from 6.4 percent to 8.5 percent.

The biggest surprise was the iPod, which despite a woozy economy and two years of predictions that the product had peaked, pulled out a 12 percent increase in sales year over year, although iPod revenue was up only 7 percent because of a February reduction in the price of the Shuffle models to $49 and $69.

The iPhone numbers were predictably low – a mere 717,000 -- since Apple cut off the supply of the original iPhone mid-way through the quarter to prepare for the launch of the iPhone 3G on July 11.

Some other clues, news and tidbits from the conference call:

Steve Jobs’ health Ben Reitzes of Lehman Brothers apologized for asking the question, but a story in the New York Post yesterday almost guaranteed the subject would come up. Oppenheimer’s response was less than reassuring: “Ben, Steve loves Apple. He serves as CEO at the pleasure of Apple’s board and has no plans to leave Apple. Steve’s health is a private matter.”

Geez Louise, Peter. How about something like “We’re confident Steve will be leading Apple for a long time to come”? Oppenheimer’s stilted, non-committal answer will only serve to fuel more speculation on Wall Street that Steve is very seriously ill, and probably contributed to the 10.8 percent walloping AAPL took in after hours trading last night.

Margins are everything The other reason AAPL shed $18.04 last night almost surely was the lower guidance Oppenheimer gave for the company’s gross margins – from 34.8 percent in Q2 to a still robust 31.5 percent for Q3. You’d think the booming Mac and iPod sales driving record revenues and profits might count for something. Oh, and Apple did sell 1 million new iPhones in three days. And the company always beats its guidance numbers anyway. But noooo. SELL AAPL!!!

The international factor Apple saw significant growth overseas in the June quarter, which could become insurance against a slowdown in its rate of growth in the U.S.

For example, international sales of the iPod grew 15 percent (compared to 10 percent in the U.S.) While the iPod’s U.S. MP3 player market share has stabilized at about 70 percent, Oppenheimer said it has been increasing elsewhere and now stands at over 60 percent in Canada and over 50 percent in the U.K., Japan and Switzerland.

Apple is adding more retail stores overseas as well. One just opened in Beijing with more expected to open in Switzerland and Germany later this year.

Piggy bank full Oppenheimer blew off a question about what Apple plans to do with its ever-swelling cash hoard – now up to $20.8 billion. Sooner or later shareholders are going to demand Apple use it for something, be it stock buybacks, acquisitions of other companies or dividend payments. Even Microsoft is sitting on a mere $24 billion in cash these days.

The iPhone rollout The iPhone 3G is now shipping in 22 countries, with 20 more coming on Aug. 22. Oppenheimer reiterated that Apple expects to have the iPhone 3G available in 70 countries by year’s end. Also, COO Timothy Cook re-confirmed Apple’s confidence that it will sell 10 million iPhones in calendar year 2008.

Posted by David Zeiler at 8:13 AM | Permalink | Comments (6)
                       

When several Apple bloggers called attention to Steve Jobs’ gaunt appearance at last Monday’s WWDC keynote, we were reminded of a fact few wish to face: Steve Jobs will not head Apple forever.

Some speculated Jobs could be suffering a relapse of the pancreatic cancer for which he had surgery in 2004. An Apple spokeswoman gave The Wall Street Journal the explanation that Jobs merely had a “common bug” and was taking antibiotics.

The story percolated on Apple-related blogs as well as financial blogs, contributing to a 7 percent drop in AAPL. (The stock fell $4.03 the day of the keynote but closed at $185.64 on Tuesday. From there it slid $13.27 to close at $172.37 on Friday. Analyst excitement this week over prospects for the 3G iPhone has pushed AAPL back to the $180 range.)

The severe reaction – both from the Apple faithful and Wall Street – illustrates how vital Steve Jobs is to the ongoing success of Apple Inc.

He is arguably the most celebrated CEO in America. Because of his “rock star” persona, his legendary ability to elicit great products from those who serve under him and his skill at manipulating the media, Jobs is as much a celebrity as a businessman.

Detractors may deride Jobs as an egotistical tyrant unworthy of the accolades but one need only look at Apple’s history to see the man’s impact on the company. Over its 32-year existence, only the years Jobs was absent – 1985 to 1997 -- did Apple struggle.

So every time even a whiff of a hint arises that something might force Jobs out of his CEO post, both Apple fans and stockholders alike break out the worry beads.

The last time this happened, it wasn’t Jobs’ health but his role in a stock backdating scandal that had people contemplating a Jobs-less Apple. Concern over that incident buffeted AAPL stock for months.

Like most fans of Apple, I’m also a fan of Steve Jobs and all he has achieved. I pray he just lost a few pounds fighting a cold in recent weeks.

But the reality is someday he will leave Apple, whether it’s for health reasons or some other unforeseeable event. What then?

At first not much would change, apart from the stock plummeting. A new CEO would be named from a list of potential successors.

Apple would continue selling cool products. High-ranking Apple execs like Senior Vice President for Industrial Design Jonathan Ive and Senior Vice President for Worldwide Product Marketing Phil Schiller would do their best to keep Apple’s winning streak alive.

But as time goes on, Apple will falter without Steve Jobs. No successor could have Jobs’ unique combination of charisma, steel will, exceptional vision and instinct for knowing which products to shun and which to pursue.

Without Steve at the helm to reject mediocrity while imposing his will on both employees and business partners, Apple will backslide from an extraordinary company to an ordinary one.

Hit products will come less regularly. The media won’t hang on every announcement. Apple won’t be special.

Contrast that to the situation at Microsoft. Bill Gates will retire June 27 from the company he founded after having ceded control to Steve Ballmer in 2000. As much as Gates has meant to Microsoft, his long goodbye means his departure won’t devastate the company.

Jobs’ controlling personality never would permit a gradual transition of power. Can anyone imagine Jobs submitting to the authority of a successor as he makes a slow and graceful exit?

No, when Jobs leaves Apple – whatever the cause -- it will be sudden and traumatic. I dread that day and hope it doesn’t come for a very, very long time.

Posted by David Zeiler at 12:39 PM in AAPL stock news | Permalink | Comments (9)
                       

Once again on Wednesday, Apple reported excellent earnings.

Though most of the reaction was positive, some expressed concern over whether Apple’s good fortunes will prove sustainable in a challenging U.S. economy. It strikes me Apple has just proved its powerful brand can keep drawing consumer’s cash even in a souring economy.

Apple could not have done much better in the March quarter, the best 2Q in company history. Revenue hit $7.51 billion, representing 43 percent growth year over year. Apple made a $1.05 billion profit, increasing its cash stash to $19.4 billion. Every operating segment did well, led by extraordinary growth in Mac sales.

Apple’s conservative guidance for the June quarter did generate some hand wringing among analysts, particularly the bit about Apple’s gross margins hovering around 33 percent.

I don’t see much of a problem here. Even if Apple just barely makes its numbers, the June quarter will be far from a disaster. Apple Chief Financial Officer Peter Oppenheimer said the company expects revenue of $7.2 billion – a 33 percent year over year increase. He estimates earnings per share at about $1.00, which translates to about $900 million in profits.

Of course, Apple always lowballs its guidance to make it easier to exceed the numbers.

In a MarketWatch story yesterday BMO Capital Markets analyst Keith Bachman pointed out that over the past three years Apple has predicted an 18 percent drop from 2Q earnings, but in fact reported gains averaging 10 percent in the June quarter.

If Apple follows this historical pattern, it will earn about $8.25 billion in revenue and $1.15 billion in profits. Not bad in a struggling economy.

Now let’s take a look at Apple’s 2Q report segment by segment:

The Mac: Three words: growth, growth, growth. Desktop sales were up 37 percent, powered by strong iMac sales and a refresh of the Mac Pro. Laptop sales were up 61 percent, helped by the new MacBook Air and a refresh of the MacBook and MacBook Pro lines. Apple shipped a total of 2.29 million Macs in the quarter, a prodigious 51 percent increase year over year.

Oppenheimer noted in his remarks that Mac sales grew 3.5 times faster than the overall PC market growth rate. He also said Apple’s U.S. education business increased 35 percent year over year, “its highest growth rate in any quarter in the last eight years.”

And the Mac’s strength extended beyond U.S. borders. Apple Chief Operating Officer Tim Cook said sales in the Americas were up 52 percent year over year; in Europe up 48 percent; and in Japan up 47 percent.

Each of the past several quarters has set some sort of record for Mac sales. I see this trend continuing for quite some time.

The iPod: Sales of the iPod increased only 1 percent year over year to 10.6 million units. Many observers interpreted the small increase as a “maturation” of the MP3 player market and a sign that Apple can no longer expect much growth in this segment.

But mere units sales of iPods doesn’t tell the whole story. Revenue from the iPod increased 8 percent because many of those sold were more expensive iPod Touches. And let’s not forget the 1.7 million iPhones – they also serve as fancy iPods.

In any case, Apple has retained its market dominance in this space, holding 73 percent of the MP3 player market in the U.S.

Meanwhile, Oppenheimer said the iTunes Store holds 85 percent of the legal download market, hinting that rivals such as Amazon have not proven as formidable a threat as once feared.

The iPhone: On the one hand, the 1.7 million iPhones Apple sold exceeded the company’s expectations, leading to shortages in some areas. But unless the pace picks up significantly, Apple can’t meet its target of selling 10 million iPhones in 2008. At the 2Q rate, Apple would sell 6.8 million iPhones by year’s end.

With the iPhone 2.0 software due out in June – near the end of the next quarter – and widespread anticipation of a 3G iPhone in the same time frame, one would expect diminished iPhones sales in 3Q while customers await the new goodies.

Yet in his remarks Oppenheimer reiterated the 10-million iPhone goal for 2008. Apple rarely lets its expectations get too far out of line with reality, so I’m guessing it’s figuring on several factors to alter the equation.

The factors that could hamper sales in the coming quarter will accelerate them in the second half of the year. Beyond that, Apple will continue to introduce the iPhone into new international markets throughout 2008.

Will it be enough to hit 10 million units by December? Apple must think so.

Apple Retail: The performance of Apple’s retail stores has gotten scant mention, but this segment continues to amaze. Revenue from the stores grew 74 percent year over year. Sales of Macs in the stores rose 67 percent. Operating profit doubled.

Apple continues to expand the chain, adding four more stores for a total of 208, including 15 in the United Kingdom. Oppenheimer said Apple plans to open its first stores in Australia, China and Switzerland in the next few months. Overall, Apple expects to add 45 more stores in 2008.

Oppenheimer as usual noted that half of the stores’ computer sales were to customers “new to the Mac,” a statistic that makes more sense now that Mac sales are exploding.

Posted by David Zeiler at 12:36 PM in AAPL stock news | Permalink | Comments (6)
                       

Over the past month investors have reconsidered the selloff in Apple stock that took place in January and February, when AAPL fell nearly $80 from a close of $198.08 on Dec. 31 to $119.15 on Feb. 26.

Helped along by a 228-point rally on Wall Street today, AAPL picked up another $6.55 to close at $161.04, its first close over $160 since Jan. 18.

Concerns earlier this year about slowing iPhone and iPod sales spooked some investors into selling AAPL, but those investors forgot about the Mac. Even back in January when the stock was getting pummeled, both Apple and several of the analysts who follow the company predicted continuing growth in Mac sales.

Sure enough, when research firms Gartner and IDC released their first-quarter reports on PC market share, the Mac’s stellar showing stole the spotlight.

Gartner says Mac shipments increased 32.5 percent, from 762,000 to 1 million units, compared to the same quarter a year ago. According to Gartner Apple snared 6.6 percent of the U.S. PC market compared to 5.2 percent in the first quarter of 2007.

Compared with Gartner’s 2006 numbers, the Mac’s growth trend is even more dramatic. Apple had 4 percent of the market in the first quarter of 2006. Mac unit shipments are up 440,000 from the same period of 2006, a 77 percent increase.

Meanwhile IDC’s data shows Apple with a 6 percent share of the U.S. market in the first quarter, compared to 4.9 percent in 1Q 2007, with unit shipments growing 25.1 percent to 950,000.

It should be noted that Apple’s relative market share changes seasonally. For instance, back in the third quarter of 2007 Gartner reported Apple with 8.1 percent of the U.S. market. But the year-over year increase in units shipped grew at a similar pace, 37.2 percent.

The one consistent element to every research report on the PC market I’ve seen in the past year is that the number of Macs shipped keeps increasing year over year, as does its market share.

When Apple reports its first quarter earnings this coming Wednesday, we’ll find out the truth about iPod and iPhone sales (I suspect the concerns of January will prove unwarranted), and we should get confirmation on the Mac’s soaring numbers.

If it turns out Apple’s core businesses with the Mac, iPhone and Pod continued to do well despite reduced consumer spending and recession worries, expect to see AAPL continue its climb upward.

Jason Schwartz predicted today in a post on the Seeking Alpha site that AAPL could hit $300 in 2009 on Mac sales alone, but gives plenty of reasons why he thinks the company’s other businesses will thrive as well.

While $300 a share might sound crazy, Apple has a long history of transforming the improbable into reality. It wouldn’t surprise me.

Posted by David Zeiler at 5:17 PM | Permalink | Comments (4)
                       

Apple reported another record quarter yesterday, posting impressive numbers once again. But with expectations running even higher (not to mention a stock market getting bruised by fears of a recession), investors sent AAPL shares tumbling.

Once again, Apple shipped the most Macs ever in one quarter: 2.32 million, 7 percent increase over the previous quarter and a 38 percent increase year-over year. The surprise here was that desktop sales increased 20 percent from the previous quarter, while laptop sales were flat. Year-over-year, laptop sales rose 38 percent and desktops a hefty 53 percent.

Apple Chief Financial Officer Peter Oppenheimer said the Mac desktop rate of growth was over five times that projected for the overall PC desktop market (estimated at 10 percent in the most recent IDC figures). He attributed the desktop gains to the popularity of revamped iMac models released in August.

Investors had no gripes with the Mac’s performance, but deflated by the iPod’s. Though iPod sales rose to 22.1 million, an increase of 5 percent from last year, many analysts had estimated sales closer to 25 million.

Meanwhile, the iPhone sold 2.3 million units. So far it appears sales of the most hyped product of 2007 have not slowed. Oppenheimer said during the earnings conference call with analysts that Apple is “confident in our goal for 10 million for calendar 2008.”

In his Macworld keynote Jan. 15, Steve Jobs said that 4 million iPhones had been sold to date, Oppenheimer noted, which included 3.7 million sold through the end of December. That means Apple sold 300,000 iPhones over the first two weeks of January – not bad post-holiday sales for a pricey consumer electronics device.

Overall Apple exceeded its own forecasts by earning $1.76 a share with profits of $1.58 billion on revenue of $9.6 billion. Though this beat the analysts’ consensus earnings estimate of $1.62 a share on revenue of $9.47 billion, most expected much better results. In the often-wacky world of Wall Street, that means Apple’s earnings are a disappointment.

On top of that Oppenheimer offered lower than anticipated guidance for next quarter’s earnings, further feeding the concerns of already jittery investors. Never mind that Apple is projecting revenue growth of 29 percent year-over-year. After watching AAPL get pummeled last week following the absence of an iPhone-caliber product at the Macworld show, it took only a whiff of negativity to launch a fresh wave of selling.

After shedding $5.72 during regular trading yesterday, AAPL dropped another $17.71 in after hours trading, putting it at $137.93, a 23 percent fall from its December high of $202.96.

Apple’s biggest problem now is the perception that the prospect of imminent economic trouble here in the U.S. and throughout the world will mean slower sales in 2008. Oppenheimer declined to address the issue directly during the conference call, but it could put a drag on Apple’s fortunes this year.

Still, there’s this tidbit of good news: between the boffo profits and other cash generating operations, grew its cash stash by $3 billion, to a phenomenal $18.4 billion. That’s one heckuva rainy day fund.

UPDATE: The selloff continues; as of noon AAPL was down about $26, a 17 percent drop from the previous day's close, leaving the stock under $130. It's getting nasty.

Posted by David Zeiler at 4:24 AM in AAPL stock news | Permalink
                       

Apple stock got hammered Friday losing $14.88, or 7.6 percent in a session that saw the Dow lose 256 points and the Nasdaq 98.

While the bad day on Wall Street didn’t help matters, apparently the AAPL sell off was precipitated when J.P. Morgan analyst Christopher Danely lowered his rating on Intel from overweight to neutral. Danely said channel checks indicated Intel had a slowdown in orders in the fourth quarter of 2007.

Two days earlier Bank of America Securities also downgraded Intel for similar reasons. Intel’s stock lost $2, or 8.1 percent Friday after the one-two punch.

Wall Street interpreted Intel’s possible problems as a harbinger of trouble for the PC industry and punished PC makers accordingly. In addition to AAPL’s losses, Dell shares shed 6.8 percent and Hewlett Packard dropped 5.6 percent.

While I won’t dispute the analysts’ contention that Intel’s business could be slowing heading into 2008, I’m not so sure sales of Macs will suffer. Mac sales have been rising steadily for two years, and with fresh product announcements less than two weeks away at the Macworld show, I’d be surprised to see that trend change.

And it should be noted that even if Mac sales do turn out to be weaker in the first quarter of 2008, Apple has two other strong core businesses in the iPod and iPhone. Just a few weeks ago UBS analyst Ben Reitzes raised his price target on AAPL from $220 to $235.

Wall Street should know better by now than to lump Apple in with the other PC makers. When less reactionary investors see AAPL trading at $180.05, two words will come to mind: buying opportunity.

Posted by David Zeiler at 7:17 PM in AAPL stock news | Permalink | Comments (3)
                       

Three –count them – three investment research firms have concluded this week that Apple faring very well during this holiday shopping season.

This comes as no surprise to those of us who have watched Apple prepare for a very merry Christmas by unleashing the iPhone in June, new iMacs in August, new iPods in September and a new version of Mac OS X, Leopard, in October.

But let’s hear what the experts have to say.

First, Shaw Wu of American Technology Research: “Well, it’s looking like Apple’s most optimistic guidance in eight quarters is turning out to be conservative after all,” the analyst wrote in a report released Wednesday. “Back in October, we had concerns that Apple might have been too aggressive in its outlook, but our recent checks with supply chain sources lead us to believe it is positioned to deliver upside.”

Wu cited strong iPod sales, predicting 25 million units sold, and strong Mac sales, predicting 2.3 million “driven by Mac OS X Leopard and switchers.” However, Wu did foresee iPhone sales falling “slightly below” expectations.

Next up, we have Mike Abramsky of RBC Capital. Abramsky sees “a massive Mac Christmas quarter” with shipments of 2.4 million units. That would break the record for Mac sales in a quarter. For calendar year 2008, Abramsky envisions a boost in the Mac’s U.S. market share to 9.3 percent from 7.2 percent and global share to 3.7 percent from 3.1 percent.

Finally, Bear Stearns analysts Andrew Neff, Bill Hand and Ted Chung sent a note to clients Thursday raising its AAPL stock price target for 2008 from $243 to $249. The team based its optimism on “favorable feedback from retail channel checks (strength in notebooks, higher iPod sales), feedback from Asia checks (which indicate sequential uptick in Mac units vs. guidance for sequential decline) and strong acceptance of the new Leopard OS.”

As for the Christmas, they see the company “well-positioned for the holidays given the confluence of product cycles for Mac (new Mac, low channel inventory, Leopard OS, Best Buy store expansion) and iPod (strong new product acceptance).

In 2008, Bear Stearns sees the Macworld show in January setting the tone for the year (as it often does): “While we’re encouraged by AAPL’s evolution into a company with multiple growth engines – including our thesis that iPhone is emerging as a personal digital lifestyle device and view that video could be the next big driver – we note that AAPL will need incremental products (e.g., 3G iPhone, ultraportable Mac, other products TBA) in early “08 to buck seasonality issues.”

Not coincidentally, a new subnotebook and a 3G iPhone have been two of the hottest Macworld-related rumors on the Web in recent weeks. Jim Goldman of CNBC gave both rumors a major boost on Thursday when he reported that a “source close to some of the Asian manufacturers partnering with Apple Inc.” had confirmed the subnotebook for Macworld and the 3G iPhone by June.

Following this onslaught of positive reports (and a decent week on Wall Street), AAPL rose $12.08 for the week, closing at an all-time high of $194.30.

As great as 2007 has been for Apple, is it possible that 2008 will be even better?

Posted by David Zeiler at 6:27 PM in AAPL stock news | Permalink | Comments (2)
                       

Apple made the list because it sells Hannah Montana videos, TV episodes and albums through the iTunes Store. But Tribune?

According to the Stockpickr.com site, Hannah Montana is filmed at Tribune Co. Studios at KTLA Channel 5 in Los Angeles. I had no inkling that I worked for a company associated with such greatness.

The other companies on the list are: Disney (for obvious reasons); Nintendo (for its Hannah video games); Time Warner (for its coverage of the show in People and Time magazines); CBRL Group (because Cracker Barrel is one of Miley Cyrus’s favorite restaurants); Yum! Brands (Long John Silver’s is Miley’s other favorite restaurant); Vivendi (because Billy Ray Cyrus, Miley’s father in real life and on the show, has written songs for Universal Music Group that have been used on the show); Warner Music Group (same reason as Vivendi); and JAKKS Pacific (it distributes Hannah-themed toys).

Full disclosure: Having a young daughter has resulted in my own frequent exposure to Hannah Montana TV episodes and songs. I’m a fan, too.

Posted by David Zeiler at 12:28 PM in AAPL stock news | Permalink | Comments (14)
                       

By now anyone reading this will know that Apple reported another blockbuster quarter yesterday. I listened to the conference call last night and heard a number of tidbits neglected in many news stories. But before I give you those, here’s a summary of the results and my thoughts on what they mean:

Apple did not set an all-time record for quarterly earnings but did break its record for the September quarter by raking in $6.2 billion in revenue for a profit of $904 million. The profit was a whopping 67 percent year-over-year increase and far exceeded analyst predictions ($1.01 per share versus 85 cents per share).

All segments contributed. Though overshadowed by the iPod and iPhone in terms of publicity, the Mac chipped in with 2.16 million units, responsible for 62 percent of Apple’s revenue. It broke the previous quarterly record for Mac shipments by 400,000 and represented a year-over-year growth rate of 34 percent, a rate consistent with the last four quarters. By comparison, the worldwide PC market grew just 14.4 percent and the U.S. PC market only 4.7 percent, according to Gartner’s third quarter market share report. No wonder Mac market share keeps increasing.

The iPod sold 10.2 million units, a 17 percent increase over the year-ago quarter. This is impressive when you consider that the new models weren’t introduced until Sept. 5, three weeks before the quarter ended, and that the iPod faced in-house competition from its iPhone cousin.

The iPhone, for its part, sold 1.1 million units for the quarter. Apple Chief Operating Officer Timothy Cook credited the controversial $200 price drop with helping to spur sales. More on the iPhone later.

Oppenheimer didn’t have much to say about its software sales, which includes such items as iLife, iWork, and Final Cut Studio, but that broad category pulled its weight with a 36 percent year-over-year revenue boost.

Apple’s “other music-related products and services” category, which includes the iTunes Store, had revenue growth of 33 percent year over year. Oppenheimer said the iTunes Store had an incredible 85 percent of the paid digital download market for music in the United States according to Nielsen SoundScan data.

Apple’s retail stores experienced 42 percent growth in revenue (further proving that Gateway simply executed the retail concept poorly). As usual, Oppenheimer noted that 50 percent of the customers buying Macs were new to the platform, which jibes with the boffo sales numbers.

To keep the momentum going, Apple plans to open 40 more retail stores over the next year, both in the United States and abroad, including one in Beijing next summer.

But enough of the basics. Here are some other nuggets I gleaned from the conference call:

Talking up the enterprise: In response to a question about Mac and iPhone sales to small and medium businesses, Cook said Apple is “doing well there and growing” and that “we’re providing a solution in iPhone that many businesses love.” Given that Apple historically has paid little heed to businesses, preferring to focus on its image as a consumer electronics company, Cook’s statement might signal that Cupertino is preparing to actively court the enterprise market.

iPhone sales: Oppenheimer repeated Apple’s expectation that it will sell 10 million iPhones in the calendar year 2008. It won’t be easy. When Apple cut the price of the iPhone, Piper Jaffray’s Gene Munster did a survey on daily iPhone sales, estimating 9,000 phones per day before the price cut and 27,000 per day after. He also called that “unsustainable,” offering 13,500 as a more realistic number. For Apple to sell 10 million iPhones in 2008, it will need to average about 27,400 per day. Of course, in 2008 Apple will be selling the iPhone in Europe and eventually Asia.

Unlocked iPhones: Many pundits had guessed the number of people buying iPhones to unlock them for use on a network other than AT&T’s was in the 2 to 5 percent range, though Munster earlier this month had guessed 10 percent. Cook said Apple has estimated 250,000 of the 1.4 million iPhones sold were purchased with the intent to unlock -- close to 18 percent of the total.

Cash: Apple now has $15.4 billion in cash and no debt. Last year at this time it had $10.1 billion and in 2005 it had $8.26 billion. Talk about a cash cow.

High guidance? Oppenheimer stunned the analysts on the conference call by offering guidance of 9.2 billion in revenue for the December quarter, $700 million higher than current analyst projections and a 28 percent increase year over year. Apple is legendary for lowballing in its guidance and then beating it handily. With new iMacs, new iPods and the iPhone launching overseas going into the holiday buying season, the company’s most lucrative quarter, Apple could be feeling more confident than usual. But consider this: the September quarter revenue it reported yesterday represented a 29 percent increase year over year. Perhaps guiding at 28 percent is not so outlandish after all.

Posted by David Zeiler at 1:06 PM in AAPL stock news | Permalink
                       

Apple’s stock rose as much as 4 percent today on a report by research firm iSuppli that the iPhone snatched 1.8 percent of the mobile handset market in July, outselling all other so-called “smart phones.” That category includes Research in Motion’s legendary Blackberry. According to iSuppli, sales of the iPhone also matched those of LG Electronics’ Chocolate, the most popular “feature phone” (a less-capable category of cell phone) in the United States.

Remember, Steve Jobs’ stated goal for the iPhone was to grab just 1 percent of the cell phone market. For the iPhone to nearly double that in its first month is a tribute to Apple’s sixth-month marketing frenzy leading up to the device’s retail debut.

The bigger question here is whether the iPhone will be able to sustain its market share as the novelty gradually wears off. I would consider the iPhone an ongoing success even if its share drops much closer to 1 percent. Sales at that level would still meet Apple’s expectations, though doubtless be greeted by headlines such as “iPhone sales plummet,” or similar sensationalist drivel.

But our friends at iSuppli don’t foresee any drop-off in iPhone sales; on the contrary, they project steady sales growth for the next four years. The El Segundo, Calif.-based company repeated its prediction of 4.5 million iPhones shipping in 2007, “rising to more than 30 million units in 2011.” Again recall that Jobs has set an iPhone sales goal of just10 million over the first 18 months. An iSuppli press release gives iPhone sales projections of 13.5 million for 2008, 21.1 million for 2009 and 26.8 million for 2010.

Sales figures like that – if they indeed come to pass -- will not only please Steve Jobs, but everyone else who holds AAPL stock.

Posted by David Zeiler at 2:44 PM in AAPL stock news, iPhone | Permalink | Comments (3)
                       

Apple posted its best June quarter in company history, with virtually every product line contributing to a net quarterly profit of $818 million, yet many new stories couldn’t resist focusing on the iPhone. Because it debuted on the evening of June 29, the iPhone had only 30 hours of sales to contribute to Apple’s third quarter. But as the Paris Hilton of consumer electronics, it gets more than its share of media attention.

After AT&T lowered expectations with the announcement that it had activated only 146,000 iPhones in the product’s first two days, everyone was eager for Apple’s number. As it happened, Apple says it sold 270,000 iPhones, much higher than AT&T’s number but far short of the outlandish analyst estimates of 500,000 and up. A few stories even referred to the number as “disappointing.” (Some of you may be wondering where you last saw that 270,000 figure; I made that guesstimate in my entry on Tuesday.)

Apple itself never announced a goal for the first weekend, although it has repeated often a goal of selling 10 million iPhones by the end of 2008. The company expects to sell 1 million iPhones within the current quarter. That it failed to meet the sky-high expectations of a few feverish analysts is not cause for concern. As Apple CFO Peter Oppenheimer pointed out during the earnings conference call yesterday, it took all of seven quarters for Apple to sell 1 million iPods.

Analyst consternation notwithstanding, the iPhone has enjoyed a resoundingly successful launch. Oppenheimer said Apple plans to start rolling out the iPhone in Europe before the end of this year and in Asia before the end of 2008. Apple officials predictably deflected all inquiries regarding plans for future iPhones, but Oppenheimer did say the company is committed to the product as a “third business” to compliment its Mac and iPod segments. If you want still another hint of Apple’s grand intentions, try this teaser Steve Jobs quote from the press release: “Our new product pipeline is very strong.” He could be talking about Macs and iPods, but that remark is the back end of a longer quote lauding the initial success of the iPhone. Combine the iPhone’s spread onto other continents with the inevitable introduction of models at lower price points, and you’ll get some idea of this product’s tremendous growth potential.

It will take a while, though, for the iPhone to make a dent in Apple’s earnings because the company plans to use subscription-like accounting to spread the revenue from each sale over 24 months. Consider this, however: if you could toss the 730,000 iPhones the company expects to sell by September 30 into its fourth quarter earnings, it would probably comprise about 7 percent of the total. For comparison’s sake, the iPod accounted for less than 12.5 percent of Apple’s third quarter revenue in 2004 – more than two and a half years after its introduction. Just one quarter later the iPod accounted for nearly 23 percent of revenue, and in the most recent quarter, 29 percent. How much do you think the iPhone will contribute to Apple’s bottom line in 2009?

Investors understandably have been preoccupied with potential iPhone profit all year, boosting Apple’s shares almost 50 percent. But the iPhone isn’t the only horse in Apple’s stable: the company’s oldest and still most lucrative business, its Macintosh computers, has been growing dramatically and shows no sign of slowing down. I’ll discuss that further in another post later today...

Posted by David Zeiler at 6:29 AM in AAPL stock news, iPhone | Permalink | Comments (1)