Thursday, January 13, 2005

ROB: Apple tops forecasts

So Apple Computer Inc. has come in big: first quarter earnings quadrupling to 70 cents a share, over guidance of 49 cents. The company attributes their strength to both the runaway success of the iPod and increased sales of computers. They’re even taking aim at people entering the computer marked with the Mini Mac, and sub-$500 machine.

Their financial strength seems to be coming from their low guidance. But that’s a cheap trick—guiding low and coming in high. Everyone (including beleaguered Nortel) has given it a try. I suspect that their success and popularity is coming from somewhere else, namely the ubiquity of the iPod. So their earnings are way up and their revenues are way up and they have a pretty saucy licensing deal with iTunes (despite the agreement with the Beatles). But how are their margins looking on the iPod? I’m not too sure. I’m not sure that the financial statements are going to tell us. What I do see, however, is increased competition in the hard-drive MP3 player market that may either put a crimp on margins or, perhaps, improve margins due to greater supply chain efficiencies from the OEMs.

Regardless of margin, the iPod has given Apple visibility. They’re everywhere in popular culture. On the scale of celebrity candids and remixed advertisements, the iPod has taken Apple to the top of pop culture. Perhaps we should pay some more attention to the “pop” part. Isn’t this the sort of thing that market bubbles are made out of?


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