Apple proves recession-resistant, for now
With all the economic doom and gloom in the world these days, Apple executives must be wondering what all the fuss is about.
Apple's Tim Cook and Peter Oppenheimer acknowledged Wednesday that these are uncertain times to be in the retail consumer electronics business. But put aside any doubts about Apple's ability to sustain the first wave of recession. Posting record revenue and profit during its fiscal first quarter, the company shattered analyst predictions on the strength of solid Mac sales and stronger-than-expected iPod sales.
Apple COO Tim Cook seems to think the future has gotten slightly easier to predict, coming off a record quarter.
(Credit: Apple)Can it last? Tough to say, given that few can predict how quickly or strongly the economy might rebound in 2009. But Apple actually improved its financial standing during what many considered to be one of the worst holiday shopping periods in generations. And that's likely to impress upon investors that Apple can hold its own even if the economy gets worse; they sent Apple's stock up 9 percent in after-hours trading following the results.
Apple's playbook for the quarter went something like this: Customers responded well to the company's new notebooks, pushing sales up 33 percent compared to last year. Favorable prices from chipmakers and display vendors slashing inventories meant Apple made a little more money on each one, as well.
One problem was that Mac growth inside the U.S. was just 2 percent, while overall desktop sales fell 25 percent. But 16 percent growth internationally made up the difference for Apple. What's more, expected refreshes to an aging iMac design could help lift desktop sales this year.
The other major factor was that the iPod continues to be a consumer electronics phenomenon, with 22 million units flying off the shelves and propelling Apple to a company record for shipments. Most analysts were expecting Apple to record only around 18.5 million shipments, making for a notable discrepancy.
The conventional wisdom was that a slowing economy would take its toll on iPod sales, but there seems to be some truth to a prevailing theory presented by some Apple executives and fans that shoppers recognize the value of the iPod when it comes to gift-giving: the basic iPods are still a hit with the kids and the iPod Touch is turning into a mini-gaming platform in its own right.
Apple knows it can't afford to coast coming off results like these.
It will need to sustain iPhone momentum, even with no new units expected for at least a few months, given the iPhone's importance to Apple's bottom line these days. Cook and Oppenheimer hinted that with 39 out of 50 states projected to run budget shortfalls in the coming year, Mac sales to educational customers--always an important segment for Apple--could be affected. And count on iPod shipment totals to fall dramatically next quarter, as they have in past years coming off the holiday quarter.
But Cook made an interesting comment midway through the conference call when discussing Apple's guidance for the upcoming quarter, which followed the company's traditional conservative pattern. In October, when Apple last reported earnings, the company spoke of the very uncertain economic environment that was hurting its "visibility" into the upcoming year.
That seemed like "a period of time where banks were going down seemingly every other day," Cook said. But now, "it is not as unpredictable as it was in October, perhaps."
Could Apple have already turned the corner on the recession? That's going way too far: Apple's increased confidence in its ability to predict 2009 resulted in guidance that would deliver a 4 percent increase in revenue and a decrease in earnings per share. But given Apple's notorious record of underpromising and overdelivering when it comes to financial guidance, the company could have far more aggressive internal targets for its business in 2009.
And having deposited another $4 billion in cash into a now-enormous war chest of $28 billion probably increases one's confidence as well.
Tom Krazit writes about the ever-expanding world of Internet search, including Google, Yahoo, online advertising, and portals, as well as the evolution of mobile computing. He has written about traditional PC companies, chip manufacturers, and mobile computers, spending the last three years covering Apple. E-mail Tom. 
You never know.
I know I am happy with the stock performance since I have been a holder from 1995
I am a happy customer for sure
I expect we might see a rev of the MacMini or the introduction of a mid Tower. Maybe just a refresh of the MacPro case, it doesn't need to be as big as it is. MacMini might well morph into a pumped up version of AppleTV.
Lots of room for new Macs!
Hungover from ObamaAid?
I thought so.
Looks like MS is laying people off.
Hmm, who's doing what again?
Holding and buying more AAPL.
Just askin'.
Anyway, great results. Interesting to see that Mac growth is starting to plateau and that iPhone sales are clearly beign cannibalised by iPod Touch sales.
Then, like the rest of the market, boom.
SO, for the first time, I did lose money on Apple.
But I also lost on every other investment.
Tough times, but I don't get your point sir?
But we are Apple-wise Mac users and watch the product cycles. Next week she gets the newly upgraded MacBook with the 9400 chip and double ram, and...as soon as the new iMacs come out within a few months, I will get a new 26" iMac. Computers are an important part of our lives and lifestyles, and we expect them to last five or more years between upgrades. We are not at all concerned with "sales" or "Christmas gift-giving" to buy in normal cycles.
I suspect the reason for stagnant desktop (iMac) sales, is that most serious Mac desltp[ Users are waiting for the coming major product cycle introduction...and the quarter of introduction will show a significant surge in sales.
their warchest keeps growing and growing,
it was $25 billion a while back if memory serves me correctly !
they could even buy RIM with the money they have !
that $28 billion could be their edge on the competition !
So I see no signs of Slowdown for Apple !
Anti-Apple? My word, you are priceless!
- by Balthasara February 26, 2009 2:11 PM PST
- What difference will quad core processors make when using an IMac?
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