Hi Jill,
<< that would be the next earnings period, I haven't checked when that is. >>
April 13 after the close, but that is not confirmed yet. Reuters expects $0.43/share, but lately AAPL has gotten into the habit of guiding upwards a month or so before earnings, which naturally sparks a gap up and rally.
<< ...although as you say "stories" are meaningless... >>
I don't mean to suggest they are completely meaningless. Just that they usually are far less significant than retail investors think, because professional traders do not usually trade stories.
Your story speaks to AAPL customer loyalty, and the fact that AAPL products are often sought after even where cheaper alternatives are available. That's worth something for sure, but I just wouldn't read too much into it. For one thing, AAPL revenues are almost $10 billion per year (and they have about $6.5 billion in the bank with zero debt). Sales of iPods and downloads are not a major contributor to their revenue, and probably never will be.
But that's not to say iPods are trivial to AAPL's business at all. IMHO, two products that do not contribute in a big way to AAPL's revenues nevertheless are key to AAPL's future: iPods, and Mini Macs. The reason is that both perform critical functions as a means to a much much bigger end---I think AAPL's ultimate goal is to replace the overwhelming dominance of PCs in the industrial and business sectors primarily. The size of these markets dwarfs the size of the iPod market, and the potential effect on AAPL's revenues is staggering. AAPL has given every indication that it will eventually succeed in this goal, though it will take 5 years at least. What I mean is that they seem to be doing everything right. They have recognized clearly their sins from the past, and have assembled marketing expertise with strategic know-how that is second to none. And from that came the iPod and Mac Mini, which they rolled out knowing full well these would never make them a ton of money.
The path to AAPL's ultimate goal leads through the home PC market first. So the first order of business is for AAPL to send out tentacles into the home markets and grow deeper and deeper roots there. First, iPods. That has been a phenomenal success, and your story is a clear and very common example of that. Key to the iPod story was establishing the "cool" but not elite image---hence U2, the progressive image of users/customers portrayed (note: progressive, sophisticated, and cool customers, NOT snobbish intellectual customers). That also has been wildly successful. Next, exploit those inroads by getting their foot more and more in the door of the home PC market---hence, the Mini Mac.
Once they have proliferated their PCs throughout the population, it will be far far easier to get their foot in the door of the industrial sector in a major way. Actually, there has been quiet but steady progress towards this end in the server markets, which also is a means to an end.
So how will this be accomplished? What is the final key step? I think it will be a highly publicized event revolving around some big Fortune 500 company in a very competitive market deciding to dump all their PCs and replace them with AAPL products (maybe a result of much of management having AAPL products at home, and getting first-hand knowledge of their unquestioned superiority over PCs). Next, they will get rid of 75% of their IT people, who won't be needed anymore since many of the PC-specific brush fires they spend their time putting out will instantly disappear (some of these brush fires are related to viruses and trojans and worms, others are related to the increasing problems that result from the tendency or need to build more and more and more levels of complexity into Windows-based systems in general, and Microsoft products in particular, that generate accelerating problems, needs for endless patches and fixes that often don't work and the patches need patches, etc. etc.) That cost-cutting move will give them a much-publicized competitive edge over their rivals, and they will grab market share.
This is the sort of event that I think will open the floodgates. Management everywhere will begin asking themselves why they should not do the same, and will have fewer and fewer reasons why they should not. Eventually, they will feel compelled to do so if they hope to remain competitive, as they watch their competitors switching to Macs.
So if all this works out, AAPL will become a 2-ton gorilla one day. This is one reason why I cannot see myself selling my core position in AAPL, unless and until I see some evidence that AAPL is not likely to succeed in this. So far I have seen none. They don't make mistakes anymore. They have learned from their past, and mended their ways.
One of the barometers of success in this overall strategy is revenues and profits. Both have been expanding in curvilinear fashion, and that is why the market has continued to accumulate AAPL shares. So, revenues and profits will be important to watch going forward.
All IMHO, of course....
T |
