Apple's Rollercoaster Two Days

In the span of just a couple of days Apple both announced another quarter of expectation-busting record profits and the fact that Steve Jobs would be taking another medical leave of absence.  Compared to his two prior medical leaves of absence this one ominously did not contain an expected duration.  

Lets start with the upbeat news
(For details, disclaimers, notes, etc. see the Full Report)

Net Sales by Operating Segment:(millions)


  Three Months Ended
  December 25,2010 December 26,2009 Change
Americas net sales $9,218  $6,092 51%
Europe net sales 7,256 5,024 44%
Japan net sales 1,433 783 83%
Asia-Pacific net sales 4,987 1,813 175%
Retail net sales 3,847 1,971 95%
Total net sales $26,741 $15,683 71%


Any of those numbers would be strong in this world economy, but the percentage growth in China and Japan are astounding. Apple’s efforts to open these markets are now bearing substantial fruit.

Net Sales by Product:(millions)  

Mac Sales:

  Three Months Ended
  December 25,2010 December 26,2009 Change
Desktops $1,731 $1,692 2%
Portables 3,699 2,758 34%
Total Mac net sales 5,430 4,450 22%

During the conference call management made a particular point of exceeding the Gartner Group’s projection for PC market growth of 3 percent.  But their desktop business did less than that (on a decline of units sold) and the portable growth was primarily driven by the new Macbook Air, an expensive high-end product that is unique to Apple.  With the overall revenue growth at 71 percent the Mac growth of 22 percent appears tepid by comparison.

Non-Mac Sales:

  Three Months Ended
  December 25,2010 December 26,2009 Change
iPod 3,425 3,391 1%
Other music related products and services (iTunes) 1,431 1,164 23%
iPhone and related products and services 10,468 5,578 88%
iPad and related products and services 4,608 0 NM
Peripherals and other hardware 593 469 26%  
Software, service and other sales 786 631 25%

Quite notable in this list is that iPod revenue increased only one percent, and that came on a seven percent decline in units sold.  Looking at the breakout the $229 iPod Touch increased in sales 27 percent over the year before to now account for half of all iPod sales.  That means that the other current models of the iPod:  the $249 classic, $149 Nano and $49 Shuffle, suffered serious sales declines.  It was not a matter of being stale products either.  Both the Nano and Shuffle had significant new models introduced at the start of the quarter.  Moreover the iPod touch, depending on your point of view, is less of an iPod as it is a phoneless iPhone or a tiny iPad.  Thus it may be that the market for a portable device that just plays media may be in serious decline.  Amidst all of the other glowing earnings news is this a matter of concern?  Not for the bottom line, but the Nano and Shuffle are kind of the gateway drug of becoming an Apple addict.  A teen might get one as a gift or on their own, build up a library of their favorite songs on iTunes, and then be linked into buying further devices that could play their songs.  

The real cloud hanging over the event, even though no reporter asked it (most likely from being told that no question on it would be answered at all) was Steve Jobs’s indefinite medical leave.  But across the business channels and financial web sites the same question was asked but left unanswered:  How valuable is Steve Jobs to Apple?  The answer is probably twice what you think.  There are a lot of famous CEO’s in history and all have eventually been replaced.  Some are superstars to the investment community such as Warren Buffet or John Rockerfeller.  Others were superstars among their workers  like Hernry Ford or Bill Gates.  Steve Jobs does both of those well.  But he also does something very rare in a CEO.   He is a large part of the reason why his company’s products are cool.  The only comparison I can think of is Sir Richard Branson.  

So if you will forgive something of a radical opinion this is what I think Apple should do.  They should bring back The Woz.  Steve Wozniak, the other co-founder of Apple.  Not to run the place.  Oh for heaven’s sake no, he never was particularly interested in the business part of it.  But to be the public image of the company, to keep it associated and connected with its history and roots.   Apple thrives on having their product announcements be huge events with weeks of buzz beforehand and a full room of tech experts at full attention.  Steve Jobs can fill the stage that way.  Few other people can, except maybe The Woz.

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  1. […] It has been three weeks since Apple (NASDAQ: AAPL) announced its financial results for its fiscal 2011 quarter ended December 25, 2010. Apple announced it had record breaking revenues of $26.74 billion and net quarterly profits of $6 billion, or 6.43 per diluted share.  As summary of the prior release and some additional comments are at this earlier post.  […]

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