“Rather than accept being a niche PC maker, Steve Jobs is transforming his baby into a high-end consumer-electronics and services company,” writes Jane Black for BusinessWeek ina Special Report on “Apple’s Strategic Shift.”
Black looks at how Apple is transforming itself with such products as the acclaimed iPod, “Steve Jobs & Co. stunned analysts by announcing they had sold 304,000 players in the company’s third quarter, nearly four times most analysts’ expectations.”
Black reports, “‘It’s a paradigm shift at the company,’ says Charles Wolf, an analyst at investment firm Needham & Co. and a longtime Apple watcher (who owns shares of Apple stock). ‘They are redefining what kind of company they are.'”
Black writes, “a look at Apple’s balance sheet reveals why it’s so anxious to broaden its audience beyond the Mac’s niche audience. In its third quarter, which ended June 30, Apple earned $428 million in gross profit, a 27.7% margin on sales of $1.55 billion, but it spent $419 million on operating expenses, leaving it with an operating margin of just 0.6%. ‘Apple’s gross margins are the envy of the industry,’ says IDC analyst Roger Kay. ‘But below the line, they give it all back. They pour money into R&D and [selling, general, and administrative expenses]. They have expensive retail locations and high-end advertising. It’s a Cadillac operation.'”
Black looks at the dramtic success of Apple’s portable line, especially the iBook, where, “In the third quarter, iBook unit sales jumped 43% from the quarter before, while revenues from the machine rose 30%.” And Black examines the potential upturn of fortunes that could result from the introduction of the Power Mac G5.
And Black reports, “Its .Mac initiative, which provides Web hosting, e-mail, and a variety of multimedia services, for $99.95 per year, is also turning out to be a sleeper hit. According to tech publisher O’Reilly & Associates, about 400,000 Mac users have signed up.”
Full article here.