“Steve Jobs has been on a roll. His iPod music player is the hottest product in the consumer-electronics market, selling a jaw-dropping 733,000 players in its first fiscal quarter, ended December 27, 2003. Apple’s new deal with Hewlett-Packard to sell HP-branded iPods and put the iTunes Music Store on the default desktop of all HP consumer machines was a major coup …And on Jan. 14, Apple posted its strongest quarter in two years. Revenues hit a four-year high of $2 billion, 36% above the same quarter in 2003. Apple shipped 829,000 computers, a 12% increase from the same quarter last year,” Alex Salkever writes for BusinessWeek.
“So why was Wall Street only lukewarm after this seemingly strong performance? Apple shares fell 5.6% the day after the earnings report, from $24.20 on Jan. 14 to $22.85 on Jan. 15 (and closed on Jan. 23 at $22.56). True, the stock had run up in anticipation of solid numbers. But the rapid retreat surprised many, even though the logic behind the move is clear: The Street had been hoping for bigger sales numbers on PowerMac G5 desktops,” Salkever writes.
Salkever writes, “The Street’s short-term logic is easy to understand. But investors with a longer-term horizon might want to look closer at Apple. For starters, worries about sluggish sales on the PowerMac line aren’t justified. The main buyers of these hihg-end machines are creative professionals in advertising and media. While that sector is looking stronger by the month, it’s still far from the salad days of the dot-com boom when buying a new computer hardly required any thought. The real return to strength in the ad and media biz will come in 2004, and that’s when Apple should start seeing stronger sales of these machines. Further, Apple is developing a strong niche in the scientific computing market as more Unix jocks at institutions of higher learning decide to combine their workstation and their PC into one box.”
“All told… the Street might be missing the forest for the trees in Apple’s latest numbers, and lots of green could shake loose if Jobs & Co. realize even a little bit of the upside that investors seem to have overlooked in the earnings report,” Salkever writes.
Full article here.