Results

In an unexpected twist, yesterday’s earnings report from Apple shows that the Silicon Valley giant is still very much dependent on its Macintosh products for revenue. As the Wall Street Journal is reporting, “Apple said it sold 51% more Macs in the quarter than a year earlier, with that revenue jumping 54% to $3.49 billion from $2.27 billion, about 47% of Apple’s total revenue.” The findings are especially significant when viewed in light of recent economic woes, as most consumer electronics companies are expected to perform poorly during a slump. Apple, however, has somehow managed to make their revenues rise against all expectations.

The other surprising thing about Apple’s earnings report is the fact that its Macintosh products are still its most significant source of profits. According to an Apple press release, “Apple shipped 2,289,000 Macintosh® computers during the quarter, representing 51 percent unit growth and 54 percent revenue growth over the year-ago quarter.” iPod sales, which were also strong, represent just 8 percent revenue growth for the company. Analysts have speculated that the strong Macintosh performance may be due to a saturation of the music player market. Apple COO Tim Cook refuted this claim recently, saying “For last quarter [Q1 2008] in the U.S., 40 percent of iPods sold were sold to people who did not own an iPod. In thinking about this number, this doesn’t feel like a saturated market to us.”

Other industry watchers have given Microsoft the credit for Apple’s big earnings. More and more companies, my employer included, are switching to Macs in the enterprise setting due to problems with Vista. Just six percent of businesses have adopted Vista, and the recent service pack release has been less than well-received. By contrast, Apple’s OS X saw a business share of 4.3 percent in 2007, putting it in very close competition with Vista.

Part of the reason this movement is occurring is due to the nature of software compatibility these days. Software as a Service (SaaS) companies are gaining popularity, and many business users and individuals alike are turning online for their word processing, spreadsheet creation, photo editing, email management, and even database management tools. Major players in the SaaS market, like Salesforce.com, Google, and Adobe are taking customers away from their MS Office Suites and onto the web. In a way, this means that a browser is really the most important piece of your operating system. Vista’s annoying quirks are too big to ignore, so even business users who would usually need Office are looking for alternatives.

However, it’s unfair to Apple’s careful brand to say that Vista’s failure is the only reason for their success. Their entertaining ads and friendly image, while much more directed at consumers than businesses, draw a clear connection between Apple and creativity. Their innovations in user interface, with both the iPod and the iPhone, have set the gold standard which all others aim to emulate. It seems to be paying off nicely, as their 2nd quarter earnings have surprised the entire industry.

Thursday, April 24th, 2008 You can skip to the end and leave a response. Pinging is currently not allowed.

By Haley January Eckels