Is There a Dark Side to Apple’s Financials?

January 19th, 2007

Consider the situation: A company earns record profits, exceeding analyst estimates in most respects. Despite the skepticism, and dire predictions from over the years, just about everything the company touches turns to gold.

At the same time, journalists don’t want to make it seem that they are fawning over the company, and they no doubt want to provide at least a semblance of fair and balanced coverage. So they’ll call a few industry analysts from a list of folks covering the business, in search of some pithy quotes.

Yes, that’s the way to cover both sides of the story, but when it comes to Apple Inc., you just know that the company has a powerful spin machine that will be working at full tilt regardless of the actual facts. It doesn’t matter if it’s a profit or a loss, whether a product is a success, a failure, or somewhere in the middle, it’s easy to go away with the impression that the company plans to change the world and is doing just that.

But let’s look and see if there’s anything about the numbers that doesn’t seem so impressive. After all, Apple’s stock took a dip after the quarterly report was released, so clearly something was wrong, although it may well be their conservative guidance for the current quarter. But Apple has always been careful about such matters, and they come off looking like huge winners when the figures end up being a whole lot higher.

Well, I suppose the sales of new Macs might be a matter of a little concern. After all, with 50% of new Macs being sold to people who are new to the platform, shouldn’t the sales have risen more than they actually did? If that estimate of Mac switchers is correct, it means that a lot of existing Mac users may still be on the sidelines and not buying new computers. And, even though their market share in the U.S. went up somewhat, at least according to one estimate, it was down overseas.

Is there something wrong here?

A good question, and I don’t pretend to have solid answers, but you have to wonder why some of you aren’t buying new Macs in sufficiently high quantities. Well, it is true that Apple sells more computers during the September quarter, because of educational purchases. This time, it was the Christmas holidays, and PC sales in the U.S. weren’t all that terrific anyway, but Apple managed to sell Mac at pretty much the same clip as in the previous quarter.

It is true, of course, that the fall upgrades to Mac hardware were fairly tame. Sure, Apple switched many of their models to the new Intel Core 2 Duo processors, which offer a modest speed boost, but nothing you’re likely to notice all that much without a stop watch.

The Mac Pro came out in August, and it’s a speedy beast. But didn’t Intel come out with quad-core versions of its Xeon processor, so why didn’t they turn up in the Mac Pro? Apple didn’t even have to do anything more than issue a press release or quietly offer quad-core processors as a build-to-order option.

So were professional users sitting on their hands, waiting for double the processor power, or is a certain powerhouse application from Adobe making them hold off their purchase of new Mac hardware? Well, that’ll change by spring.
What about Leopard? Does the idea of a brand new operating system make you want to hold off buying a new Mac until they come installed with Mac OS 10.5 preloaded. After all, why pay an extra $129 — or whatever Leopard will cost — when you can get it free? Besides, perhaps Apple will upgrade Macs even more in the coming months, with faster processors, new form factors, the whole nine yards.

Of course, all of this is speculation. Perhaps informed speculation, since these scenarios are very plausible.

On the other hand, I do not think that some people are postponing new Mac purchases because of that stock options affair. Besides, if anything were to happen that would hurt Apple, I expect it’ll be telegraphed in advance to some degree, particularly if Steve Jobs were targeted further by government investigators and prosecutors.

But despite some wayward speculation from a few tech pundits, I don’t see that much of a chance of it happening. Although Steve Jobs is one of the most powerful executives in the tech industry — and the entertainment industry for that matter — there’s not really a huge incentive to bring him down.

So is there something potentially upsetting in Apple’s record-breaking financials? I’m sure there are plenty of naysayers out there who will try to find the dark cloth behind the silver lining, but I just don’t see it happening.

But I’ve been wrong before too.

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11 Responses to “Is There a Dark Side to Apple’s Financials?”

  1. Javier says:

    Professional users are waiting for Adobe to get their game on. Other users are either waiting for their current Macs to die, or for Leopard to be released. Unfortunately for Apple, Macs last longer than Windows PCs.

    Last year, Abode could be excused because Apple’s Intel transition occured ahead of schedule. Now we are at the point where the transition was originally scheduled to occur; Adobe is running out of excuses. It will be interesting to see how Apple and Apple’s prosumers react.

  2. John says:

    I, for one, am waiting for the Dual Quad core Mac Pros to be released to get one. I’ve been waiting since Intel announced the processors.

  3. MichaelT says:

    I waited till after Macworld to order my iMac (24) and an iBook for my wife. I just wanted to see whether we’d get a little speed bump or a software upgrade, but since neither one happened, and because I am happy with the current state of both of these computers, I got them right afterward.

  4. Snafu says:

    Actually, Adobe is following plan, too: theirs, which is go Mac Intel in the next big release of Adobe software, as it makes most sense for them.

    Anyway, everything has conspired to hold pro buyers until Summer: Adobe products’ launch, major Mac Pro and peripherals updates, Leopard, etc.

  5. Steve J says:

    Maybe Adobe is waiting for Leopard, too.

  6. Dave Barnes says:

    I am waiting.
    Waiting for something new in the Mac Pro line to be announced and then I will replace my 1.8 GHz G5 SP.
    Waiting for the Mac Mini to be upgraded to Core 2 so I can tell my friend–who are converting from Windows to Mac OS X–what to buy.
    Waiting for new monitors to be announced so I can buy a bigger one.
    Waiting for iWork07 to be announced so I can buy it and try out Pages and Keynote.
    Waiting for Leopard so I can buy the family pack and upgrade 4 machines.
    Waiting for the next upgrade to the MacBook so I can replace a PowerBook 1.3GHz.

  7. MichaelT says:

    At work I’m waiting for my mandated upgrade after my warranty expires (August). By then, I expect everything I’m looking for will be available. (Quad-core Pro, Leopard, iWork07.) Pant-pant.

  8. Tom B says:

    I was disappointed by the numbers, given all the anecdotal buzz about “switchers” coming over in droves. I think the release of Vista, though, will serve to make tha Mac even more appealing. I am hearing that Vista has a few really user-hostile “features” relating to DRM.

  9. Jon says:

    This is one pro Mac user who is looking to switch from print to video. I serendipitously managed to pick up a copy of Final Cut Studio Pro HD at 50% off at a Phx CompUSA closing and have it sitting on the floor next to my desk just waiting for the proper Mac to run it.

    I was ready to buy a top of the line Mac Pro at the beginning of Dec, but held off mostly because of the not realistic expectation (IMHO) that MacWorld would see some Mac announcements. (Yes, the TV and iPhone looke to be terrific devices, but it is highly unlikely I’ll use either. I don’t even own an iPod, nor am I likely to. And money is not the issue.)

    But no…so it looks like I’ll be holding off a bit longer. No sense sinking a tidy sum into something now, only to have an improved Mac Pro released in another 90 days or so.

  10. Brock says:

    I’m holding off until Leopard arrives. Because of footprint restrictions, my first computer will be the 24″iMac.What new hardware is required to run it is important, but being that WebTv is so archaic – anything is better. Whatever his Stevieness’ financial concerns are is irrelevant, as is the iPhone. Just `get it done’.

  11. Dana Sutton says:

    I bet there’s another and equally important reason for the soft sales of the Mac Pro that has nothing to do with the lack of a Universal MS Office and Adobe Creative Suite — simply that the iMac has become such an attractive option that it appealing to many customers who once upon a time would have opted for a tower.

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