Dos Hombres: Apple Keeps on Shining

Following their blow-out earnings release last night, Henry Blodget sat with me to talk Apple (AAPL). I don't know about Henry, but I kind of wanted to say something negative, if only to play devil's advocate. While devil's advocacy is normally a personal specialty, sometimes a man simply has to concede defeat. While there were some nits one could pick, for the most part, it was hard to find too much fault. The company reported $6.40 on more than $24 billion in sales against expectations of $5.26 and $23.34. Revenue growth was up 83% year-over-year, and every other financial measure followed suit.

But forget about the significance of Apple beating expectations. This was the 29th earnings beat in a row for Apple; that's seven years and three months to you and me. Instead Henry drilled into the drivers for this particular quarter. "It was a stupendous quarter for the iPhone," offered Blodget, alluding to the much better than expected 18.6 million iPhones sold in the quarter, an acceleration from the 4th quarter's 16.2 million. "The hitch is the iPad; you can't overlook that."

Henry has a point. Apple shipped 4.7 million iPads, well below some guesstimates as high as 6 million. That said, Apple did ship every iPad they could produce. Yes, not being able to make enough product to satisfy insatiable demand is a high-class problem -- but it's a problem nonetheless.

Blodget's other observation was that Apple's positioning in tablets is reminiscent of the '90s, when the company was dueling for desktop domination with a then-meaningful corporation named Microsoft. "Google's doing what Microsoft did, spraying a platform" across an endless number of product lines, says Blodget. The proliferation of Windows in every PC vs. Apple's closed operating system nearly drove the company into bankruptcy.

Of course, this time is different (words that are chilling to even type) in the sense that Apple's desktops, then and now, were priced at a premium to the competition. In iPhones and iPads, Apple is competitively priced against Android competition. Google may, and almost certainly will, surpass all forms of iOS by putting its Android OS in an endless number of devices, but Apple will only be at a competitive disadvantage if they offer an inferior product.

These aren't the days of the hideous and buggy "Flower Power iMac." Apple's got the title in terms of design elegance and performance. Is that sustainable? Tune in 90 days from now, when Apple posts its 30th consecutive earnings beat.

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