Analysis: I Would Not Worry Too Much About Apple’s Cautious Outlook

Authored by Jay Baage on January 17, 2007 - 7:09pm.

Apple’s stock tumbled in after-hours trading on Wednesday in response to Apple’s conservative guidance for the next quarter, a traditionally tough one for the company. However, record earnings for the first quarter and a steady hold of the digital music market, as well as new products in the pipeline – such as the Apple TV wireless media hub set to ship in February and the much hyped iPhone cellular phone due to hit the market in June – things are looking pretty good for CEO Steve Job right now. The question is what will happen to Apple after he is gone?

The market is worried about comments from Apple executives regarding somewhat lower margins and slower software sales ahead of the company's spring release of its upgrade to the new Mac OS X operating system, dubbed Leopard. However, Apple may also benefit in the coming months as consumers begin to consider replacing their computers after Microsoft introduces its new Vista operating system. Many industry analysts, as reported by the New York Times, believe that the delay in getting Vista to market significantly hurt the sales of Windows-compatible PCs in the last quarter. Moreover, market research firm IDC reported Wednesday that Apple's share of the PC market in the U.S. had grown to 4.7 percent in the quarter, up from 3.6 percent a year ago. That means that the growth rate of Mac sales was three times higher than sales of PC's during the quarter.

But Apple these days is so much more than computers. In fact, the company even changed its name last week – from Apple Computer Inc. to just Apple Inc. – in order to better reflect its broadening portfolio beyond computer products. With 21 million iPod players sold in the last quarter alone – more than double the number that it shipped in the same quarter last year – and total company profits up 78%, it is hard to complain that Steve Job’s is doing a bad job. Sure, he might have been smarter about settling things with Cisco when it comes to the use of the iPhone brand name. The options back-dating debacle has given the company a lot of negative PR, as well. But all-in-all, Apple looks like its is pretty well positioned to navigate through the new digital media/Web 2.0 universe right now.

“It sure feels good,” said Jobs, the co-founder and chief executive of Apple, during a telephone interview after the company’s briefing for analysts.

The main question is perhaps what Apple will be without Steve Jobs? There is no obvious heir to the throne. Jobs tried to play down his importance to the company in the call with analysts on Wednesday, paradoxically stating in effect that he is an “irreplaceable asset” that could be replaced. Nor did he present any details on the “After-Jobs” era for Apple.

“I believe I’m an irreplaceable asset with my family,” he said, “but Apple is an amazing company that would go on without any individual, including myself.” True enough, but where and how far?

Joakim Baage

Related Links:
Apple Reports Record Q1 Profits, But Outlook Disappoints Market
Apple Q1 2007 Report (Press Release)
Apple Reports Record 1Q Profit (AP)
Apple Profit Rose 78% in Quarter (NYT)
Apple Unveils $499 iPhone, Apple TV Wireless Media Hub
Cisco Sues Apple Over Use of iPhone Name
Buzz Watch: Apple iPhone – Wow!
What happens to Apple when Steve Jobs quits or dies? (Cox, Mar. 25, '06)
Poll: Which media stock would drop the most without its current CEO?
Steve Jobs' Bio (Wikipedia)