October 23, 2007
For all the hoopla about the iPhone, Apple (Nasdaq: AAPL ) delivered a great quarter on the strength of boring old iPods and computers.
The first full quarter of iPhone sales on the AT&T (NYSE: T ) network saw 1.1 million phones sold, which gave Apple $118 million for its share of the revenue. On the other end of that equation, AT&T reported earnings this morning and hardly even mentioned the iPhone in its earnings release.
So the Street-beating, Rick-pleasing performance had very little to do with the new toys and much more connection to the stodgy old iPod, iMac, and MacBook product lines. This back-to-school season was much stronger than the last, with 38% higher revenues from desktop computers and a 42% jump in notebook sales.
iPods pulled in just 4% higher sales than last year because lower prices nearly outweighed 17% unit growth. But the iTunes music and movie store sold 33% more tunes and flicks than last year, and remained the third-largest music distributor in the country ahead of Target (NYSE: TGT ) and Amazon.com (Nasdaq: AMZN ) but behind Wal-Mart (NYSE: WMT ) and Best Buy (NYSE: BBY ) . Let your balalaika sing what my guitar wants to say about the music industry.
Now, the iPhone might become a solid contributor to Apple's results one day, as the gadget spreads to Britain, Germany, and France this quarter and presumably beyond that thereafter. I still think the company would be better served by taking a page from the playbook of Research In Motion (Nasdaq: RIMM ) and selling its phones through several carriers in each market -- but perhaps that's for later.
Ramping up the production line and then spreading out certainly could make sense -- but perhaps Steve Jobs wants to duplicate the single-service lockdown that has proven so effective in the iTunes-iPod symbiosis. I wouldn't presume to know what Jobs is thinking. His company is looking good with or without the iPhone and can afford to take its time developing that strategy.