Community Perspective Apple's Big Bite

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By Standabove
May 3, 2001

The following perspective was written by a member of the Fool community and regular contributor to our discussion boards. The opinions of the author are not necessarily representative of the opinions of The Motley Fool or its editorial staff.

Apple (Nasdaq: AAPL) turned in a great quarter, whether some acknowledge it or not, but what really has me jazzed is how well Apple seems to have absorbed the lessons of the past and seems focused on the future.

This quarter's results show just where Apple's strengths lie, mainly in the ability to create new, must-have products even in dark economic waters. 750+M Macs are pretty good for a company on the verge of obsolescence, eh? Apple has always been out in front of the innovation cure, but they seem to be out there more frequently these days, producing great new product after great new product, with the occasional Cube thrown in.

Here's a riddle for you: Apple posts $43 million in profit. Subtract non-recurring earnings ($89 million for ARMHY shares -- I think they sold some to me. Those guys are printing money.) Add back in one-time charges ($86 million from equity write down).

So, $43 million - $89 million = - $46 million + $86 million = $40 million

So, if Apple shows a $40 million profit after non-recurring income, why does the income statement show an $8 million operating loss? I think I know the answer. Do you?

And here we are rolling into the real quarters, school buying and Christmas. New iBooks on the horizon, and the impending big OSX circus that is descending upon the general citizenry. And has anyone noted the way AAPL is eyeing the education market like the last cupcake at Anna Nicole's house? What will the press make of it when tiny, beleaguered Apple retakes the #1 education spot from Dell (Nasdaq: DELL)? How will they explain how David slew the goliath? It's gonna happen.

And QuickTime? For the first time in a long time Apple seems really focused on exploiting QuickTime as a profit center.

Apple was the only PC company that didn't cut jobs, and lookie, lookie R&D expenditures are up. While other companies are retreating, holding on for dear life, and waiting for direction, Apple is preparing for the future NOW. What future? Follow the Herring -- the man's spot on. AOL everywhere and high bandwidth content is the next upgrade cycle. And Microsoft's (Nasdaq: MSFT) monopoly is weaker than it's been in maybe 10 years. Now we have OSX and some insanely great products on the horizon (back to school iBooks).

Hey, Steve, it took you long enough but finally Apple is releasing products more frequently than at the two big trade shows. He can be taught!

By the way, I'm extremely impressed with OSX from a layman's point of view, but egad that e-mail application sucks. I'm afraid they've a ways to go before I give up good ol' Outlook. OSX's stability is instantly recognizable, and I love the versatility of the user interface, though the changes do take some getting used to.

Finally, can anyone explain to me why we're discussing analyst recommendations here? Of course, the analysts are bearish on Apple. Badmouth Apple and you're just one of many professionals who fall in line. Certainly no one will hold you accountable for that because the Street is conformist by nature. An analyst who bets on Apple who later turns out to be wrong (God forbid) will forever have that one thrown back in his face at broker barbecues and wall street ice cream socials.

Face it, it's easy to be bearish on Apple. It probably always will be. You can't be the leader of the pack unless you're out in front and exposed to reducible and occasional failure. It's easy to focus entirely on the past and miss the signs that point to the future. It's easy to avoid making leaps of logic that take you out of your cerebral comfort zone. It's easy to give up when success is uncertain.

It's much more difficult to dig in for the duration on the strength of your convictions.

Think different, mate.

Standabove