Apple Holders Bask in 'Halo' Effect

After Apple (AAPL - commentary - Cramer's Take) reported that remarkable quarter three months ago, in which it trounced the Street's consensus and guided way higher into the Christmas quarter, I thought that was probably the best quarter vs. expectations that I'd ever seen. Last night's quarterly report from Apple was probably even better.

As I noted last night, the quarter is even more remarkable than the headlines read, as the company's share count and tax rate were both higher than expected. Yet the company still earned 70 cents vs. the 49 cent consensus. Simply remarkable.

It sold more than 4.5 million iPods, which is astounding, but we all knew that before the company even reported. The most remarkable part of the quarter was that they sold more than a million Macintosh units. The so-called "halo effect" is already showing itself. The company has rolled out that new sub-$500 headless iMac, and the bears are worrying about Apple cannibalizing sales of its own higher-priced units. The real story there is that the cheapMac (as I like to call it though it's not a very flattering term and maybe I shouldn't) is going to help the company really go mainstream in the home once again.

I read a quote today from Robert Chira, an analyst at Fulcrum Global Partners, that said a third of all desktops in the U.S. market are priced under $599 and that two-thirds are priced below $899. With this cheapMac, Apple is now poised to go after this 67% of the PC market that was unaddressable to them previously.

This halo effect is no joke, and it's going to propel market share gains for Apple throughout the year that started on our calendar two weeks ago.

I have to wonder about all these bears who told me to short Apple in the 30s, 40s, and 50s and who now say I should sell it because it's priced for perfection -- when did they tell me to buy it that they can now tell me to sell it? That said, you know me and that whole discipline thing. I've got January and April 70 calls that are now kicking in, so I'm selling some of the January 55 calls that I have big gains in and now want to take off some exposure.

Given that Microsoft's (MSFT - commentary - Cramer's Take)runaway success with its Halo video game, which is likely to help Microsoft beat the Street's consensus for itself this quarter, isn't it ironic that the "halo" effect is driving Apple and its rival Microsoft and Apple at the same time.

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At time of publication, the firm in which Willard is a partner was net long Apple and Microsoft, although positions can change at any time and without notice.

Cody Willard is a partner in a buy-side firm and a contributor to TheStreet.com's RealMoney. He also produces a premium product for TheStreet.com called The Telecom Connection and is the founder of Teleconomics.com. The firm in which Willard is a partner may, from time to time, have long or short positions in, or buy or sell the securities, or derivatives thereof, of companies mentioned in his columns. None of the information in this column constitutes, or is intended to constitute, a recommendation by Willard of any particular security or trading strategy or a determination by Willard that any security or trading strategy is suitable for any specific person. Willard appreciates your feedback and invites you to send it to [e-mail].