This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Don't Buy Apple's One-Trick iPhone Pony

On Tuesday I described some reservations I have regarding the market's reaction to Apple's (AAPL) iPhone.

While some have criticized my pricing and keyboard concerns, the real objection seems to be to my statement that Apple's shares have benefited from a nearly $20 billion incremental rise in equity capitalization from last week's MacWorld announcement.

In actuality, that was being conservative. I would say there was more than $5 to $10 of pre-announcement hype built in to Apple's share price, and then the stock rose another $10. With 870 million shares outstanding, those two pops represent $4.3 billion to $8.7 billion and $8.7 billion, respectively, which is how I arrive at nearly $20 billion in hype.

I believe those who have objected to my view are wrong. Here's why.

Were it not for the success of the iPod, Apple's growth rate would have plunged over the last two years. (You could argue that the iPod's growth rate, too, is decelerating, albeit from a lofty rate of growth.)

If you doubt my assertions on Apple's non-iPod growth, turn to page 54 in Apple's 10k, which highlights the dollar and unit sales contributions by product line and geographic region.

From 2004-2006, iPod unit sales rose from 4 million to 39.4 million, representing unit gains of 75% in 2006 over 2005 (69% in revenue) and gains of 409% in 2005 over 2004 (248% in revenue). During the same period, Apple's desktop sales rose from 1.6 to 2.4 million units -- a loss of 3% in 2006 over 2005 (-3% in revenue) and a gain of 55% in 2005 over 2004 (45% in revenue) while Apple's portable products unit sales rose from 2.6 million units to 4.05 million units, representing unit gains of 42% in 2006 over 2005 (+43% in revenue) and unit gains of 11% in 2005 over 2004 (11% in revenue).

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,142.89 +10.92 0.06%
S&P 500 2,000.22 +1.24 0.06%
NASDAQ 4,559.8030 +7.0440 0.15%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs