Apple's Not a Hardware Company: Tech Weekly

NEW YORK ( TheStreet) -- Apple ( AAPL) was firmly in the spotlight again this week following CEO Tim Cook's comments at the Goldman Sachs Technology and Internet conference on Tuesday.

Despite the phenomenal success of the iPhone and iPad, Cook used a question-and-answer session with Goldman analyst Bill Shope to explain that Apple's more than a mere hardware company.

"Because we're not a hardware company, we have other ways to make money and reward shareholders," he said, adding that Apple generated $3.7 billion in software and services revenue last quarter. "If you look at that compared to software and services companies, it's an incredible amount of revenue."

Cook noted the purchase of an Apple device opens the door to additional revenue for the company. "We don't look at the sale of a product as the last part of our relationship with a customer," he said. "It's the first."

The Apple CEO, however, gave no hints about rumored products such as the "iCar" and "iWatch" during the 59-minute discussion.

Cook, however, took a swipe at PC giants such as HP ( HPQ) during the San Francisco event, explaining that the tablet market still represents a huge opportunity for Apple.

Inevitably, Cook was quizzed on hedge fund manager David Einhorn's decision to sue Apple. The Greenlight Capital president wants his fellow shareholders to vote against Apple's proposal to do away with preferred stock, which he says restricts "the board's ability to unlock the value on Apple's balance sheet."

Cook described the lawsuit as "a silly sideshow" and a "distraction," but reiterated Apple's prior commitment to "thoroughly" evaluate and consider the Einhorn proposal.

Later on Tuesday, Apple filed a proxy statement following Cook's comments about Einhorn's preferred stock proposal and subsequent lawsuit.

Also this week, it emerged that legendary investor George Soros added to his Apple stake during the fourth quarter. Einhorn also added to his Apple stake.

On Wednesday, Apple also lowered prices and upgraded the processor on its 13-inch MacBook Pro with Retina display barely four months after its launch.

Apple shares ended the week down 3.12% at $460.16.

Cisco ( CSCO) beat Wall Street's second-quarter earnings and revenue estimates on Wednesday, allaying concern about tepid enterprise spending.

The networking company reported revenue of $12.1 billion, up from $11.5 billion a year earlier and just above analysts' estimates of $12.06 billion. Excluding items, Cisco earned 51 cents a share compared with 47 cents a year earlier. Analysts surveyed by Thomson Reuters were looking for 48 cents.

Cisco's non-GAAP earnings included a tax benefit of approximately 1 cent a share thanks to the reinstatement of the U.S. federal R&D tax credit last month.

The San Jose, Calif.-based firm also offered healthy guidance, predicting revenue between $12.06 billion and $12.3 billion and earnings, excluding items, between 48 cents a share and 50 cents a share. Analysts surveyed by Thomson Reuters were looking for sales of $12.22 billion and earnings of 49 cents a share

Cisco CEO John Chambers struck a positive note during the conference call to discuss the results. "We continue to be pleased with the traction of our company," he said, and cited "a tone of cautious optimism" among Cisco's customers.

Chambers noted particular strength in U.S. commercial orders, which he said could be an early indication of GDP growth.

"U.S. enterprise and commercial, I really believe that that is the key to what the U.S. is going to do over time," he said. "At the moment, that looks good -- our pipeline is good."

The CEO, however, acknowledged that other parts of the world are still challenging. "We continue to see a soft global recovery," he said, pointing to weakness in parts of Europe, particularly southern Europe.

Cisco shares ended the week's trading down 0.8% at $20.99.

Star hedge fund manager Leon Cooperman has initiated a new three-million share stake in Facebook ( FB), according to a 13F filing this week. As of Dec. 31, 2012, Cooperman's Omega Advisors owned 3.1 million shares of the social networking phenomenon. Cooperman, who liquidated his Apple stake, did not have a position in Facebook prior to this filing.

Elsewhere, Warren Buffett's Berkshire Hathaway ( BRK.A) initiated a stake in Internet-infrastructure specialist VeriSign ( VRSN). The billionaire's holding company opened a position in Verisign, which provides domain name registry services, with 3,685,700 shares.

The Oracle of Omaha also made a modest increase to his IBM ( IBM) holding, adding 597,588 shares, bringing Berkshire's total to 68,115,484.

Facebook shares ended the week down 0.79% at $28.32, while VeriSign was up 1.65% at $46.14. IBM's stock was down 0.35% at $200.98.

Internet real estate company Zillow ( Z) blew past Wall Street's fourth-quarter estimates on Wednesday, much to the delight of investors.

"It was a terrific quarter, ending a great year. I'm really proud of the year we had this year," Rascoff said in an interview with TheStreet.

Zillow ended the week up 25.08% at $44.93.

Rackspace ( RAX) shares, however, took a pounding on Tuesday after the company missed analysts' fourth-quarter revenue estimates.

"We're in a 'prove me' kind of state, where we have spent a lot of time, all of last year, building out a new cloud platform," Bryan McGrath, director of finance at Rackspace, told TheStreet. "Now the onus is on us to sell it and prove that we can run large production workloads on our cloud."

Rackspace shares tumbled 19.62% during the week's trading to close at $59 on Friday.

Tech earnings season rumbles on next week, with quarterly numbers from Dell ( DELL) and HP.

In the meantime, enjoy the Presidents' Day weekend!

--Written by James Rogers in New York.

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