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Investors were cheering another strong quarterly performance by Apple Computer (AAPL) - Get Apple Inc. (AAPL) Report on Thursday, but it was the company's astonishing growth in Mac sales that grabbed the Street's attention.

Apple's stock jumped 5.8% in recent trading, adding $4.33 to $78.86.

"On the strength of the Mac's forthcoming ability to run Windows applications, we thought 2007 would be a breakout year for Mac sales. We were wrong," wrote Needham's Charlie Wolf in a Thursday note. "The breakout appears to be already occurring." Needham makes a market in Apple.

"Never in the history of the PC has a company been better positioned to both gain share and improve profitability," wrote a bullish Jonathan Hoopes for ThinkEquity Partners, which makes a market in the company. "Investors should ... understand that Apple's software holds the key to both share gain and margin expansion."

Helped along by the back-to-school season, Apple's Macintosh sales grew 30% to 1.6 million units, while sales of its market-leading iPod digital music player ballooned 35% to 8.7 million units during the quarter.

Apple said late Wednesday that it earned $546 million, or 62 cents a share, vs. $430 million, or 50 cents a share at the same time last year. Revenue totaled $4.84 billion, compared to $3.68 billion.

Thomson First Call analysts pegged the company for 51 cents a share on sales of $4.66 billion.

Apple observers were especially pleased with the stellar Mac growth, given the computer industry as a whole.

"IDC and Gartner just

released their numbers... Apple grew at four times the industry, which implies very strong share gains," says Chirag Vasavada, an investment analyst with T. Rowe Price, which holds Apple shares.

Compared with a

Hewlett-Packard

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PC and a

Dell

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PC and a

Gateway

(GTW)

PC, Apple's PC is "a differentiated product in an otherwise commodity market," Vasavada says.

And by moving to

Intel

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chips, customers still can run Windows, making the barriers to adoption lower, Vasavada says.

In addition, unlike pure hardware vendors that ship their PCs with Windows, Apple does not have to pay a percentage to

Microsoft

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each time a unit is shipped, Vasavada says. Apple machines can run Windows, but doesn't sell Windows-based PCs.

"They've changed the competitive landscape dramatically," he says.

Others cited the so-called halo effect -- the theory that iPod owners, seduced by the sleek design and user-friendly product, will increasingly migrate toward Macs -- could be now be unfolding.

Steve Lidberg, who covers Apple for Pacific Crest Securities, wrote that for the past three quarters, more than half of Apple store customers are new to the Mac platform, according to Apple management. Pacific Crest makes a market in Apple.

"Clearly more and more people are adopting Apple's operating system," says Jim Grossman, an equity analyst with Thrivent Asset Management, which holds Apple shares. "People have started to see the advantage of a tightly integrated system. They're changing their mind and buying Macs."

It's an evolution that takes time, Grossman pointed out. People don't buy new laptops at the same pace they replace cell phones, for instance. "It's a commitment that's pretty big.

"We expect them to continue this solid share gain. This strategy is coming to fruition now and I think we're going to see more of it next quarter, and for that matter, 2007," Grossman says.

Credit Suisse's Robert Semple agreed: Apple's "relatively low market share of 2.7% (in PCs) leaves substantially more head room than its dominant, but lower margin, iPod business." His firm does and seeks to do business with the companies it covers.

Perhaps overshadowed, but certainly not forgotten, was the robust growth in iPod sales, which surpassed analysts' informal consensus estimates.

"I was genuinely surprised at the 8.7

million number on the iPod side," Grossman says. "There was kind of a buzz on Wall Street that iPod numbers were going to be low."

The company issued lighter guidance, as is its custom. For its first quarter, Apple forecast a profit of 70 cents to 73 cents a share on sales ranging from $6 billion to $6.2 billion. Analysts had higher hopes, estimating 77 cents a share on revenue of $6.4 million.

Despite the soft guidance, Apple is poised to deliver plenty of holiday cheer.

"With its entire systems portfolio switched to Intel processors and refreshed iPods out, Apple should be well positioned for the holiday selling season," Lidberg wrote. "New product introductions and the continued expansion of Apple's ecosystem should provide fuel for 2007."