October 22nd, 2008
Steve Jobs to Wall Street: Apple is positioned to ride economic storm
Apparently, Steve Jobs still has what it takes to sell Apple - even to battered-down Wall Street.
For the past week or so, there’s been a lot of chatter about the state of the economy and what sort of impact it might have on companies during the holiday quarter. Apple, like many others, is walking blind into the storm, uncertain of what’s ahead. So, to make sure that investors don’t start getting too nervous about the outlook for Apple, the company called in the big guy - Mr. Jobs himself - to get on the line with analysts during the company’s quarterly earnings call and answer the questions that are weighing heavy on their minds.
But first, before the questions, Jobs took a few minutes to go over the numbers - no, not those numbers. The other numbers:
- Macs and iPods continue to be big sellers. The company sold 11 million iPods and maintained a market share lead of more than 70 percent for portable music players. More than 2.6 million Macs were sold in the quarter. The iTunes music store has more than 65 million accounts and a catalog of more than 8.5 million titles. The iPhone App Store will see its 200 millionth download today (if it hasn’t happened already).
- And speaking of the iPhone, the sales have been so phenomenal that the iPhone now accounts for about 39 percent of the total business - in just 15 months. Oh, and as for that goal of 10 million iPhones by the end of the year - it’s already been met. In fact - when you count by revenue - Apple has become the third largest mobile phone supplier in the world.
- Oh, and one last thing before the questions begin: Apple is sitting on $25 billion in the bank and has no debt. That leaves Apple in a position to invest in the way it did during the last downturn. After all, companies flush with cash in a downturn are presented with opportunities that other companies don’t get.
Hmmmm. (Long pause here to reflect on that last sentence and what it might really mean.)
So, with all of that out of the way, Jobs opened the line to questions. The thing is, Jobs probably could have made his statement and hung up the phone without taking a single question. By the time he was done recapping the quarter, shares of Apple - which had dropped about 7 percent on the day - were back on the upswing in after-hours trading, heading for a rally that would eventually send the stock price up more than 13 percent.
Jon Fortt - a former colleague of mine at the San Jose Mercury News and now a journalist with Fortune - said in his own blog posting yesterday that the last time he remembered Jobs on the line for an earnings call was eight years ago when Apple missed its numbers, a sign that the dot-com bust was about to hammer down on Silicon Valley. But if you’re thinking that the cameo by Jobs was a sign that another tech crash is on the horizon, think again. Sure, things are economically challenging these days, but Fortt, who has been following Apple for probably close to a decade now, says things today aren’t the same as they were back then:
Back then Apple was a puny computer maker with a stagnant market, expensive products, and no obvious prospects for growth. The iPod and iPhone weren’t born yet. The company didn’t have a lot of cash. Fast forward to 2008 and Apple’s Mac sales are growing faster than its rivals, its iPods rule the MP3 player market and the iPhone is on a tear.
Does this mean that Apple will be immune to the economic downturns and that Apple will have a bright and shiny holiday quarter with record iPod, Mac and iPhone sales? Hardly. Even Jobs himself admits that he’s no economist and that he reads the same newspapers we’re all reading to get the latest insight into the economic forecasts. Still, for the moment, he was able to calm the nerves of Wall Street and remind them that Apple is planted on a solid foundation of popular, high-quality products and services that continue to see growth and shatter records quarter after quarter. The economy may smack the company around a bit over the next few quarters but, rest assured, Apple will still be standing when the storm has passed.
Sam Diaz is a senior editor at ZDNet. See his full profile and disclosure of his industry affiliations.
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