20 April 2006

Apple's Profit Beats Estimates

One of my initial posts was wondering if the high-flying stock of Apple was a bit too high. At that time, Apple was trading at about 80, or at about a P/E of 54. Since then, Apple came down about 20% to trade below 60 (per charts at Yahoo! Finance).

Last night, Apple reported profits that beat analyst estimates, sending the stock up nearly 3.5% (as of 12:30 EDT). Apple now trades at a more reasonable P/E of 36. More reasonable being relative for a company that's growing as fast as Apple is currently.

My problem is still the same as three months ago. I don't believe Apple will stay on top of the world forever. The switch to Intel chips (and the resulting success in installing Windows) has been plugged as the savior for the Mac line, but I don't agree. Pundits have been saying that education and business will flock to the Mac now that people can boot into Windows or OS X. Imagine being at your workstation and having to reboot the computer to use a Windows-specific application (and most business applications are). I wouldn't want to be in tech support for the first month of a Mac rollout.

The iPod just keeps selling! TV shows and movies are showing up in iTunes! Big deal. Apple loses money on everything that is purchased at iTunes, its a loss leader for the iPod. The iPod is currently the leader in the market, but at some point it will go the way of the Walkman. Remember when Sony was the dominant consumer electronics company?

Now, I'm not just bashing Apple to bash them. Had I won the argument, I'd have an iBook in our house right now (and Parallels gives me the way to win next time). I will likely be getting an iPod rather than one of the competitors when I do pony for an MP3 player. I use iTunes as my primary library organizer on my computer. I use and love Apple products, but I'd never buy the stock.

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