Reality Check for Apple

Apple's strong Q3 results, along with record Mac sales, are not all what they have been touted as, according to one columnist. MarketWatch's Herb Greenberg has posted a "Reality Check" on Apple stock, noting that while Apple posted impressive Q3 2006 numbers, the trend is still down for Apple. "So, what's not to like? Plenty, especially when you consider that iPod unit sales, from a quarter ago, tumbled 5 percent -- the second straight quarter of declines," the columnist noted. "And while iPod unit sales were up 32 percent year-over-year, that's down from the prior quarter's 61 percent year-over-year gain."

While iPod unit shipments were up, iPod revenue was down 13 percent year-over-year--in part to the due to the introduction of the low-end 1GB Nano at $149. Slower iPod shipments also decreased its average revenue per store, according to Apple.

Greenberg notes that most of the gain in operating margins was due to lower component costs and better expense control--both of which Greenberg believes is is not sustainable.

He also noted that much of the increase in Mac sales--almost 12 percent year-over-year because of surging laptop sales--was due to pentup demand of Intel-based portables and strong sales to higher education, which Greenberg was hestitant about calling "broad-based," despite IDC numbers that shoed surging marketshare in the US and a doubling of portable marketshare this year.

In addition, Apple's lack of openness about its operating segments disgruntled Greenberg: "the company said zero about changing the way it discloses data on its operating segments, the focus of several items here. Didn't think they would."

by MacNN Staff