Category Archives: Technology

AAPL’s awesome 1Q12

January 26, 2012 By in earnings conference calls, Industry Analysis, Stock ideas, Technology, Wireless Tags: , , , , , Leave a comment

the report

After the close of New York trading on Tuesday January 24th, AAPL announced results for 1Q12 (AAPL’s fiscal year ends in October).

The company reported its best single quarter ever, with diluted earnings per share of $13.87 on revenue of $46.3 billion.  Sales were up by 73% year on year for the three months; eps were up by 116%.  Wall Street analysts had been anticipating earnings of $10.16 per share.  AAPL not only handily beat that figure, but also blew through the high end of the estimate range at $11.26.

Management’s (notoriously lowball) guidance for 2Q12 is for revenue of $32.5 billion and per-share profits of $8.50.

AAPL shares rose by 6.3% in the Wednesday market.  On the surface at least, this strikes me as a tepid response to the numbers.  More on this topic below.

the details

quibbles first…

–AAPL is another one of those companies that uses the week rather than the month as their basic unit of time.  This creates a problem, because a year is equal to 52 weeks plus one day for regular years, plus two days for leap year.  So companies like AAPL have to throw in an occasional quarter that has an “extra” week in it to keep their reporting year and the calendar in sync.

1Q12 was one of those adjustment quarters.  Not only that, but the extra week was the high-volume sales period between Christmas and New Year’s Day.  So AAPL’s sales for the three months were likely 10% or so higher than they would ordinarily have been.

–the introduction of the iPhone4S shifted revenue out of 4Q11 and into 1Q12, because AAPL ran down inventories of its older phones and consumers deferred iPhone purchases until the new model became available.

–don’t make the same mistake I’ve heard from Bloomberg radio commentators of saying that this quarter’s earnings were more than AAPL made in a whole year not that long ago.  This sentiment is correct, but the comparison isn’t.  AAPL changed its accounting treatment for iPhone sales a couple of years ago to recognizing all the profits from a sale (markup on the device + a share of revenue collected by the telecom company over the life of a contract) up front, rather than recognize them gradually over the (usually two-year) contract term.

…followed by stunning numbers (ex the iPod)

iPhone

In 1Q12 AAPL sold 37 million iPhones, with iPhone4S leading the way.  That’s up 126% yoy, in a market that expanded by 40% over that time.  It’s also 17 million more than AAPL’s previous record for a quarter.   Sales would have been even higher except AAPL ran out of phones to sell in key areas.

iPhone 4S wasn’t available in China during 1Q12.  It went on sale there earlier in the month.  Demand has been “staggering.”

iPad

APPL sold 15.4 million iPads during the quarter, up 111% year on year.  According to CEO Tim Cook, the launch of AMZN’s new Kindle lines has had no effect, good or bad, on sales.

Macs

AAPL sold 1.48 million iMacs and 3.72 million laptops, both records, during the quarter.  Desktops were up 21% in units yoy; laptops were up 28%.  Industry growth was zero.

iPods

This declining category of devices was up 133% quarter on quarter for AAPL, but down 21% yoy.  iPod Touch remains the lion’s share of sales.  APPL retains a 70% share of the MP3 player market in the US and is the top-seller in most other markets (not that any investor is going to buy AAPL’s stock because of the iPod anymore).

other stuff

Sales at the Apple Stores, which make up almost a third of retail revenue for AAPL, were $6.1 billion during the quarter.  Average revenue per store was $1.7 million, up 43% yoy.

The iTunes store took in $1.7 billion.

Weak worldwide demand for tech components gave AAPL a lot of buying clout for NAND flash and DRAM during 1Q12.  As a result, the company’s gross margin was unusually high at 44.7%.  To give a basis for comparison, full-year 2011 gm came in at 40.5%.  This favorable development probably also boosted net income by 10%.

AAPL has $97.6 billion in cash on the balance sheet.  Of that, $64 billion is being held offshore.

the stock

Trying to “normalize” 1Q12 eps by correcting for the extra week and the elevated gross margins, I come up with a figure of $11.50 or so for the quarter.  If I had to guess, I’d peg full-year eps at least $40, even after a downward adjustment of 1Q12 results–meaning reported figures could be closer to $45 a share.

If I’m correct, AAPL shares are currently trading at, at most, 11x this year’s earnings, with 40%+ earnings growth in prospect.  That strikes me as really cheap.  Subtract AAPL’s cash from the equation and the forward multiple is 8.5x.

In contrast, WMT, which has nothing like the recent growth record or current prospects of AAPL, is trading at about 12x.

COH, a global semi-luxury company, whose stock has paralleled AAPL over the past year, and which has far better growth characteristics than WMT, trades at almost double the PE of AAPL.  But even COH probably won’t grow as fast as AAPL this year.

Why the low valuation for AAPL?

I think Wall Street views AAPL as a firm built at present on a single product, smartphones.  It perceives the global transition from feature phones to smartphones, which is at least part of what’s driving the company’s extraordinary growth, to be mostly played out.  Therefore, investors theorize, AAPL will sooner or later–and probably sooner–be reduced to depending on replacement demand.  When that happens, its earnings growth will shift into a much lower gear.

There’s some truth to this idea.  Look at the breakout of AAPL’s revenues during the current quarter:

iPhone     53% of sales

iPad     20%

Macs     14%

iPods     6%

Music services     4%

Other stuff     3%

Total = $46.3 billion.

After iPhone and iPad, nothing else moves the needle that much.  A half-decade ago, the iPod doubled the size of AAPL; the iPhone then doubled (a much larger) AAPL again.  Can iPad perform the same trick for AAPL a third time?  Eventually, maybe, as part of a transformation of the personal computer market over the next decade.  But I’m not sure many people would like to bet on that.

And, of course, NOK and RIMM are reminders of how fast the tech world can change.

Potential pitfalls may be Wall Street’s current focus, but it’s by no means the whole AAPL story.

As I’ve been writing for some time, AAPL shares have suffered immense PE contraction over the last four or five years, both in absolute terms and relative to the market.  According to Value Line, AAPL traded at a 40% premium to the market multiple in 2007 and a 60% premium in 2008.  By my reckoning, AAPL is now selling at a 25% discount to the market–a much lower level than firms (like WMT) with weaker business models and balance sheets.

That’s actually the good news.  The fact that a huge amount of potential future bad news seems to me to be already baked into the stock price is a powerful argument for owning the stock.  In fact, I think the market is discounting a far worse future for AAPL than is likely to develop.

Can AAPL do anything to help its own cause?  The company could begin to pay a dividend or split the stock.  Either would give the shares a short-term boost.  In the final analysis, however, all AAPL can really do is continue to post strong earnings to show that Wall Street fears are overblown.

INTC: 4Q11, prospects for 2012

January 24, 2012 By in Current Market Thoughts, earnings conference calls, Industry Analysis, Portfolio management, Stock ideas, Technology Tags: , , , , , , , , , , Leave a comment

the report

4Q11

After the close of trading in New York on Thursday January 19th, INTC reported 4Q11 results.  Revenues came in at $13.9 billion.  Profits were $3.4 billion, eps $.64.  Both figures were down slightly quarter on quarter during what’s normally the company’s seasonally strongest period.  Eps surpassed the Wall Street consensus of $.61, though.  Wall Street’s habitually somewhat downbeat stance toward INTC was certainly influenced by the firm’s early December warning that near-term orders for its PC chips were being cancelled by device manufacturers who are unable to get enough hard disk drives to make new PCs.

On a non-GAAP basis (adjusting for acquisition-related goodwill),  eps came in at $.68.

Investors were pleased with the results.  INTC shares rose by about 3% in a flat market on Friday.

full year 2011

During 2011, INTC achieved lots of all-time financial highs, including:  revenues at $54 billion; net income at $12.9 billion; eps at $2.39 (non-GAAP, $2.53).

one-time factors

There are two:

–Historically, INTC has used the week as the basic time period for its accounts rather than the month.  Because  52 weeks x 7 days/week = 364 days, or not quite a year, this approach requires the company to have occasional 53-week years to keep their accounting in sync with the calendar.  2011 was one of those “extra-week” years.  That probably added $.05 to 2011 eps.

(By the way, INTC has just shifted to the month as its basic time measure, so the “extra week” adjustment will no longer be necessary.)

–Thailand produces about 40% of the world’s hard disk drives. Massive flooding there during 4Q11 took many HDD factories out of commission.  In early December, unable to build PCs without storage, device makers began to cancel orders for the INTC chips slated to go into those machines.   INTC thinks we’re now passing the worst of the HDD shortage and that Thailand will be back at full HDD production late in 2Q12.  INTC is adamant that component supply, not a falloff in demand, is the problem.  Assuming the company is correct–and I see no reason to doubt it–the result of the cancellations has probably been to shift $.10 – $.15 a share in earnings for INTC from 2011 into 2012, as well as to make the firm’s 2o12 eps more second-half loaded than normal.

prospects for 2012

INTC expects another up year in 2012, with revenues advancing by “high single digits” and gross margins expanding by 1.5 percentage points to around 64%.  Despite a massive increase in R&D spending to $10.1 billion this year (up by 21% from the 2011 level) this company guidance probably implies eps on a GAAP basis of $2.60 ($2.75, non-GAAP).  If we correct for the one-time factors I’ve cited above, I read the guidance as being for flattish eps on, say, 5% revenue growth.

my thoughts

down Memory Lane

At the peak of the internet bubble in 2002, INTC was a $75 stock.  It traded at 36x eps (a relative multiple of 2.4x the market) and yielded .1%.  After a decade of wretched relative performance, the stock is now trading at less than 10x 2012 earnings, yielding 3.4% and at a price earnings multiple discount to the market of about 25%.

If you think that’s bad, in early October 2011 INTC was trading at 7.3x 2012 eps and yielding 4%+, more than the 30-year Treasury!  Interestingly, despite Wall Street skepticism, INTC shares are enjoying their longest period (and one of only a few) of relative strength in the last decade.

where to from here?  (I wrote this on Sunday January 21st)

I think there are four potential positive points to the INTC story:

1. valuation.   …low PE, high dividend yield, massively cash generative operations

2.   demand for PCs.   …that emerging markets have reached wealth levels where average citizens are able to afford PCs.  According to INTC, two-thirds of PCs worldwide are currently being sold to customers in emerging economies.  None of these markets are as yet well-penetrated.   So this business, INTC’s biggest by unit volume, appears to me to have much better growth prospects than is commonly thought.  Ultrabooks, using reference designs supplied by INTC, may well be an added plus.

3.  servers/the cloud.   …the continuing evolution of the internet is creating strong demand both for the INTC chips that drive sophisticated servers for the cloud and for those used for general corporate purposes.  These tend to be advanced (read: expensive and high-margin) chips.

4.  INTC’s immense technology investments.     …in 2012, INTC plans capital expenditures of $12.5 billion, in addition to R&D outlays of $10.1 billion.  In 2011, those figures were $10.8 billion for capex and $8.3 billion on R&D.  The two-year total comes to $41.7 billion!

Three possible consequences:

–increasing INTC’s already large technological lead over other manufacturers

–creating chips that will be accepted by makers of cellphones and tablets.  For instance, Lenovo has announced its first INTC-powered smartphone for the mainland Chinese market.

–creating an environment for collaboration on design of increasingly complex multi-function chips, either with independent design firms or with device manufacturers.  In other words, INTC would use its advanced chip fabs to attract and lock in customers.     …like AAPL?

It seems to me that at $20 a share, Wall Street was factoring into the INTC stock price a belief that:

–none of its turnaround efforts would be successful,

–that the parlous state of the PC market in the US and Europe is indicative of the global market for these devices,

–that INTC parts will be displaced by ARMH components, and therefore

–that INTC will gradually go out of business.

the stock

To buy the stock at $20 a share, you’d only have to believe that stories of INTC’s demise have been greatly exaggerated.

At the current $26 or so, in contrast, it seems to me the price already factors in a grudging acceptance that the PC business may not be on its deathbed.  I don’t think, however, that the value of the server business is fully reflected.  Nor is there anything, in my view, for the possibility that ultrabooks may expand the PC category or that INTC will have any success cracking the smartphone or tablet market.  Wall Street analysts are merrily downgrading the stock, meaning they don’t want to be seen as endorsing any of these possibilities.

$30 a share seems to me to be the next price objective.  At that level, I think the idea that the current business, PCs and servers, is viable would be in the quote.  But I don’t think there would be very much for new products.  In addition, I don’t think that very many have considered the thought that, after more than a decade of foundry success, the economic winds may be shifting in favor of integrated design/manufacturing firms like INTC or Samsung.

My bottom line:  INTC is no longer the one-way street it was in October, but I think it still has very attractive prospects.  I have no desire to sell any of the stock I own.  On the other hand, given the strong run it has made over the past four months, the size of my holding, and the possibility that good news probably won’t arrive before 2H12 begins, I don’t feel a powerful urge to buy today.  I do think the stock will outperform the S&P over the coming year, though.

Thai floods mean lower earnings per share for Intel

December 13, 2011 By in earnings conference calls, Industry Analysis, Recent Market Action, Stock ideas, Technology Tags: , , , , , , , , , , , Leave a comment

the INTC announcement

Yesterday, INTC issued a press release and conducted a brief conference call to say that earnings per share for 4Q11 were going to be lower than anticipated. The stock fell about 4%, in a weak market, on the news.

The reason?

Recent flooding in Thailand (see my post) has put most of that country’s hard disk drive manufacturing capacity–about 40% of the world’s HDDs are made there–out of commission.  Production won’t be back to normal until May or June.  INTC’s original supposition that inventories of HDDs in the supply chain would be enough to tide makers of PCs and servers over has proved to be too optimistic.

About two weeks ago, HDD makers began to tell device makers how many HDDs and of what type they would be able to deliver in 1Q12.  The numbers are low.  Device makers immediately cancelled orders for large numbers of chips they’d planned to buy from INTC, since there’s no sense in buying components that will be gathering dust in a warehouse waiting for HDDs so a PC can be assembled and shipped.   Hence the public announcement of lower 4Q11 results.

1Q12 eps will doubtless also be less than Wall Street had been expecting, although INTC had not given formal guidance.

eps for 4Q11…

The press release was very brief.  Previously, INTC had expected revenue of around $14.7 billion for 4Q11.  Due to order cancellations, the company now thinks revenue will be closer to $13.7 billion.  Margins will be relatively unaffected.  Yes, volumes will be lower, but device manufacturers are putting the HDDs they are allocated into their highest-profit products (duh!)–which typically also contain INTC’s highest-margin chips.

Analysts had been figuring that INTC would earn $.69 per share for 4Q11.  I think the actual outcome will be around $.63.

 

Looking at the figures another way, INTC was selling chips at a rate of $1.13 billion a week before the industry became aware how low 1Q12 production of HDDs would be.  Subsequent cancellations amount to a bit less than one week of INTC’s December production, or about a quarter of its monthly output.

…and 1Q12

This is anyone’s guess.  Everything depends on how quickly HDD output in Thailand can be restored and on whether it comes back in a linear fashion or in big lumps.  It’s possible, for example, that INTC will be selling at 75% of a normal rate for most of the quarter and then have a huge number of chips fly out the door during the last two weeks.

My stab in the dark is that earnings per share for the quarter could be as low as $.50 but will probably be higher.

more important, earnings will be deferred–not lost

INTC said repeatedly during its conference call (analysts kept asking the question, over and over) that the revenue decline it is experiencing is due solely to lack of HDDs from Thailand.  Its monitoring of sell-through of PCs and servers indicates that end-user demand remains strong and is growing in line with INTCs expectations.  True, Europe may be a little weaker than INTC thought, but Asia is better.

Servers are unaffected.  Device makers are simply not producing the lowest-priced PCs.

Once HDDs are again available, INTC expects the market to return to normal.  Device makers will doubtless boost purchases from INTC to restore the inventory levels they are now running down.

impact on INTC’s production

INTC isn’t going to slow production down, even though my guess is that about 25% of what it is making will, in one form or another, remain in inventory for a while.  Several reasons:

–it can take months to make semiconductors, so INTC can’t just turn production on and off

–INTC is just beginning to ramp up production of its next generation 22 nanometer chips, so it doesn’t want to slow down on them

–the company believes (correctly, in my opinion) that there will be a pickup during late 1Q12 or early 2Q12 that’s just as rapid as the current slowdown.  It would be crazy to miss that sales opportunity just to save a penny or two in eps now.

what about solid state drives?

…the ones made from flash memory.  So far, INTC sees no move by PC makers to substitute more expensive SSDs for HDDs.  INTC, however, believes the future of laptops is in Ultrabooks, sleek Macbook Air-like devices.  So it’s going to see what it can do to use the shortage of HDDs to push device makers to transition more quickly to SSDs.

the stock

INTC shares lost 4% yesterday, in a market that was down 1.5%.  I interpret this as meaning Wall Street is going to ignore the current eps weakness and focus instead on INTC’s low valuation, high dividend and reasonable prospects for growth.  I think that’s the right thing to do.  (A purist might argue that a deferral of, say, $.20 in eps for six months is really a loss of at most a penny, so that the $1 a share fall in the INTC stock price is excessive.  But you’ve also got to factor in something for the uncertainty of the situation and the fact that the market as a whole was down.)

I still think the stock is cheap.  There may be a better buying opportunity when the market gets around to thinking about 1Q12 earnings, or if the current period of market weakness continues into next year–which it could.  On the other hand, there may not be.  I own a lot of INTC, so I’m not tempted to buy.  If I owned none I might be.

Intel’s record 3Q11

October 20, 2011 By in Current Market Thoughts, earnings conference calls, Industry Analysis, Stock ideas, Technology, Uncategorized Tags: , , , , , , , Leave a comment

results

INTC announced 3Q11 earnings after the close of trading in New York on October 18th. The report was records all around.

Revenue for the three months was an all-time high of $14.3 billion, up 29% year on year.  Net income was another first, at $3.7 billion, up 24%.  So, too, were eps, at $.69, up 33%.  (Why the difference between the percentage gains in net and eps?  …INTC’s continuing aggressive stock buybacks, which have shrunk the number of outstanding shares by 354 million over the past 12 months.  During 3Q11, INTC bought back 186 million shares at an average price of $21.50.)

These results also blew away the Wall Street analysts’ consensus of $.61 for the quarter.

INTC gave guidance of 4Q11, sketching out a quarter pretty much a carbon copy of 3Q11.  That’s a bit weaker than normal seasonality, but softness in the developed world PC business, especially in the EU, has kept the company from being more enthusiastic.

details

Actually, this is more “new information” than “details.”

How could analysts miss INTC’s earnings so badly?  After all, the company’s overall business isn’t growing at warp speed.   INTC is also deeply connected into the supply chains of its customers, lead times are long enough for it to see much of the coming quarter, and the company tells analysts in advance what it is seeing.

The issue is INTC’s mainstay PC business–which grew by 17% year on year during 3Q.  This performance was based mostly on strength in emerging markets like China and Brazil.  It also contrasted sharply with predictions from third-party research firms that have been saying the global PC market is barely growing at all.

INTC says these firms are systematically underestimating demand.  They have a good handle on the PC market in the developed world, but don’t have good sources in developing countries, where consumers are just becoming affluent enough to afford PCs.  In such markets, PC demand is booming but the consultants can’t see it.

Analysts have so far chosen to believe the consultants, not INTC, and have been projecting a stagnant PC market.

INTC’s 4Q11 caution?  It stems from two factors.  Demand in the EU is weak.  Slowdown in global growth has lowered airfreight rates enough that PC vendors are shifting from ship to air for sending their output to market.  Faster delivery allows PC makers to trim finished goods inventories further.

New chips?  INTC will be churning out 22nm 3-D chips in volume by yearend.  The company thinks that this will give it attractive alternatives to ARM chips for low-end PCs or tablets-maybe even smartphones.  INTC’s offerings can sell at the same $30 price as ARM’s but be faster, smaller and use less power. They’ll also already be compatible with all a potential customer’s existing technology.  If so, INTC may be able to compete successfully with ARM for the first time ever.

what about 2012?

My rough guess is that INTC earnings will be up, and by around 10%. 

INTC thinks corporations are only about halfway through their upgrade from Windows XP to Windows 7.  Initial demand for the company’s newest server chip, which will debut early net year, already has 2x the design wins and 20x the demand that today’s standard had at launch.   Cloud computing, which is still a small business for INTC, is growing by leaps and bounds.  These users demand the newest, highest-performance and highest-profit server chips INTC makes. Assume this all adds up to 20% growth for a third of INTC’s business.

For the traditional consumer PC business, let’s say the developed world and the developing world are about equal size today.  For 2012, assume that the developed world be flat and the developing world will slow down to 10% growth.  That would mean 5% growth for two-thirds of INTC’s business.

Add the two together and growth for 2012 will come out to +10%.  Stock buybacks will probably add a few percentage points to that number.  Eps would probably be slightly above $2.50 for this year and would come in at $2.75-$2.80 for 2012.  The consensus brokerage house estimate is at $2.45.

There’s some risk that demand in developed markets will decline next year.  But I think the fall would have to be more than 10% to make an appreciable change to the overall company’s fortunes.  On the other hand, it’s possible that INTC’s new 3-D chips will allow it to gain tablet or smartphone design wins–something that Wall Street now finds impossible to believe.

investment thoughts

At today’s share price, INTC is trading at 9.4x current earnings and 8.5x earnings for 2012.  It’s yielding 3.5%.  I’m tempted to write that the stock is priced like a business cycle-sensitive industrial at the top of the cycle–but even stocks like CAT and DE are selling at higher multiples than INTC.

That’s actually part of the positive investment case for the stock.  It’s priced as if all that matters for it is the consumer PC business in the US and EU, that these markets are in secular decline and that INTCs attempts to adjust its offerings to a smartphone- and tablet-driven future will fail.  So downside risk seems to me to be limited.  Upside could be considerable if INTC’s new 3-D chips do what the company thinks they can.

AAPL’s 4Q11: another strong quarter

October 19, 2011 By in Current Market Thoughts, e-readers, earnings conference calls, Industry Analysis, Retail, Stock ideas, Technology, Wireless Tags: , , , , , Leave a comment

the results

AAPL reported 4Q11 results after the close of trading in New York yesterday.  The company earned $6.6 billion ($7.05 per share) over the three months, on revenue of $28.2 billion.  This is an advance of 52% in eps, year on year, on sales growth of 39%.  Although the company exceeded its guidance of $5.50 per share handily, it failed to beat the Wall Street analysts’ consensus, $7.39 a share, or the first time in a long while.  (The StarMine consensus of analysts who have historically been the most accurate forecasters–which in this case may simply have been the most aggressive–had been $7.51.)

EPS for the full fiscal year 2011 (ended September 24th) were $27.68, or 82% better than results for fiscal 2010.

AAPL also gave guidance for the holiday quarter we’re in now.  APPL’s 1Q12 will have 14 weeks in it instead of the normal 13.  This is an adjustment companies who organize themselves on a “weeks” basis rather than a “months” basis must make every six years or so to make sure their fiscal year remains aligned with the calendar year.  Anyway, AAPL’s guidance for 1Q12 is eps of $9.30.  My rough guess is that this equates to a “normal” quarter of $8.50,  which would be a gain of about a third over the $6.43 AAPL reported in 1Q11.

As a result of its earnings “miss,”  AAPL shares are down about 6% in pre-market trading as I’m writing this.

details

iPhone

Let’s get straight to the heart of the earnings “shortfall,” if that’s the right word to describe a quarter that’s up more than 50% year on year.  It comes in the iPhone.

AAPL sold 17.1 million iPhone units in 4Q11.  That’s up 21% year on year, and an all-time record for a September quarter, but down 16% from the record 20.4 million the company sold in 3Q11.  There were two reasons sales weren’t higher, both related to the introduction of the new iPhone 4s.

–AAPL decided not to add any new carriers to its iPhone network in the September quarter; and

–consumers slowed down purchases of the iPhone 4 in anticipation of the new model they expected to debut during 4Q11.  As demand waned toward quarter end,  carriers slowed down purchases of iPhones from AAPL.  Apple Store sales of iPhones were particularly weak.

APPL has since reported that the iPhone 4s has sold over 4 million units during the first three days of its launch in early October, more than double the rate at which the original iPhone 4 left the warehouses when it first came to market.  At $645 each, those sales amount to $2.6 billion, or about $.85 a share.  They could just as easily have occurred in 3Q11 if AAPL had moved the launch date of the 4s back to late September rather than early October.

How good is the iPhone business today? “In our wildest dreams we couldn’t have gotten off to a start as great as we have on the 4s,” says CEO Tim Cook.  Cook also noted that AAPL had anticipated a much larger reduction in telecom purchases of the original iPhone during the quarter than what actually occurred.

iPad

AAPL sold 11.1 million units during the quarter, an all-time record.  That’s up 20% quarter on quarter and 166% year on year.  AAPL finally seems to have obtained enough manufacturing capacity to keep up with demand.

Macs

Unit sales were up 37% year on year and 30% quarter on quarter.  That’s also an all-time record.  AAPL sees some cannibalization of the Mac business by iPads, but is still producing growth much greater than the PC industry.

iPods

Once half the company, iPods are now less than 10% of AAPL’s revenue.  Unit sales were 6.6 million during the quarter, down 27% year on year and 12% sequentially.

my thoughts

Even with an extra week to work with, I don’t think AAPL’s profits can be up 82% again this fiscal year.  Suppose they “only” reach $35, with (to make the arithmetic easy) $1 of that coming from the 53rd week.  Organic growth would then be in the low 20% range, which I think is easily doable.  It could be very much higher.

At a $400 stock price, AAPL would be trading at a forward multiple of under 12x on my low-ball figure.  Subtract out the $86 a share in cash (remember, AAPL has no debt) on the balance sheet from the stock price and the multiple shrinks to about 9x.  Even factoring in a substantial maturing of AAPL’s businesses, of which there’s no credible evidence yet, AAPL shares seem very cheap to me.