Seeking Alpha
Long/short equity, special situations, momentum, research analyst
Profile| Send Message|
( followers)

It’s looking like this earnings season has a consistent theme among US companies. Most are showing an ability to manage their way through the recession with cost cuts but hardly any companies are showing significant revenue growth. Except Apple (NASDAQ:AAPL). Apple’s report stunned just about everyone. Apple’s closed ecosystem is proving to be the way to win in modern technology. Unless your business model has some kind of moat surrounding it, you are destined to become just another commodity caught in a pricing war. Apple’s earnings report defies the logic that says you can’t sell high priced computers in a recession. 3.1 million Macs and 46% net income growth shows that avoiding the low margin netbook fad is the way to go. Oh by the way, real earnings growth was much higher. Apple’s real net income was $2.85 billion on revenue of $12.25 billion (non-GAAP). Consumers are rewarding this company because they trust the products.

The big debate going on in the tech world right now is whether or not Google’s (NASDAQ:GOOG) Android is going to put an end to the iPhone market share growth. Android is an open platform akin to the Microsoft (NASDAQ:MSFT) operating system that dominated share in the PC market for so many years. Because of Microsoft’s past success, many assume that Android will eventually overtake the iPhone for similar reasons. The problem with this assumption is that modern tech is too complex; the only way to simplify it is to control both the hardware and the software. Steve Jobs’ insistence that Apple maintain such tight control on the Mac OS hurt Apple during the last generation but it will propel them to greatness in the future. In a world of constant downloads and upgrades it is imperative that all users can seamlessly perform such functions. The latest release of Snow Leopard has already doubled the rate of Leopard. It’s so easy to do and it only costs $29. Most who upgrade to Windows 7 are going to need a new computer along with new software that is compatible. That doesn’t work for today’s generation.

Apple is so good at what they do. They shouldn’t be the best at both software and hardware but they are. The resulting pricing power is yet another reason why I’m predicting the 2010-2020 decade will be known as the Apple Revolution. The latest earnings release merely reconfirms that the Apple trend is on solid footing.

Disclosure: Long AAPL.