plus 1, Grapevine: No nose job for 'Glee' star; 'Happy Days' Tom Bosley dies - Detroit News

Grapevine: No nose job for 'Glee' star; 'Happy Days' Tom Bosley dies - Detroit News

Posted: 19 Oct 2010 09:55 PM PDT

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Apple: The Book of Jobs - Yahoo Finance

Posted: 22 Oct 2010 04:55 AM PDT

ByEric Jackson, RealMoney Contributor , On Friday October 22, 2010, 7:45 am EDT

On Monday night, Apple released its September quarterly earnings. Much of the focus in the media since the call has centered on 1.) the disappointing iPad numbers and gross margins, which have been most commonly cited as the reasons for the selloff of the stock afterward, and 2.) Steve Jobs' criticisms of his two main competitors, Google and Research In Motion.

So, was the selloff justified? A little perspective is needed. The company beat on the top and bottom lines, as the Street is now trained to expect. While that in itself shouldn't surprise, it's easy to lose sight of just how big the quarterly numbers have grown for Apple: $20 billion on the top line, over $4 billion on the bottom line. And the company is accelerating its growth.

Google just reported $7.3 billion in revenue for its quarter and $2.2 billion for its net income. Research In Motion most recently reported $4.6 billion in quarterly revenue and $800 million in net income.

So, by any measure, Apple is a monster and is still growing tremendously. And just when you think it has become too big -- because its stock price has hit $300 or because its market capitalization has surpassed Microsoft's -- the company shows you that its products, not some second derivative, are driving its growth.

From a future growth perspective, we know that the iPhone 4 and iPad are hits and are still very early in their product lifecycle. We also know that Apple has a history of introducing beloved new products since Steve Jobs returned.

Apple didn't estimate how many iPads it would sell in the September quarter. Analysts did. Apple started selling iPads in China -- in only four stores -- on the last day of the quarter, so its future there is very bright. Tim Cook said on the call that supply issues on the iPad got resolved in mid-September, and this positions the company well for the holiday season. On the basis of all the positive feedback you hear from iPad users, you would have to agree with this assessment.

Are the reduced gross margins a big deal? All things being equal, of course Wall Street would like the highest margins. Apple has always sought to price its product at a premium to the market. That philosophy hasn't changed. Jobs went out of his way to say on Monday's call that the company wasn't "smart enough" to figure out how to successfully sell a $50 phone, and they'd leave that to Nokia.

If that's the case, why has Apple been aggressive in pricing its new iPhone and iPad -- and willingly given up something on the gross margin? Apple's argument is that it made a strategic decision to grab market share now. The company believes that it also has a price advantage due to close relationships with its partners.

Why lower prices now? My interpretation of the comments on the conference call is that the company believes it has an opportunity to sew up the tablet market. It has a killer product. History tells us that the first-generation knock-offs of the iPad will be inferior from a user perspective. It also appears that they won't be cheaper and might be more expensive. We don't even know exactly when the "credible" competitor tablets will appear. So there's green field ahead for Apple.

This isn't like iPhone, where Apple was the new kid on the block and had to slug it out to take market share away from Research In Motion and Nokia. iPad is like iTunes. Apple has created the product category. It is now tightening its grip. Apple knows that pressing its first-mover advantage now will make the difference between having a 10-year run of 50%-plus market share and merely having 30%.

So, what does one make of Jobs coming on the call at all and then being so directly critical of competitors? I admit it surprised me.

Having taken a few days to think about it, my read is that Jobs wanted to take down RIMM more than any of its smartphone competitors. RIMM built a good hardware device that lets people do a lot of email. RIMM has never done software well and never done new products well. I think it bugged Jobs to hear RIMM and analysts characterize RIMM as having a lock on the enterprise space and Apple as being preferred by consumers. Jobs has rejected this dichotomy and said that good products attract users, whether they're at work or at home. He's betting on that.

I think he takes deep satisfaction in surpassing RIMM on handsets sold this quarter and wanted to point it out.

As for Google, there's no question that it represents Apple's most serious current and future competition. As a guy who loves business, I can't help but love the rivalry. This could easily be the best business rivalry ever. These are two companies run by incredibly smart people who are at the top of their game in terms of their market power. They are both pursuing wise strategies.

Besides the whole Judas-betrayal storyline between Jobs and Schmidt, it's obvious that Jobs sees Android as a very serious threat. He also clearly chafes at the open vs. closed description of the two companies' approaches. No one will ever accuse Apple of getting unfair treatment from the press, but Jobs is right to point out that the issue is integrated vs. non-integrated ... not walled garden or not.

He is right that Apple is a systems integrator. Google's head of Android, Andy Rubin, made Jobs' point perfectly in his Tuesday tweet rejoinder: "the definition of open: "mkdir android ; cd android ; repo init -u git://android.git.kernel.org/platform/manifest.git ; repo sync ; make"." Rubin was speaking geek, suggesting that the open approach would eventually swallow a closed approach with an army of developers.

Jobs would say that users don't speak geek. They just want a good experience and will happily pay someone who gives them that.

Grab some popcorn and watch this fascinating battle unfold. A year from now, let's see if we're still talking about Apple's gross margins and how many iPads it sold in September 2010.