More Good News for Tech
Tuesday, July 21st, 2009Following up on IBM and Google’s better-than-expected Q2 results last week, Apple and Yahoo also have declared unexpected quarterly profits that sent shares soaring on Tuesday. Apple’s revenue jumped 15% on sales of both iPhones and laptops, while Yahoo beat the street by 9%. This is an interesting trend. Is it the result of the vaunted economic stimulus package, or merely normal boom-and-bust cyclical business trends in action?
I don’t know, but I like it.
There are several interesting aspects to Apple’s results. First, sales of laptops are up. The company “sold 4 percent more Mac computers than a year ago, with a 13 percent rise in laptop unit sales more than making up for a 10 percent drop in desktops.” This indicates that (a) the Mac is making at least some headway against PC dominance of the market, and (b) the swing away from desktop machines in favor of laptops is continuing.
Second, the Mac is seen as an “elite” or “luxury” machine in comparison with the PC. But sales are up even during an economic decline. Sure, some of this trend was fueled by price drops. But it indicates people are still spending money, and not just on low-priced “it just needs to get me through the downturn” systems. That’s a good sign that the economy might be perking up, as some analysts have expected.
Despite the lower prices, profits were still good. The act of “lowering prices didn’t eat into Apple’s gross margin, which improved from a year ago and beat his expectations.” This was largely due to cheaper components, indicating everyone is cutting costs to the bone in order to keep products flowing. It’s better to ship more items at a lower per-item margin than to hold out and lose business to the next guy.
So the tech industry is showing signs of a rebound. The markets have been steadily up for the last week or so. IBM is now back to $117 a share — close to its mid $120s high of just over a year ago. Is this just a blip on the radar, or is the downturn (okay, the recession) finally ending? The last two quarters of 2009 may tell the story.