Apple announced quarterly results yesterday, and I was in attending a conference when those results hit the web. A few things jumped out at me as I read from the corner of my eye. First, Apple just had the most profitable year in corporate history. Second, iPhone sales were the highest so far. One bruise stood out: Mac sales were down 20%. I knew this quarter was a week shorter than last year, but that didn't seem like enough to cover 20%. Even so, it was obviously a great quarter, so I returned my attention to the conference.
Imagine my surprise when I opened up USA today on my flight home and saw this headline: "APPLE SALES FALL SHORT." Apple sales fell short? You mean Mac sales, right? Macs (sadly) represent a pretty small slice of Apple's total business, so even a 20% year over year slide isn't enough to call Apple sales short. The summary on the front page directed me toward the business section for more details, and I turned there expecting more comprehensive reporting. "Apple misses iPhone forecasts" lead the business section, and even talked about how this is two disappointing quarters for Apple in a row.
What am I missing? Apple's sales are up. Apple's market share in smartphones is growing. Apple can't make enough iPad minis to meet demand. On the Mac front, a large part of the shortfall came from the new iMac: Apple can't ramp them up fast enough to meet demand. The primary limiting factor on growth for Apple is an inability to make products fast enough.
I checked the web to see what the sentiment was like in other publications when I hit 10,000 feet. The big news today is how Apple's shares are sliding against disappointing results. The market has lost its mind. The most telling quote I saw was from Patrick Moorhead in the L.A. Times: "Overall, compared to other companies, it's impressive. But for Apple's standards, it's not great." Apple's remarkable growth has finally elevated market expectations to a level that can't be matched. Those lofty expectations are beating up the AAPL share price. That's a good thing for investors.
It's a great time to buy Apple stock because Apple's growth isn't going away. The iPad has incredible growth potential as it consumes larger swaths of the PC market. The iPhone is well positioned to capture the profit in smartphones as smartphones take over the mobile market. Remember, Apple's finally established really great global distribution for the iPhone, and sales are rising along with that distribution. The Mac will rebound as iMac supplied increase, and you'll see the Mac sales continue very modest growth that beats the rest of the PC market.
In short, Apple will continue to iterate its product portfolio to make sure everything they offer is the best device in its market. If all Apple does is follow that path, the market's going to have to respond to consistent world-leading profitability and revenue growth. But Apple will do more. The company that gave us the Apple II, the Mac, the iPod, the iPhone, the iPad, the iTunes Music Store and other industry disruptors is not done disrupting. I think the market has grown impatient, and they expect Apple to deliver an iPhone level new product every couple of years. Look back at Apple's history and you'll find that's not how they work. Apple is remarkably disciplined about holding new products back until they are ready. At some point, the Next Big Thing will be ready, and AAPL will begin a remarkable run when it becomes another billion dollar business for Apple.
AAPL is all upside. Let the market panic now, and take advantage of the discount on shares that result. Buy and hold Apple.
Disclosure: I own Apple stock. I'm not selling it.