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It’s All About the Numbers

by Sachin Balagopalan on January 23, 2008 · Comments

Yesterday was a “Numbers” day on the Street as a bunch of companies reported their earnings - including Apple (AAPL). To a layman such as myself and an Apple shareholder I thought the numbers were stellar.

Apple® today announced financial results for its fiscal 2008 first quarter ended December 29, 2007. The Company posted revenue of $9.6 billion and net quarterly profit of $1.58 billion, or $1.76 per diluted share. These results compare to revenue of $7.1 billion and net quarterly profit of $1 billion, or $1.14 per diluted share, in the year-ago quarter. Gross margin was 34.7 percent, up from 31.2 percent in the year-ago quarter. International sales accounted for 45 percent of the quarter’s revenue.

Yet in spite of reporting their “best quarter ever”, investors beat the living daylights out of Apple during after-hours trading - the stock plummeted more than 11 percent. The cause for the punishment? Because Apple forecasted lower earnings for the next quarter than what Wall Street expected - $6.8 billion was the number forecasted by Apple versus $7 billion by the Street. The bottom line is the bottom line :) - no pun intended. Even a company like Apple is not immune to the brutal market forces. It was not too long ago when investors valued a company based on their earnings potential and not the the earnings of the past or next quarter - remember the dot com boom (and bust)? These days investors are a lot more cautious, it seems to me and the EPS (earnings per share) measure is the determinant factor as to when we decide to dump a company’s stock (for the most part anyway). The good news for the consumer is companies like Apple will continue to innovate and come out with cool products because at the end of the day it’s all about the numbers!

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