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April 06, 2008

Thinking About Apple

Apple has staged a strong recovery, rising 33% from its 2008 intraday low in late February. The beta effect during the recent rally certainly has helped but continuing good news on Mac sales and speculation over the 3G iPhone have been equally responsible. A long-time friend and institutional salesperson, JK, recently IM''d me noting that "Macs drive earnings, iPhones drive the multiple." I think that is a good observation and wanted to pass it along.

I have a couple of other thoughts on Apple. First, Don’t forget the ASP uplift in IPods coming from a mix shift in favor of the Touch and nanos at the expense of shuffles. Last quarter iPod units only rose 5% but iPod revenue rose 17%. I expect a similar uptick in ASPs this quarter which should provide comfort to worries about iPod units.

Second, I subscribe to the Lefsetz Letter written by music industry expert, Bob Lefsetz. It's a free service that our old pal, Cody Willard, turned me onto. Bob has pretty strong opinions on the music industry and the disaster it has become for the record companies even as iPods have driven music listening to all-time highs. Bob also occasionally writes about Apple, often to show how a company with the right view of its markets and customers can prosper. His latest post on Apple touches on the MySpace Music deal announced last week, the record industry, and Apple. It's a good read. I especially liked this excerpt: "The vibe in the Apple Store was palpable. It was akin to that at the gig, decades ago, when music was the most exciting art form, when you used to have to listen to the record to know which way the wind blew. Sure, Apple cares about Wall Street, but when the stock tanked, there was no excuse, no crying, no explanation…Once again, there was no access, just a focus on the underlying business, and a resultant mystique."

Posted by Steve Birenberg at April 6, 2008 08:50 PM in AAPL