Last Updated: Wed Jul 20, 2011 21:15 pm (KSA) 18:15 pm (GMT)

Eman El-Shenawi / Market Moves: Wall Street loves to eat Apple

Eman El-Shenawi

Market reports this week stated that Apple is set to “wow” its investors, referring to its “dazzling” second quarter results on Tuesday.

Like the success story that keeps on giving, Apple consistently outperforms analyst expectations. This has bloated its share price to $392 on Wednesday. This time, the strong second quarter figures were brought on by strong consumer demand for its perennial bestseller, the iPhone, and the new, sleeker iPad 2 tablets.

Apple said that its net profit more than doubled to $7.31 billion on unprecedented revenue of $28.57 billion in the quarter ending June 25. And a proud statement from Steve Jobs, Apple CEO, polished off the corporation’s announcements.

“We’re thrilled to deliver our best quarter ever, with revenue up 82 percent and profits up 125 percent,” he said, quantifying the success with a few more numbers.

But can their money-making formula really be so watertight? The technology corporation monetizes everything it offers: accessories, applications, hardware, and the list goes on. This quarter, Apple sold every iPad 2 it could make and has been striving to increase supplies of the sought-after tablet computers. Also this quarter, estimates suggest that Apple sold between 17 million and 18 million iPhones internationally, while the sale of Macintosh computers climbed 14 percent to 3.95 million.

But Apple’s stock, the darling of Wall Street, has been relatively immobile after quadrupling over the past two and a half years. Indeed the share price is up 11 percent year-on-year but this remains distant from brokerage price targets of $450 or more.

Analysts believe that short term concerns that have cropped up are behind this, like Mr. Jobs’ illness, with the CEO being one of the key personalities behind the inspiration of Apple’s coveted products. He is a survivor of a rare form of pancreatic cancer but has recently requested more time off and Wall Street concerns over his health have begun to resurface.

Another pang of concern is the escalating competition from other technology heavyweights, namely Google and Microsoft. Shares of Google have now surged to $597 on Wednesday after announcing second quarter earnings of $2.5 billion. Both Google and Microsoft have also squeezed into the high-end mobile phone market and competition over digital content is rife.

But an Apple official will always have a comeback similar to this: Apple has that certain “je ne sais quoi.” That wow factor. Something special.

Quarterly, analysts comfortably predict Apple’s success (even if the gains are smaller than forecasted, success has always been anticipated for Apple in recent years). But for this particular corporation any signs of the beginning of a downfall may be harder to see coming.

Although one factor that could stem some troubles for Apple in the future is that the much-loved iPhone is aging. And unlike every summer, the corporation has not yet announced whether there will be an extension to the iPhone product line. We know that the corporation is also shifting focus to roll out an iCloud music service and a new operating system for its products. But will it ever let go of the iPhone and leave it at that?

Perhaps it has built enough of a tech empire to do so and not remain loyal to one product; after all, its staple ideology is innovation. And while its stock price grows slower than forecasted, it still remains attractively priced. For both Apple’s consumers and investors, any competition from other technology big shots will not immediately hamper its “je ne sais quoi.” Nothing is watertight, but it always helps to be an international favorite.

(Eman El-Shenawi, a Columnist at Al Arabiya English, can be reached at: eman.elshenawi@mbc.net.)

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