Tuesday, October 30, 2007

Apple and Microsoft - Ain't No Stopping Their Stupendous Growth

Apple Inc. (NASDAQ: APPL) and Microsoft Corporation (NASDAQ: MSFT) are two of the top 20 Innovators of The Innovation Index. Both innovators are growing unabated with new innovations.

The Innovation Index introduced in December 2006 is a weighted stock price index of the top 20 Innovators in North America, and has returned a whopping 56% in 2007 (as of Q3, 2007).

Today Apple announced that it has sold two million Copies of Mac OS X Leopard in just the first weekend, "far outpacing the first-weekend sales of Mac OS X Tiger, which was previously the most successful OS release in Apple's history. Sales included copies sold at Apple's retail stores, Apple Authorized Resellers, the online Apple Store(R), under maintenance agreements and bundled with new Mac(R) computers. "

Leopard is the sixth major release of Mac OS X and is packed with more than 300 new features.

"Early indications are that Leopard will be a huge hit with customers," said Steve Jobs, Apple's CEO. "Leopard's innovative features are getting great reviews and making more people than ever think about switching to the Mac."

Leopard has many key innovations including the Time Machine, "an effortless way to automatically back up everything on a Mac; a redesigned Finder that lets users quickly browse and share files between multiple Macs*; Quick Look, a new way to instantly see files without opening an application; Spaces, an intuitive new feature used to create groups of applications and instantly switch between them; a brand new desktop with Stacks, a new way to easily access files from the Dock; and major enhancements to Mail and iChat(R)."

Apple Inc.'s (AAPL) fourth-quarter net income improved to $904 million, or $1.01 a share, from a year-earlier profit of $542 million, or 62 cents a share. Sales rose to $6.22 billion from $4.84 billion. Analysts, according to Thomson Financial, expected a quarterly profit of 86 cents a share and revenue of $6.07 billion...Among the quarter's highlights were sales of 2.16 million Macintosh PCs and 1.11 million iPhones. Apple had the most amazing launch of the all new iPhone, and this holiday season could be a blockbuster for the iPhone and Apple revenues. The latest iPod Touch could also rake in huge sales.

Apple is firing on all four cylinders: iPod, iPhone, Macintosh PCs and Leopard.

On October 25, 2007, Microsoft reported 27% revenue growth (over last year) on sales of $13.76 billion for the quarter ended September 30, 2007, and the "fastest first quarter since 1999". Further, the operating income and EPS growth exceeded 25% over the same quarter last year. Operating income, net income and diluted earnings per share for the quarter were an astonishing $5.92 billion, $4.29 billion and $0.45, respectively.

"This fiscal year is off to an outstanding start with the fastest revenue growth of any first quarter since 1999," said Chris Liddell, chief financial officer at Microsoft in the press release. "Operating income growth of over 30% also reflects our ability to translate revenue into profits while making strategic investments for the future."

Microsoft’s businesses of Client, Microsoft Business Division, and Server and Tools grew combined revenue in excess of 20%, and experienced robust demand for Windows Vista, the 2007 Microsoft Office system, Windows Server, and SQL Server.

"Customer demand for Windows Vista this quarter continued to build with double-digit growth in multi-year agreements by businesses and with the vast majority of consumers purchasing premium editions," said Kevin Johnson, president of the Platform and Services Division at Microsoft.

During the quarter, Microsoft’s two consumer focused divisions passed milestones with the successful close of the company’s largest ever acquisition, aQuantive, and Halo 3 achieving the biggest entertainment launch day in history. (Halo 3 launch eclipsed all previous video games and movie launches)

Importantly, Microsoft raised the guidance for the quarter ending December 31, 2007:
Revenue is expected to be in the range of $15.6 billion to $16.1 billion.
Operating income is expected to be in the range of $5.9 billion to $6.1 billion.
Diluted earnings per share are expected to be in the range of $0.44 to $0.46.

It is safe to assume that barring any major change in the world economy, both Apple and Microsoft are expected to have an outstanding 2007, and 2008. The fact that both companies have a significant and growing percentage of international revenues make them resilient to potential changes in local economy and yet provide them the wheels for continued expansion and growth. Apple and Microsoft - ain't no stopping their stupendous growth.

SOURCE
Apple Inc.
Microsoft Corporation

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