Steve Jobs, Master Of The Universe, Cannot Save The World (AAPL)

Posit, if you will, that unusually strong Apple (AAPL) earnings, coupled with an upbeat forecast for the next few quarters, might have stopped the sell-off in techs in its tracks. Apple has a broad enough array of products and sells them in virtually every country around the world.

The last quarter of calendar 2007 could not have been better. Apple 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. 

The firm shipped 2,319,000 Macs, representing 44 percent unit growth and 47 percent revenue growth over the year-ago quarter. It sold 22,121,000 iPods during the quarter, a five percent unit growth and 17 percent revenue growth over the year-ago quarter. Quarterly iPhone sales were 2,315,000.

But, the CFO did drop a bomb by saying "looking ahead to the second quarter of fiscal 2008, we expect revenue of about $6.8 billion and earnings per diluted share of about $.94." Wall St. thought things would be better. The entire earnings call is available at Blogging Stocks.

The recession may not be the real problem at Apple. It is just as likely, if not more likely, that its two flagship products, the Mac and iPod, have hit their natural saturation levels. Apple lovers and Apple investors will not admit that until it is too late and the stock is back below $100. But, the case is still fairly strong.

iPod sales are clearly not growing much anymore. No one should be surprised. The product is six years old. Apple has done a nearly perfect job of designing and marketing the product. But, almost every man, woman, and child in the civilized world has one. The growth rate of the product is dying. That is not Apple’s fault. It is actually a perverse by-product of the success of a device that has sold so terribly well.

The Mac suffers from a somewhat different problem. Despite its success, it is still a niche product. Very few companies are going to move away from PCs and Microsoft (MSFT) Windows. The cost and hassle of the changeover is too great. Dell (DELL) and HP (HPQ) still dominate global sales of computers. They are building better products and have a level of price leverage that Apple lacks. Dell has to keep prices low to keep volume up. Otherwise, any hope of a turnaround at the company is gone.

Apple’s forecast is not poor because of the economy. It is poor because the firm is reaching the natural limits of the world it has created.

Douglas A. McIntyre