The Value Of Brands During Earnings Season

Does financial success make a brand or does a brand drive strong financial results? The extraordinary quarterly results of Apple (AAPL) and Google (GOOG) raise the question.

Apple beat most analyst expectations with its latest quarterly numbers. Mac sales were above expectations and iPhone numbers slightly below. Its earnings should be the envy of any other consumer electronics company, with its profits higher by 50% compared to the same period a year ago.

Apple’s numbers and the recent quarterly results from Google underscore that the two companies are largely “recession proof”. Other large American companies and financial firms have posted strong earnings. TI (TXN) and VMWare (VMW) did better than expected. So did companies like JPMorgan (JPM) and American Express (AXP). But, these companies are not growing rapidly compared to their results two and three years ago, or if they are, their businesses are still small.

Analysts might argue that the Apple brand is so powerful that consumers will buy its products even during periods when they have to stretch financially to make those purchases. Google is the prefered search engine because it produces the best results which makes it the consumer favorite. In most brand surveys, Google ranks at or near the top of global brand valuations. The strength and efficiency of Google’s search products draws revenue well beyond competitors Bing and Yahoo! (YHOO)

Apple may sell more Macs because of its recent financial success. Its earnings allow it to put more money into marketing and product development. The product development genius of its management is harder to quantify. What is certain is that the Apple brand draws customers and those customers drive revenue. Or, it may be the other way around?

Douglas A. McIntyre