In the extended comments section at the bottom of this post is the commentary I wrote for StreetInsight.com immediately following Apple Computer’s conference call discussing its September quarterly earnings. As it turned out, I was right that the Street was overreacting when the shares were trading down 10% in after hours trading during the conference call. The next day, when the market opened, AAPL never traded down less than 6% and closed the day with a loss of just 4.5%. The volatility continued on Thursday when AAPL shares gained 9%, closing more than $2 above the pre-earnings close, after the company announced new iPods with video download capability and a refreshed iMac computer that comes darn close to merging your TV with your computer….

As noted in my initial post earnings commentary, the fact that iPod shipments fell short of expectations in the September quarter was the key source of the initial decline in APPL shares. I attributed the shortfall to the slowing of iPod mini shipments in anticipation of replacement of the mini line by the nano. Remember that the nano came as a total surprise to Wall Street as no one anticipated the radical redesign and the elimination of the mini line. Obviously, AAPL management knew this and thus was unconcerned about the iPod shipment figure since they knew that nano demand was “staggering.” On the call, management further explained the shortfall in iPod shipments by noting that initial nano shipments were constrained by component supply issues. I’d guess that AAPL could obtain only much flash memory from Samsung given the surprise introduction of the nano.
More of the supposed iPod shipment shortfall came into focus with Thursday’s introduction of the new video-enabled iPods. As with the mini, AAPL probably limited shipments of the old 20GB and 60GB iPods in order to clear the channel for the October launch of the Video iPods. This past Saturday I visited my local Apple Store and learned that 20GB iPods are being discounted by $50 to fully clear inventory ahead of stocking of the new 30GB and 60GB iPods. Although I heard no statement of fact, I also think that my discussions indicate that shipments of old iPods had tailed off in September.
The bottom line from all this is that iPod shipments were not an issue in the September quarter. The market figured this out on Thursday and thus revalued AAPL shares off the earnings report to ahead of prior prices. This makes sense because as I noted in my original StreetInsight.com piece, “an objective read of the press release and analysis of the financial statements and conference call suggest that the company’s competitive positioning and long-term fundamentals look better than ever.”
Somewhat lost in the media coverage of the “Video iPod” was the introduction of the new iMac. Analysts have been speculating that AAPL is heading toward a digital media/entertainment center for the family room. The new iMac is a good signal that the speculation is correct. A remote control (with just 6 buttons!) and a new software interface allow you sit across the room from your iMac and play any music or video that you have loaded into iTunes. You could also watch a DVD you rented or own or any home video you have uploaded and edited using APPL’s iMovie or iDVD software (head over to Apple’s website and tour the new Front Row software).
With the simultaneous announcement that through iTunes you will be able to download hit shows like Desperate Housewives and Lost, short films from Pixar, or music videos it seems clear that it won