AAPL and IBM Earnings
On Tuesday evening January 18, International Business Machines Corp (IBM) and Apple Inc. (AAPL) reported quarterly results.
Generally, I do not comment on specific earnings reports for individual equity names via this blog. However, within the results for AAPL and IBM, there are THREE macro themes that are extremely supportive of my expectation that the domestic economic recovery will advance in 2011.
1. The Resilient U.S. Consumer
The seasonally strong "holiday quarter" exceeded all expectations for AAPL. Early in the fall of 2010, I highlighted the potential for holiday sales of AAPL products to provide investors with insight toward the true state of the consumer. During the "holiday quarter," consumers abandoned frugality to aggressively purchase.
- 7.33 million iPads vs. 6 million consensus
- 16.2 million iPhones vs. 16 million consensus
- 19.5 million iPods vs. 18.7 million consensus
- 4.13 million Mac computers vs. 4.2 million consensus
2. Global Enterprise IT Spending
The world's largest computer software-services firm, IBM, reported earnings that suggest global corporations are increasing IT spending.
- Hardware revenue increased 21% to $6.3 billion
- Software revenue increased 7% to $7 billion
- Revenues in BRIC nations increased 19%, 17% when adjusted for currency
The competitors of these two technology giants must keep pace. Growth can be attained organically or via acquisitions. Given the robust cash balances in the technology sector and the excellent earnings reports of January 18, I expect an increase in M&A as IBM and AAPL competitors attempt to compete and pay a premium for growth over the next few months.