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Apple Earnings: Every Silver Lining Has A Cloud

While Apple's fourth-quarter earnings defied the economic slowdown, breaking its own revenue and earnings records even in the middle of the malaise, the news wasn't all good.

First, the good news: Apple reported increased profits and revenues, buoyed by strong Mac and iPhone sales. The company sold 2.5 million Macs in the quarter ending Dec. 27, a 9% increase year-over-year, results which far outpaced the PC industry as a whole, which saw sales drop slightly. iPod shipments rose 3% year-over-year, to 22.7 million units, and iPhone shipments soared 88% to 4.4 million units.

Apple TV, a product which Jobs himself dismissed as a "hobby," is doing pretty well, with sales up 300% over the past year. "However let me be clear, we still consider this a hobby," said COO Tim Cook, who is running the company day-to-day during CEO Steve Jobs's leave of absence. Cook added: "It is clear the movie rental business is working and there are more customers who want to try it. We will continue to invest there, because we believe there is something there for us in the future."

But the news wasn't all good. Apple's growth took a "hit, but not a dive," writes Ars Technica. iPod sales growth is slowing. "iPod sales growth has been slowing for a while as the reason for buying changes—fewer people are looking to get their first iPod, and more are simply interested in upgrading to the latest model."

I quibble with Ars's conclusion here -- how much of slowing iPod growth came from people who decided to buy an iPhone instead? The iPhone incorporates an iPhone; a person switching from an iPod to a iPhone is hardly a failure for Apple, any more than diminishing black-and-white TV sales in the 1960s meant television was going out of style (it just meant that color TV was becoming mainstream).

More bad news: Mac sales dropped by about 90,000 from the previous quarter, compared with the year earlier, when quarterly sales increased when the holiday arrived.

Still, despite the bad spots, Apple's earnings were a powerful beacon of light in otherwise gloomy dark times (especially in contrast to Microsoft's gloomy financials.)

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