Notes of interest for Apple's Q4 2008 results call
Apple has just concluded its fiscal fourth quarter conference call which featured a surprise appearance by company chief executive Steve Jobs, who fielded questions on low cost PCs, the future of the iPhone, and the new netbook category of portables.
Apple said fourth quarter profit rose over 26 percent to $1.14 billion, or $1.26 per diluted share for the three-month period ended September 27th, 2008.
Apple regional business segments
Apple Americas accounted for 1,121,000 Mac shipments and $3.572B in revenues. These figures are up 16 percent and 22 percent year-over-year, respectively. Sequentially, shipments were down one percent with revenue up 4 percent.
Apple Europe accounted for 611,000 Mac shipments and $1.723B in revenues. Both these figures were up 22 percent and 29 percent year-over-year, and also climbed 6 and 5 percent sequentially.
Apple Japan accounted for just 78,000 Mac shipments and $320M in revenues, an increase of 8 and 25 percent year-over-year, but a decrease of 24 and 12 percent sequentially.
Apple's Asia Pacific (and FileMaker Inc), billed as "Other Segments," accounted for 205,000 Mac shipments and $562M in revenues. These figures are up by 32 percent and 27 percent compared to the same period a year ago. Sequentially, unit shipments are near-flat with declines of 1 and 2 percent each.
Apple's "Other Music Related Products and Services" segment accounted for $832M in revenue. The figure represents a 38 percent spike year-over-year but a more gradual climb of 2 percent versus the spring.
Apple's "Peripherals and Other Hardware" added $428M in revenue, representing a 24 percent increase year-over-year but dipping 2 percent sequentially.
Apple's "Software, Service and Other Sales" segment provided $549M in revenue, climbing 28 percent versus the same point in 2007 and 10 percent over the previous quarter.
Apple's Mac business
Apple sold 2.611 million Macs, which is more than the company has ever sold in a single quarter of its history.
Of those Macs, 936,000 were desktops and 1,675,000 were notebooks, which equates to modest year-over-year gains of 14 and 18 percent, respectively. Sequentially, notebook shipments grew at 8 percent, while desktops declined by 1 percent.
Macs accounted for less than half of Apple's total revenue at 45.9 percent. Nevertheless, Macs accounted for the largest slice of the company's sales.
Apple last week saw a "very, very strong launch" of new notebooks, according to Jobs, although the company separately notes that rumors and press leading up to the launch likely caused customers to delay their new Mac purchases until the new MacBooks were released. Apple is unsure how much the economy impacted Mac sales.
Over 90 percent of the new Mac notebooks now ship with LED backlights. They also represent the company's greenest products ever. "You'll hear more about this in the future," Jobs said.
The unibody MacBooks are primarily responsible for Apple's earlier low-margin guidance. September's iPod refresh also played a role in the guidance.
Jobs said netbooks still represent a "nascent category." He considers the iPhone a form of entrant to the netbook category as it performs many of the functions, just in a smaller form factor. That said, he noted that Apple hold some very "interesting ideas" in the netbook arena should the field evolve into a booming market segment.
A contraction in the educational market, particularly in California, hurt Mac sales. K-12 institution business was down during the quarter. However, sales have rebounded in October following the new MacBook launches.
Jobs dismissed a question of the possibility for tablets or other form factors for Macs and says he unfortunately can't talk about future products.
Apple ended the quarter with 3-4 weeks of channel inventory for Macs, slightly below its target of 4-5 weeks.
The company doesn't believe it can make a $500 computer without it being a "piece of junk" and won't build a computer at that spec as a result. It's not in Apple's DNA, Jobs said.
Market prices for aluminum have dropped 35 percent, for example, but that doesn't account for machining the metal into the finished product.
Jobs claims the cheap PC market isn't being created by the economic downturn; Apple would be "surprised" if large numbers of people moved to lower-cost computers during the period. The company "isn't tremendously worried."
There are significant backlogs on Apple's new products introduced last week, suggesting a high glut of orders. Apple is already making "bets" on demand.
Apple's Apple TV and iPhone businesses
Apple sold 6,892,000 iPhones during the quarter and earned about $806M from these and related products over the quarter; this is more than all previous quarters combined.
Apple has already surpassed its goal of selling 10 million iPhones in calendar 2008.
If revenue wasn't deferred over 24 months, the iPhone would have represented 39 percent of all of Apple's revenue for the quarter.
Combined with the Apple TV, deferred iPhone revenue rose to $5.8B, up from $3.8B.
A "significant" percentage of iPhone 3G units were sold internationally, Apple says. Many of these were to first-time iPhone owners, while RIM's BlackBerries largely went to upgrade customers.
Steve Jobs noted during the call that the size of the iPhone business is too large to ignore, and so the company has started to provide non-GAAP metrics so that analysts and industry follows can get a better grasp of Apple's performance each quarter relative to past quarters.
The iPhone beat RIM's BlackBerry shipments last quarter; RIM shipped 6.1 million handsets compared to Apple's near 6.9 million. Apple is now the third-largest mobile phone supplier in terms of revenue. Nokia and Samsung are first and second respectively while LG and Motorola are fourth and fifth.
Customers will download the 200 millionth app from the App Store tomorrow, with that figure being reached in just 102 days. There are over 5,500 apps available in 62 countries. "Competitors are scrambling to copy the App Store, but it's not easy," Jobs said.
Apple ended the quarter with iPhone inventory of less than 6 weeks for the 44 countries launched before August. At the end of the quarter, there were 2 million iPhones listed in inventory around the world, which Apple sees as just about right.
Apple TV is still just a "hobby", according to Jobs and will remain that way in 2009. He noted that many of the companies experimenting in the category have recently faded away and the economy isn't helping matters much in this regard.
In the long term, Apple will simply "have to be the best" to compete in a more cluttered 2009 smartphone market, Jobs adds. He said one of the company's goals is to avoid leaving a "price umbrella" underneath the iPhone for competitors to leverage.
"From what I've heard, Babe Ruth had only one home run. He just kept hitting it over and over again," said Jobs, responding to a question on whether Apple would fill out its iPhone line with various different models and prices. iPhone is a software platform and Apple doesn't want to do too much to complicate matters for developers.
Apple is confident that its year-over-year iPhone sales will be up significantly for the future, but the "crystal ball isn't working" for sequential predictions.
Apple's Retail business
Apple's retail stores combined to sell a record 596,000 Mac units and generate $1.718B in revenues during Apple's fourth fiscal quarter, marking yearly growth of 32 percent in units and 27 percent in revenue. Sequentially, retail sales were responsible for a 25 percent growth in units and 19 percent in revenue.
Over half of all Macs sold at Apple retail stores went to customers who never owned a Mac.
There were 31 new stores opened during the quarter, for a total of 247 stores -- Apple actually exceeded its retail opening plans by 5 stores.
With an average of 226 stores open in the quarter, about $7.6M was earned per store. There was $301M in segment margin.
About 42.7M people visited Apple's stores during the quarter, besting the company's old record of 38.4Â*million set in the first quarter of 2008.
No mention has been made of how many retail stores will open in 2009.
Apple said its new "start at home" iPhone buying process has reduced the time required to buy an iPhone at retail stores to just one minute longer than it takes to buy an iPod.
Apple's iPod and iTunes businesses
About 11,052,000 iPods were shipped this quarter, with the media players generating $1.678B in revenue. The unit shipments climbed 8 percent year-over-year while revenues rose by 3 percent. Sequential results were flat at 0 percent unit change and revenues down one percent.
The company sold the most iPods it has ever managed in a non-holiday quarter.
Apple has over 70 percent of the MP3 player market in the US, according to NPD. Share is also growing in Australia, Canada, France, Germany, Japan and Australia.
The company ended the quarter with 4-6 weeks of channel inventory, which is in line with expectations.
The financial side of Q4
Apple is now proving non-GAAP measures that it says show actual results; before GAAP accounting, the company would have generated $4.6B in gross margin during the quarter, $1B higher than the reported GAAP margin. Its net income would have been $2.4B before GAAP.
As mentioned, Apple is now accounting for non-GAAP figures to account for the disproportionate amount of iPhone revenue.
The tax rate was 28.2 percent, which was below guidance due to a higher than anticipated mix of foreign earnings.
Apple customers are more likely to delay their future Apple product purchases during this time of economic uncertainty rather than switch to competitors' offerings, according to Jobs, because his firm's customer base is unusually loyal.
He feels "really good" about the company's new lineup.
The company has $24.5B in the bank and zero debt, having added another $3.7B in cash during the quarter. During an economic downturn, that level of cash creates "extraordinary opportunities," according to Jobs.
Analysts are curious whether this means possible acquisitions. Jobs just repeated his observation that the cash creates "extraordinary opportunities." Apple may be shopping for strategic acquisitions.
Apple's next fiscal quarter (Q408)
Apple is targeting revenue of between $9B and $10B for its fiscal Q1 2009, and earnings of between $1.06 and $1.35 per diluted share.
Gross margins should be between 30 to 31 percent.
There's "a lot of prudence" in Apple's guidance.
Always a lot of nail-biting during October, which is "foggy" -- the company has yet to see exactly how well its shipment predictions will turn out. November is usually when sales take off.
Guidance is driven by the introductions of both the new notebooks and iPods. Apple confirms that the margin impact was from the notebooks and that it's working to push the costs downwards as it manufacturers more and more of the new systems.
Additional Coverage
Apple profits rise 26% on sales of 2.6M Macs, 6.8M iPhones
Steve Jobs on Apple's cash, NetBooks, Apple TV, and Cheap PCs
Apple iPhone 3G sales surpass RIM's Blackberry
iPhone App Store continues to exceed iTunes song sales growth
Apple said fourth quarter profit rose over 26 percent to $1.14 billion, or $1.26 per diluted share for the three-month period ended September 27th, 2008.
Apple regional business segments
Apple Americas accounted for 1,121,000 Mac shipments and $3.572B in revenues. These figures are up 16 percent and 22 percent year-over-year, respectively. Sequentially, shipments were down one percent with revenue up 4 percent.
Apple Europe accounted for 611,000 Mac shipments and $1.723B in revenues. Both these figures were up 22 percent and 29 percent year-over-year, and also climbed 6 and 5 percent sequentially.
Apple Japan accounted for just 78,000 Mac shipments and $320M in revenues, an increase of 8 and 25 percent year-over-year, but a decrease of 24 and 12 percent sequentially.
Apple's Asia Pacific (and FileMaker Inc), billed as "Other Segments," accounted for 205,000 Mac shipments and $562M in revenues. These figures are up by 32 percent and 27 percent compared to the same period a year ago. Sequentially, unit shipments are near-flat with declines of 1 and 2 percent each.
Apple's "Other Music Related Products and Services" segment accounted for $832M in revenue. The figure represents a 38 percent spike year-over-year but a more gradual climb of 2 percent versus the spring.
Apple's "Peripherals and Other Hardware" added $428M in revenue, representing a 24 percent increase year-over-year but dipping 2 percent sequentially.
Apple's "Software, Service and Other Sales" segment provided $549M in revenue, climbing 28 percent versus the same point in 2007 and 10 percent over the previous quarter.
Apple's Mac business
Apple sold 2.611 million Macs, which is more than the company has ever sold in a single quarter of its history.
Of those Macs, 936,000 were desktops and 1,675,000 were notebooks, which equates to modest year-over-year gains of 14 and 18 percent, respectively. Sequentially, notebook shipments grew at 8 percent, while desktops declined by 1 percent.
Macs accounted for less than half of Apple's total revenue at 45.9 percent. Nevertheless, Macs accounted for the largest slice of the company's sales.
Apple last week saw a "very, very strong launch" of new notebooks, according to Jobs, although the company separately notes that rumors and press leading up to the launch likely caused customers to delay their new Mac purchases until the new MacBooks were released. Apple is unsure how much the economy impacted Mac sales.
Over 90 percent of the new Mac notebooks now ship with LED backlights. They also represent the company's greenest products ever. "You'll hear more about this in the future," Jobs said.
The unibody MacBooks are primarily responsible for Apple's earlier low-margin guidance. September's iPod refresh also played a role in the guidance.
Jobs said netbooks still represent a "nascent category." He considers the iPhone a form of entrant to the netbook category as it performs many of the functions, just in a smaller form factor. That said, he noted that Apple hold some very "interesting ideas" in the netbook arena should the field evolve into a booming market segment.
A contraction in the educational market, particularly in California, hurt Mac sales. K-12 institution business was down during the quarter. However, sales have rebounded in October following the new MacBook launches.
Jobs dismissed a question of the possibility for tablets or other form factors for Macs and says he unfortunately can't talk about future products.
Apple ended the quarter with 3-4 weeks of channel inventory for Macs, slightly below its target of 4-5 weeks.
The company doesn't believe it can make a $500 computer without it being a "piece of junk" and won't build a computer at that spec as a result. It's not in Apple's DNA, Jobs said.
Market prices for aluminum have dropped 35 percent, for example, but that doesn't account for machining the metal into the finished product.
Jobs claims the cheap PC market isn't being created by the economic downturn; Apple would be "surprised" if large numbers of people moved to lower-cost computers during the period. The company "isn't tremendously worried."
There are significant backlogs on Apple's new products introduced last week, suggesting a high glut of orders. Apple is already making "bets" on demand.
Apple's Apple TV and iPhone businesses
Apple sold 6,892,000 iPhones during the quarter and earned about $806M from these and related products over the quarter; this is more than all previous quarters combined.
Apple has already surpassed its goal of selling 10 million iPhones in calendar 2008.
If revenue wasn't deferred over 24 months, the iPhone would have represented 39 percent of all of Apple's revenue for the quarter.
Combined with the Apple TV, deferred iPhone revenue rose to $5.8B, up from $3.8B.
A "significant" percentage of iPhone 3G units were sold internationally, Apple says. Many of these were to first-time iPhone owners, while RIM's BlackBerries largely went to upgrade customers.
Steve Jobs noted during the call that the size of the iPhone business is too large to ignore, and so the company has started to provide non-GAAP metrics so that analysts and industry follows can get a better grasp of Apple's performance each quarter relative to past quarters.
The iPhone beat RIM's BlackBerry shipments last quarter; RIM shipped 6.1 million handsets compared to Apple's near 6.9 million. Apple is now the third-largest mobile phone supplier in terms of revenue. Nokia and Samsung are first and second respectively while LG and Motorola are fourth and fifth.
Customers will download the 200 millionth app from the App Store tomorrow, with that figure being reached in just 102 days. There are over 5,500 apps available in 62 countries. "Competitors are scrambling to copy the App Store, but it's not easy," Jobs said.
Apple ended the quarter with iPhone inventory of less than 6 weeks for the 44 countries launched before August. At the end of the quarter, there were 2 million iPhones listed in inventory around the world, which Apple sees as just about right.
Apple TV is still just a "hobby", according to Jobs and will remain that way in 2009. He noted that many of the companies experimenting in the category have recently faded away and the economy isn't helping matters much in this regard.
In the long term, Apple will simply "have to be the best" to compete in a more cluttered 2009 smartphone market, Jobs adds. He said one of the company's goals is to avoid leaving a "price umbrella" underneath the iPhone for competitors to leverage.
"From what I've heard, Babe Ruth had only one home run. He just kept hitting it over and over again," said Jobs, responding to a question on whether Apple would fill out its iPhone line with various different models and prices. iPhone is a software platform and Apple doesn't want to do too much to complicate matters for developers.
Apple is confident that its year-over-year iPhone sales will be up significantly for the future, but the "crystal ball isn't working" for sequential predictions.
Apple's Retail business
Apple's retail stores combined to sell a record 596,000 Mac units and generate $1.718B in revenues during Apple's fourth fiscal quarter, marking yearly growth of 32 percent in units and 27 percent in revenue. Sequentially, retail sales were responsible for a 25 percent growth in units and 19 percent in revenue.
Over half of all Macs sold at Apple retail stores went to customers who never owned a Mac.
There were 31 new stores opened during the quarter, for a total of 247 stores -- Apple actually exceeded its retail opening plans by 5 stores.
With an average of 226 stores open in the quarter, about $7.6M was earned per store. There was $301M in segment margin.
About 42.7M people visited Apple's stores during the quarter, besting the company's old record of 38.4Â*million set in the first quarter of 2008.
No mention has been made of how many retail stores will open in 2009.
Apple said its new "start at home" iPhone buying process has reduced the time required to buy an iPhone at retail stores to just one minute longer than it takes to buy an iPod.
Apple's iPod and iTunes businesses
About 11,052,000 iPods were shipped this quarter, with the media players generating $1.678B in revenue. The unit shipments climbed 8 percent year-over-year while revenues rose by 3 percent. Sequential results were flat at 0 percent unit change and revenues down one percent.
The company sold the most iPods it has ever managed in a non-holiday quarter.
Apple has over 70 percent of the MP3 player market in the US, according to NPD. Share is also growing in Australia, Canada, France, Germany, Japan and Australia.
The company ended the quarter with 4-6 weeks of channel inventory, which is in line with expectations.
The financial side of Q4
Apple is now proving non-GAAP measures that it says show actual results; before GAAP accounting, the company would have generated $4.6B in gross margin during the quarter, $1B higher than the reported GAAP margin. Its net income would have been $2.4B before GAAP.
As mentioned, Apple is now accounting for non-GAAP figures to account for the disproportionate amount of iPhone revenue.
The tax rate was 28.2 percent, which was below guidance due to a higher than anticipated mix of foreign earnings.
Apple customers are more likely to delay their future Apple product purchases during this time of economic uncertainty rather than switch to competitors' offerings, according to Jobs, because his firm's customer base is unusually loyal.
He feels "really good" about the company's new lineup.
The company has $24.5B in the bank and zero debt, having added another $3.7B in cash during the quarter. During an economic downturn, that level of cash creates "extraordinary opportunities," according to Jobs.
Analysts are curious whether this means possible acquisitions. Jobs just repeated his observation that the cash creates "extraordinary opportunities." Apple may be shopping for strategic acquisitions.
Apple's next fiscal quarter (Q408)
Apple is targeting revenue of between $9B and $10B for its fiscal Q1 2009, and earnings of between $1.06 and $1.35 per diluted share.
Gross margins should be between 30 to 31 percent.
There's "a lot of prudence" in Apple's guidance.
Always a lot of nail-biting during October, which is "foggy" -- the company has yet to see exactly how well its shipment predictions will turn out. November is usually when sales take off.
Guidance is driven by the introductions of both the new notebooks and iPods. Apple confirms that the margin impact was from the notebooks and that it's working to push the costs downwards as it manufacturers more and more of the new systems.
Additional Coverage
Apple profits rise 26% on sales of 2.6M Macs, 6.8M iPhones
Steve Jobs on Apple's cash, NetBooks, Apple TV, and Cheap PCs
Apple iPhone 3G sales surpass RIM's Blackberry
iPhone App Store continues to exceed iTunes song sales growth
Comments
Apple beat RIM's BlackBerry shipments last quarter; they shipped 6.1 million. Apple is now the third-largest mobile phone supplier in terms of revenue. Nokia and Samsung are first and second respectively while LG and Motorola are fourth and fifth.
[ View this article at AppleInsider.com ]
Considering they have only one current product on the market (and one prvious product) don't they get an Academy award or a Pulitzer prize or something for this?
Seriously though, if all they do is "weather the storm" with their 25B in this economic downturn, HUGE opportunity lost.
Guess the market is starving for someone who's performing and executing well for a change.
Here is a thought: 25B in the bank....Dell capitalization 25B....buy Dell, own corporate and consumer
Seriously though, if all they do is "weather the storm" with their 25B in this economic downturn, HUGE opportunity lost.
So you think you could do better than Apple in this environment? With all that money in the bank, they are doing the smart thing buy waiting it out and picking up the almost-dying companies (if they choose) for pennies on the dollar.
Here is a thought: 25B in the bank....Dell capitalization 25B....buy Dell, own corporate and consumer
Seriously though, if all they do is "weather the storm" with their 25B in this economic downturn, HUGE opportunity lost.
A business sector would be nice, but I don't see what buying Dell would do for Apple. Do they then continue to sell Windows and Linux, or do they sell OS X? They have the experience and knowledge, and nothing is stopping them from building a business machine with Windows. Do they continue to sell $400 machines filled with trialware to turn a small profit? I just don't see how buying Dell helps Apple in any way.
Up $10/share in after hours trading, and still climbing.
Guess the market is starving for someone who's performing and executing well for a change.
After Hours closed at $102.21 +10.72 (11.72%). I was expecting a drop, per the norm.
So you think you could do better than Apple in this environment? With all that money in the bank, they are doing the smart thing buy waiting it out and picking up the almost-dying companies (if they choose) for pennies on the dollar.
Having cash-on-hand is the best position they can be in at the moment.
Remember the anchor on the economy in general is that companies can't get their hands on lines of credit for things like investment, R&D, etc.
Apple doesn't have to worry about that... its essentially self-funding.
They'd be crazy to burn through their cash at this moment.
Considering they have only one current product on the market (and one prvious product) don't they get an Academy award or a Pulitzer prize or something for this?
Oh, wait. They get a couple billion $$ instead...
Here is a thought: 25B in the bank....Dell capitalization 25B....buy Dell, own corporate and consumer
Seriously though, if all they do is "weather the storm" with their 25B in this economic downturn, HUGE opportunity lost.
Along the same lines they can almost buy RIM in cash. Not that they should.
Having cash-on-hand is the best position they can be in at the moment.
Remember the anchor on the economy in general is that companies can't get their hands on lines of credit for things like investment, R&D, etc.
Apple doesn't have to worry about that... its essentially self-funding.
They'd be crazy to burn through their cash at this moment.
Indeed. It's only an "opportunity lost" if the goal of the company is to dominate the computer market and take over the other companies, a la Microsoft. Apple's goals are not those.
There is not much out there worth buying in the sense of actually adding to Apple's goal of making good products. The rumour of designing their own manufacturing facilities comes closest, all other aspects of their production chain are already under their control.
Indeed. It's only an "opportunity lost" if the goal of the company is to dominate the computer market and take over the other companies, a la Microsoft. Apple's goals are not those.
There is not much out there worth buying in the sense of actually adding to Apple's goal of making good products. The rumour of designing their own manufacturing facilities comes closest, all other aspects of their production chain are already under their control.
Agree completely.
If spend on anything, then R&D on even better products for an even greater head-start in the recovery.
(Apple are not like MSFT trying to buy their way into a market that they failed to crack themselves.)
After Hours closed at $102.21 +10.72 (11.72%). I was expecting a drop, per the norm.
This time the drop was before the news. Normally anticipation is very high and the stock climbs the days before. Then low guidance disappoints. This time fearful uncertainty, followed by relief. Investors aren't thrilled, but they sure are happy Apple isn't eating grass.
There is not much out there worth buying in the sense of actually adding to Apple's goal of making good products. The rumour of designing their own manufacturing facilities comes closest, all other aspects of their production chain are already under their control.
I'm thinking there are lots of teensy companies out there Apple could make use of. Or they could just build a chip fabrication plant for the PA Semi guys to play with?
/Adrian
Along the same lines they can almost buy RIM in cash. Not that they should.
Adobe's market cap is 15B. They could buy half of the company for say 10B (price would go up as they buy).
I really think as the fight btw MS and Apple heats up Apple needs a bargaining chip to keep MS for nixing Office. If Apple controls Photoshop MS would have to play nice on Office
Sell a $400 computer, load it with linux with a OS X "like" GUI. People who buys $400 computers don't know the difference or don't care.
Then buy a Game software company. Make the money on the games (sounds like x-box idiotology)
A label like "Micro$urf" would be a hit.
P.S.- Heard last mounth Dell was selling off their Manufacturing Plants. Is that going to happen?
One way it would make money.
Sell a $400 computer, load it with linux with a OS X "like" GUI. People who buys $400 computers don't know the difference or don't care.
1) Apple wants them to care and people are starting to care as they are depending on computers more every day.
2) How does a $400 computer running Linux make a profit? They lose the revenue from all the trialware that comes on it, they lose the sales from the vast majority that still want or need Windows in some form, the they have to make an "OS X "like" GUI" that will cost Apple money, and then confuse the user who try to install OS X software on the machine but it won't work because it's not actually OS X.
3) The only such purchase that makes any sense to me is buying Sun Microsystems, and even that has many concerns about how that helps Apple.
No one cared to ask about the fate of the Mac Mini in the call??
I am surprised it was asked, but they would skirt around it anyway. I'd think that Apple would need some sort of headless machine and I do think the Mac Mini will be retired for a new headless Mac to be announced in January. Though not the elusive xMac that people want from Apple. Just an update to an Aluminium case, NVIDIA chipset and miniDP. Basically the new MB components.
Here is a thought: 25B in the bank....Dell capitalization 25B....buy Dell, own corporate and consumer
Seriously though, if all they do is "weather the storm" with their 25B in this economic downturn, HUGE opportunity lost.
SJ just explained why Apple wouldn't make a $500.- computer. The operative word was 'JUNK'. Why then would they spend 25 billion on exactly that?
If they did it would be so depressing. I can hardly think of anything more dreary. I think the opportunities will come in the form of something far more interesting than a mere business opportunity. Can you imagine SJ's face if he unwrapped his xmas present and found DELL. It would be like giving your 16 year old a Transistor Radio instead of an iPod.
Apple loves to design quality products with great usability. Stuff that excites them. Don't you know?