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To the delight of Apple (Nasdaq: AAPL) fans everywhere, the company is kicking butt and taking names. There's really no way around that statement, and Apple's most recent report for its fiscal 2009 third quarter backs it up. The company in Cupertino posted revenue of US$8.34 billion and a net quarterly profit of $1.23 billion, which is up compared to revenue of $7.46 billion and net quarterly profit of $1.07 billion in the year-ago quarter.
That's right, Apple grew revenue and profit in one of the worst economies of the modern tech age.
Better yet, Apple reported that its gross margin was 36.3 percent, up from 34.8 percent in the year-ago quarter.
Apple sold 2.6 million Macintosh computers during the quarter, representing a 4 percent unit increase over the year-ago period. While its sales 
of 10.2 million iPods represented a 7 percent unit decline from the year-ago quarter, it was hardly unexpected by Apple.
"We have three categories of what we call pocket products," noted Apple CFO Peter Oppenheimer in the company's conference call with investors this week. "Traditional MP3 players, iPod touch, and iPhone. For traditional MP3 players, which includes shuffle, nano, and classic, we saw a year-over-year decline, which we internally had forecasted to occur. This is one of the original reasons we developed the iPhone and the iPod touch. We expect our traditional MP3 players to decline over time as we cannibalize ourselves with the iPod touch and the iPhone." For details, you can listen to the Apple QuickTime replay stream or head over to SeekingAlpha for the transcript.
iPhones Eat iPods
And boy, did Apple's iPhone cannibalize iPod sales: Quarterly iPhones sold were 5.2 million, representing a mind-blowing 626 percent unit growth over the year-ago quarter.
While Apple CEO Steve Jobs didn't chime in on the investor conference call, he did manage to squeak out a sound bite for the earnings press release:
"We're making our most innovative products ever, and our customers are responding," Jobs said.
There is no doubt that the iPhone, of which Apple sold $3.08 billion worth, has been instrumental to the company's bottom-line revenue. While the popular belief is that Apple's iPhone comes with a halo effect that encourages new owners to buy Macs, too, the iPhone isn't the reason Apple is having amazing success in our troubled economic times. Apple's success was inevitable, and it has to do with the company's core values.
Apple is successful right now because Apple is simply being Apple.
At Apple, products aren't just "units" the company shills to make a profit. Apple's products are experiences.
iPhone as Experience
This most certainly comes from Steve Jobs, but every single element of an Apple product is designed, from the ground up, to create an experience. For instance, whenever Apple releases a new product, unboxing strip-tease videos are taken by geeks everywhere and posted online for thousands to gush over. If you're an Apple product fan, you know what I'm talking about. Heck, there's a decent chance all the major porn see a lull in traffic hit whenever Apple unveils a cool new product. It's that bad.
Hyperbole aside, Apple takes packaging seriously. In fact, the company was awarded a patent for its iPhone packaging. Think about this. Not only did Apple create a great package, it patented it, too. Why? Because the company believes packaging has value.
CultofMac.com has a great post on the package patent.
"The iPhone's box certainly is elegant. Pull off the top, and the iPhone is presented to its new owner sitting on a slab of glossy plastic, like an expensive watch. Hidden underneath are its accessories and instructions," explained Leander Kahney, senior editor of Cult of Mac.
"Jobs has always been fascinated by packaging, believing the unboxing routine to be a crucial part of the customer experience. All of Jobs's products have been carefully packaged going back to the original Mac in 1984. Jobs believes unpacking a product is a great way to introduce unfamiliar technology to the consumer -- they explore the components as they unbox them," he added.
And get this -- Apple's patent listed 17 designers named on the patent. Do other companies even have 17 package designers?
Selling Cool
Some might think Apple is just peddling "cool" rather than great technology. Take the "Get a Mac" campaign, which features the cool "I'm a Mac" guy and the dumpy-looking "I'm a PC" guy. These ads have been running since 2006. If Apple was simply selling cool, could these ads (despite being funny) manage to sell Macs? No way. If something isn't truly cool to its core, you can't keep selling it over the course of four years. Eventually people will find out you're a fraud and ignore it.
But Apple is still selling cool, and more importantly, it's selling the products at the same time. Take a look at all the ads on Apple's Get a Mac page -- they're all there -- and you'll find that Apple focuses on weaknesses with PCs and strengths with Macs. They cover viruses, crashes, backups (Time Machine), Apple's Geniuses in its Apple stores, the confusing variety of Vista packages. And speaking of Vista, Microsoft (Nasdaq: MSFT) has the ability to create some amazing products, but the company's core isn't consistent with the consumer experience. With Windows Vista and the upcoming Windows 7, Microsoft sells multiple versions: Home Premium, Business, Professional, Ultimate . . . what? Are you kidding me?
There are lots of good reasons to segment an operating system -- enterprise users have features that home owners certainly do not -- but the tiers come off as being designed for Microsoft profit rather than for a customer experience.
Take the fairly popular -- and actually decent -- Microsoft ads that feature "regular" people shopping for budget laptops. In the first one, "Lauren" isn't cool enough to be a Mac person when she finds out that her $1,000 budget won't get her into a MacBook. This is nice. Microsoft slams the Mac as simply a cool item rather than a valuable product. However, this is a short-term move. Can anyone imagine watching these ads for four years? All Microsoft is doing is making sure that Apple is not seen as a commodity tech provider.
Nike Is Cool, Too
Take the shoe manufacturer Nike (NYSE: NKE). While Nike has ancillary products like clothes, watches and plenty of stuff endorsed by Tiger Woods, the heart of Nike is its shoes. Are Nike shoes cool? Indubitably. The company churns out new designs like no other shoe manufacturer on Earth. But like Apple, Nike is far more than cool. The company uses innovative technology for cushioning, traction, and overall design. And what about quality? Nike shoes are generally pretty darn robust. I'm wearing a pair of running shoes that I've had for well over a year, and I wear them nearly all the time. The soles are wearing flat, yet the stitching is holding together remarkably well. I just noticed that one of the laces is starting to fray.
Now, I'm on a middle income budget that's been constrained in various ways over the last couple of years, like the budgets of most Americans. And when I go shoe shopping, I ignore the cut-rate brands even though they have attractive pricing. Is it just that they aren't cool? No. Some are actually learning to create better looking shoes. Instead, I shell out for Nike shoes because I realize they will last longer and treat my feet better than most other shoes. I've tried cheap shoes. They last a few months. Would I rather have one pair of shoes that cost $70 for a year or three pairs of $35 shoes that add up to $105 and fail on me at inopportune times?
There's a reason Apple created a stiff unibody frame and new battery technology for its MacBook Pro line of notebooks -- the company wants to produce a trouble-free unit that will last for years, not something that's going to break in a few months. I've got a buddy who bought a popular netbook a few months back. He gushed about it after he installed Mac OS X on it. The screen failed within six weeks, it wouldn't shut properly, and the case started coming apart -- and this is after being handled by an adult who carried it in a briefcase, not some teenager tossing a netbook in backpack. As for the netbook's manufacturer, the customer service rep had the gall to tell him that the netbook wasn't meant for briefcases ... when the company's marketing materials actually showed how nicely the netbook fit into briefcases.
There's a reason why Apple is doing well right now, and it's not the iPhone. It's quality. Attention to detail. Simple, elegant, durable design. More people than ever are starting to notice because they understand value. All a person has to do is walk into an Apple retail tore and pick up an iPhone. They can feel the value. It's solid. It has nice lines. Everything fits together perfectly. That's Apple, and that's why the company is kicking butt and taking names these days.
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