Apple defies economic gravity

As the global economic crisis shows little sign of relenting, it’s beenanother brutal week in tech. News Corp digital chief Jonathan Miller fired MySpace’s two co-founders, CEO Chris DeWolfe and president Tom Anderson. A Swedish court sentenced the two founders of the Pirate Bay web service to a year in prison. Yahoo! announced plans to lay off another 5% of its staff and finally shut down GeoCities, the archaic web hosting company it bought for $3.6 billion in 1999. Joost, at one point the great hope of online video, is reportedly now up for sale. Even Microsoft announced a 6% annual drop in revenue, the first the Redmond, WA based company has reported since it went public in 1986.

Microsoft CFO Chris Liddell described the current business conditions as "the most difficult economic environment the company has faced in our 30-year history". But for Apple, Microsoft’s greatest rival over the last twenty five years, the most serious global economic crisis in a century has had little impact on the company’s remarkable growth.

Yes, in the midst of all the general economic carnage, a Steve Jobs-less Apple continues to defy economic gravity. Announcing its first quarter 2009 sales to Wall Street last Wednesday, Apple revealed a net profit of $1.2 billion on overall sales of over $8 billion. Leading the Apple miracle were 3.79 million iPhones sold in 81 countries, more than double the number from the same quarter last year. And last week Apple also celebrated the billionth download from its 9 month-old App Store which now features more than 35,000 different iPhone apps. 

The iPhone is more than just a successful hardware product. With its telephone and Internet access, the pocket-sized iPhone is driving the real-time communications revolution. Without the iPhone, fashionable real-time services like Twitter wouldn’t have taken off so meteorically. The iPhone has swept away the traditional boundaries between a mobile telephone, a web browser, a computer, a portable entertainment system, and even an e-book reader. It is now the critical vehicle of both old and new media.

So is the iPhone invulnerable? Palm certainly hope it isn’t. This once iconic Silicon Valley firm has bet everything on a new iPhone style device called the Pre which will be launched in the summer. Google’s promising Android telephone will also be out later this year, while Research in Motion’s popular BlackBerry family of devices (which I myself own & cherish) remains the iPhone’s primary competition amongst business users.

But my money is firmly on Apple. If the rumors that it will release a $99 third generation iPhone in early June at its World Developers Conference in San Francisco, expect sales to at least double again in the second half of 2009. Whatever happens to the world economy over the next eight months, 2009 will likely be remembered as the year that Apple overtook both Microsoft and Google as the critical engine of the new media economy.