Editor's Outlook

With all the success Apple Computer is enjoying these days, many may not remember how gloomy things were looking for the company five years ago. At the end of April 2001, although no one knew it at the time, Apple’s share price reached the highest point it would see for almost three years. The company announced year-on-year declines in revenues and net income of 19% and 69.1%, respectively, for the third quarter ended June 30, 2001. The next quarter wasn’t any better as the company announced a year-on-year decline of 30% in revenues and 59.6% in net income. However, Apple’s road to recovery began when it rolled out its iPod digital music player on October 23, 2001.

Ironically, the iPod met mixed reviews at first, with many industry analysts balking at its $399 price tag. Others wondered whether Apple would be able to compete in the consumer electronics arena. However, at least one analyst, looking back, was eerily prescient: IDC analyst Bryan Ma was quoted as saying, “It’s another incentive for them that can convince people to buy a Mac.”

Fast forward to the iPod’s fifth birthday last month. Apple had announced the week before that it had shipped almost nine million iPods, many of which now also play video, during its fourth quarter alone (ended September 30)—sales worth $1.6 billion to the company. To put this in perspective, Apple generated more revenues from iPod sales alone than the entire company generated in the same quarter back in 2001. Apple is estimated to control roughly 70% of the U.S. digital music player market and Apple’s iTunes music downloader and manager accounts for approximately 80% of the digital music market. Furthermore, if you had invested $10,000 in Apple stock on the day the iPod was released, you would have had $89,813 on its fifth birthday, a gain of over 798%.

As Mr. Ma predicted, the iPod, along with Apple’s retail stores, have introduced the Apple brand to millions of people who probably would never have considered purchasing an Apple product. Apple’s market share in the U.S. PC market is at its highest level in years.

Apple’s presence in the marketplace, many will argue, is a boost for Microsoft Windows users as well. The competition from Apple forces Microsoft to be a better company, which in turn makes for (hopefully) a more stable and more secure Windows operating system. Many of the new features and enhancements that have found their way into the next version of Windows—Vista—are part of the Mac OS X operating system, which Apple released shortly after the iPod. For more information on Vista andMac OS 10.5 Leopard, Apple’s latest operating system, both due out in 2007, as well as our tips and recommendations for those looking to buy a new computer system, turn to page 17.

It is too early to tell whether or not Apple’s growing market share will translate into additional software titles, especially those for individual investment analysis and tracking. Our annual CI Editors’ Top Investment Product Picks begins on page 9 and covers our favorite software packages—for both Mac and Windows—and Web sites for investment tracking and analysis.