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Promise Trumps Peril on Planet iPhone

The year was 2006, and Apple was said to be developing a cellular telephone.

Reporting on that rumor for this magazine at the time, I encountered tremendous skepticism. Apple just couldn't do it, people in the business told me. Building a cellular phone is very complex, not exactly like making computers or iPods. And even if it could, Apple would find it tough to get phone companies to play along.  cheap michael kors watches

Flash forward, and Apple's biggest challenge seems to be its success. Sales of 35 million iPhones in the fiscal second quarter, ended in March and reported last Tuesday, made up 58% of Apple's total revenue, up from 53% of sales in the prior quarter, even though it actually sold fewer iPhones.

APPLE IS MORE THAN EVER an iPhone company, at least by revenue. Some worry that means it is overly dependent on the gadget. michael kors outlet bags

The phone companies, moreover, having played along with Apple in a big way, increasingly look as if they've done so to their own detriment. Having used the iPhone to lure new customers for many years, Verizon Communications (VZ), AT&T (T) and Sprint -Nextel (S) all reported results in the last two weeks that seemed to show iPhone subsidies taking a toll on their profits, according to analysts. They might at some point just walk away from this crazy circus.

Amid those concerns, Apple stock has seen some eventful trading.

Though still up 49% this year, at a recent $603, the stock is down 0.4% in the last two weeks. The shares passed through both their biggest five-day point decline and their biggest one-day point jump in that time.

Anyone who bought in at an all-time high of $644 on April 10, only to see the stock fall back to $555 ahead of the April 23 report, had a rough ride. I think, however, the story of The iPhone Company, and its stock, keeps getting better.  michael kors tote bags

First, there is the stock's valuation. As always, it trades below what it merits, at about 13 times projected earnings per share for the fiscal year ending this September, despite 69% projected profit growth. That's not counting the $110 per share, or so, the company has in cash and investments.

The stock now has some income support, too, in the $10.60-per-share annual dividend proposed back on March 19, as well as a three-year, $10 billion buyback program.

The iPhone, however, weighs on one's thoughts, as revenue increasingly seems to hinge on one quarter, the December fiscal first quarter, now seen as the annual season for a new iPhone debut. Jefferies & Co.'s Peter Misek, who has a Buy rating on Apple shares (ticker: AAPL)—and an $800 price target—on Friday wrote to clients that the next unveiling, the "iPhone 5," will be "enormous," with Apple intending to build as many as 50 million to 60 million phones in September for sale in October. cheap Michael Kors