Apple, IBM earnings reflect wealth effect
Reports from the 2 tech titans reveal increased spending at corporate and individual levels -- a rejuvenation the market isn't taking into account yet.
We fret so much about how consumers are strapped and how companies are just withholding profits and not spending, and then we get two quarters that tell us, frankly, the opposite.
First, the products that IBM and Apple sell are not inexpensive. The big rap against Apple is that the price point for so many of its devices is so high. Anyone who has bought a truly wireless, no-Wi-Fi iPad as I did this holiday, or anyone who has bought a MacBook Air, as I did the year before, knows these devices are very expensive compared with a plain-old but pretty good Hewlett-Packard (HPQ) at Costco (COST).
IBM's major growth area this quarter was its consulting business, but you don't see the pickup in software that it saw -- and predicted at the big earnings meeting where it outlined stretch goals that seemed pretty wild at the time but now seem doable -- if corporations are holding back spending.
Remember, I am not even talking about the $9 billion in capital expenditures that Intel (INTC) committed to, an astounding number and one that most analysts didn't like, because they thought Intel was spending too much. They failed to recognize that if demand were weak, Intel would never do such a thing.
Of course, much of this Apple-Intel growth was global, but the U.S. seems to be at the forefront of the expensive spending.
I think people on Wall Street might be too negative about the prospects of people on Main Street and their spending habits, as well as the spending habits of corporations. Don't forget, also, that Apple had its first dent in the corporate market with iPad enterprise sales.
One reason for my optimism for 2011 has to do with the wealth effect, that people are feeling better and spending more -- both at corporate and individual levels -- in part because of newfound certainty coming from Washington and in part because the pressures from the Great Recession are finally easing up.
These two reports stand out as positive exhibits of the power of rejuvenation, something the market isn't taking into account just yet at these prices at this time.
At the time of publication, Cramer was long Apple and Intel.
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