• Business Week, Wednesday, January 23, 2008 11:33 AM

Apple got burned on Wall Street yesterday, shedding 11 percent its value after disappointing investors with a weak outlook and lower than expected iPod sales. The electronics giant is famous for issuing conservative forecasts, but when investors added together recession fears plus lower-than-expected iPod sales plus a 14 percent lower first quarter outlook, the company ended up with minus $20 billion in market cap.

But investors were over hasty, pronouncing Apple "relatively well-insulated against chill" on closer inspection. Sure, iPod sales were a few million short, but Mac sales were "scorching," with desktop Macs growing 53 percent in a market that expanded just 10 percent. Of all of its businesses, Apple has the most room to grow in the PC market, with a less than 5 percent share of a massive $258 billion pie. Other good news: roughly half of the 500,000 or so Macs sold in the last quarter were purchased by someone who never purchased a Mac before, and history shows that Mac converts are likely to stay that way--and buy other Mac-compliant products.

What's more, iPod sales met revenue expectations, which means that in falling 2 million -3 million short on unit sales, Apple sold more of its most expensive iPods than expected, under-delivering in lower-end products like the iPod Shuffle. As one analyst said: "I think this is an outrageous buying opportunity."

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