Apple's sexiest feature

August 6, 2009: 8:00 AM ET

It's undeniably interesting to talk about the health of Steve Jobs. And whether Apple plays nice with the competition. Oh, and the multiple conflicts of interest between the boards of Apple (AAPL) and Google (GOOG), even after Eric Schmidt removed himself as an Apple director. (Genentech Chairman Art Levinson remains on both boards, and unless something has changed recently, Apple lead director and Steve Jobs confidante Bill Campbell is still Eric Schmidt's executive coach and a heavily involved advisor to Google's senior managers.)

This is all true, and truly worth jabber-jawing about. It also explains why there hasn't been all that much chit-chat about an astounding if unexciting report released earlier this week by the respected Sanford Bernstein analyst Toni Sacconaghi that details just how freaking profitable Apple is. The once-beaten company's ability to spew out cash may indeed be its neatest trick of all.

Some of Sacconaghi's points to consider:

* In the first half of 2009 Apple's iPhone accounted for only 8% of the cell-phone industry's handset revenues but 32% of its profits, Sacconaghi estimates. Its profitability blew everyone else away, 40% operating margins versus a 7.5% industry average.

* Similarly in PCs, Apple's meager 6% share of revenues translated into a quarter of all the industry's profits. Apple does this, the analyst surmises, by only going after the high end, designing gorgeous  products and benefiting from the integration of hardware and software.

* All by itself, Apple accounts for as much as 20% of worldwide purchase of NAND memory, the type of chips that go into the iPhone. Such dominance gives Apple a tremendous cost advantage.

For years Apple was a yes-but story. Yes, its Macintoshes were pretty and well loved by hipsters. But its market share was minuscule and therefore it was irrelevant. All of a sudden we see in the financial data that revenue market share is the wrong way to consider Apple. Its share is high where it counts, profitability, which translates into a market value of $148 billion.

Sacconaghi, by the way, used his report as an opportunity to up his price target on Apple's shares to $185.  At $165, the stock price had reached his previous target.

It seems Apple's various battles with competitors, the Federal Trade Commission, and even would-be partners will keep the company busy for months. None of these issues, however, will put a dent in the company's profitability in the near term.  For financial types, at least, that's a pretty sexy story.

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Adam Lashinsky
Adam Lashinsky
Senior Editor at Large, Fortune

Adam Lashinsky is a San Francisco-based editor-at-large for FORTUNE, covering Wall Street and Silicon Valley. Lashinsky joined FORTUNE in 2001, after two years as a contributing columnist. Prior to joining FORTUNE, Lashinsky covered Silicon Valley for TheStreet.com and The San Jose Mercury News. A Chicago native, Lashinsky holds a B.A. in history and political science from the University of Illinois at Urbana-Champaign.

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