Editor’s note: Ezra Gottheil is an analyst at Technology Business Research. He reviewed Apple’s quarterly earnings announcement earlier this week.

HAMPTON, N.H. – Despite a distinct softening of the market, Apple (Nasdaq: APPL) had another excellent quarter.

With 27 percent year-to-year revenue growth, an 18 percent operating margin, and more than $24 billion in cash and short-term investments, the company is very healthy. Because Apple specializes in premium products, TBR believes the company will be affected more than competitors by a severe sustained economic downturn. Nevertheless, we believe the company will continue to be profitable, and will successfully weather difficult conditions.

The iPhone 3G is a great success.

Apple sold 6.9 million iPhones in 3Q08, as a result of expansion into more than 50 countries and product improvements that include 3G data access and availability of a wealth of downloadable applications. Apple has already exceeded its goal of 10 million iPhones to be sold in CY2008. In fact, if the company did not spread out the recognition of iPhone revenue over 24 months, Apple would now be the third largest wireless handset vendor by revenue.

CEO Steve Jobs announced that the 200 millionth iPhone application (App) will be downloaded tomorrow, three and one-half months after the introduction of the iPhone 3G. TBR believes the iPhone and iPod touch are important application platforms driving what Jobs called a “virtuous cycle” between hardware and software similar to the PC boom in the late 1970s. While the iPhone will have increasing competition, Apple’s ecosystem for delivering applications gives the company a distinct advantage in the smartphone market for the next three or four quarters.

To reassure the market, CEO Steve Jobs made an appearance at the earnings announcement.

Jobs did not mention his health, as he had jokingly at the introduction of new notebook PCs on October 14. TBR believes his presence was meant to show his ongoing participation, as well as his role in a winning team. He also sought to address economic uncertainties, by pointing out Apple’s customer loyalty and vast cash reserves. TBR agrees that Apple is positioned to deal with adversity.

The company’s fiscal caution caused it to lose only $117 million on a portfolio of $24.5 billion. Jobs said Apple customers may defer their PC upgrades, but will not switch to other vendors’ products. TBR believes this is largely true. For the first time, Apple discussed how it would have performed if it did not defer its iPhone revenue, another reassurance. If iPhone purchases (and associated costs) were recognized when the devices were sold, revenues would have been $11.7 billion, an 88 percent increase over 3Q07. Gross margin would have been 41 percent , and iPhones would have contributed 39 percent of revenue.

The iPod market is mature.

Apple introduced attractive new iPods in 3Q08, and lowered the entry price for its pocketable Web browser, the iPod touch. In spite of these efforts, Apple’s iPod business grows slowly, but does contribute significantly to profit. Apple dominates the mobile media player market, and increases its market share, but the market is very nearly saturated.

iPod revenue growth was only 2.5 percent year–to-year, and unit growth was 8.4 percent , as average selling price declined to a new low of $150. iPods are very profitable, however, and the iPod touch is really part of a different product category, pocketable PCs.

Mac growth slowed.

The economic slowdown was reflected in Mac sales. Mac unit sales were up 21 percent year-to-year, a number most companies would be proud of, but it was the smallest growth Apple has posted since 2Q06, when the company transitioned to the Intel platform. Mac revenue growth was only 17 percent year-to-year, as average selling prices (ASPs) decreased.

One of the causes of ASP erosion was the seasonal back-to-school promotion, which gave Mac purchasers an iPod rebate worth up to $299, but TBR believes consumers, even Mac consumers, were more cautious in 3Q08. According to Apple, Mac market share continued its sustained growth, as all PC sales slowed in 3Q08. Apple invested in new Mac manufacturing processes in 3Q08, and a major decrease in Mac sales would put pressure on Apple’s margins, but most manufacture is outsourced, and TBR believes Apple will be able to scale downward to maintain profitability if necessary.