Apple Casually Trounces Wall Street Again
AAPL spiked in after-hours trading Tuesday following the company's latest earnings report, in which it claimed $15.7 billion in revenue. The figure was driven by solid iPhone and iPad sales, but Mac computer sales also continued to grow. Apple executives indicated the furor over the iPhone 4's antenna hasn't hurt sales. "We're selling every iPhone 4 we can make," Apple's Peter Oppenheimer said.
Apple rocked Wall Street once more Tuesday when it announced a blowout 2010 third fiscal quarter.
"It was a phenomenal quarter that exceed our expectations all around," Apple chairman and CEO Steve Jobs said. "The iPad is off to a terrific start, more people are buying Macs than ever before, and we have amazing new products still to come this year."
Apple share prices jumped in after-hours trading; they closed the day at US$252.07 but by press time had climbed to $258.60 in after-hours activity. However, trading remained volatile.
Dollars and Cents
Apple posted revenues of $15.7 billion and a net quarterly profit of $3.25 billion, or $3.51 per diluted share.
Revenues were driven primarily by iPad sales, as well as by iPhone and Mac sales, Apple Chief Financial Officer Peter Oppenheimer said during an earnings call Tuesday.
Gross margins for the quarter were 39.1 percent, compared with the 40.9 percent reported a year ago.
"They beat my expectations," Brian Marshall, an analyst at Gleacher, told MacNewsWorld. "The logical thing to do would be to revise my estimates upwards."
International sales accounted for 52 percent of this quarter's revenues, Apple said.
In his guidance for the fourth quarter, Apple's Oppenheimer said the company expects revenues of about $18 billion, and is targeting about $3.44 in earnings per share. He expects gross margins to be about 35 percent.
Given that Apple's guidance has almost always been conservative -- and given Jobs' promise of more goodies in the pipeline -- investors should look to even better results for the coming quarter.
The Source of the Money
Apple sold a record 3.47 million Mac computers for the quarter. This was over 100,000 more than the December quarter record figures, Oppenheimer said.
"We are pleased to have outgrown the global market in both the desktop and portable categories," Oppenheimer stated. This was led by the continued momentum of iMac and MacBook Pro sales. Apple also saw record Mac sales in U.S. educational institutions despite state budget constraints.
Apple sold 9.4 million iPods in this quarter, compared to 10.2 million a year ago. However, iPod touch sales grew 48 percent year over year, and the average selling price of the iPod touch increased 12 percent, Oppenheimer said.
Sales of the iPhone were also strong.
"We were very pleased with iPhone sales of 8.4 million, including over 1.7 million iPhone 4s," Oppenheimer said. That sector showed a growth rate of 61 percent year over year.
Apple put to rest some analysts' concerns that iPad sales would cut into demand for Macs.
"We are thrilled we reported our best Mac quarter ever in the same quarter that the iPad sold 3.3 million units," Apple chief operating officer Tim Cook said during the earnings call. "For us it's a jaw dropper," he added.
"This quarter was driven by solid strength in iPhone and Mac sales," Marshall said. "They're not seeing any cannibalization of the iPhone and Mac lines by the iPad."
Clawing Back Some Ground
The rebound in Apple share prices may or may not last. Apple shares fell to their lowest point in almost two months Monday, briefly plunging below $240 mark for the first time since May 25 before closing at $245.48.
Two major factors may have played big roles in that slide. One involved concerns about the company's profit margins in the light of reports that wages in China, where Apple products are made, are going up.
The other factor might have been fears over the competition posed by Android smartphones, the latest being the Motorola Droid X, which was released last week. Customers are cleaning out stocks of the Droid X and the HTC Evo every time these devices are available.
Tuesday's earnings call could exacerbate fears about Apple's profit margins, so investors may remain skittish.
As for competition from Android smartphones, there's plenty of room in the market right now for every vendor, Chris Hazelton, a research director at the 451 Group, told MacNewsWorld.
"Smartphone sales are exploding because of pent-up demand," Hazelton explained. "There's such an appetite for them that this is probably the largest opportunity in technology today."
Antennae Are for Insects
During the earnings call, Apple executives indicated that the recent furor over the iPhone 4's poor reception hasn't hurt sales.
"We're selling every iPhone 4 we can make," Apple's Oppenheimer said in response to one question.
Returns because of poor reception are "extremely small," Apple chief operating officer Tim Cook said. "The return we've seen on the iPhone 4 is less than that for the 3GS," he added.
Last Friday, Apple offered free cases to iPhone 4 purchasers who get the device until Sept. 30. The move appeared to tone down some of the heat Apple had been taking over the supposed iPhone 4 "death grip" issue.
That's probably because people aren't buying smartphones for voice communications, the 451 Group's Hazelton pointed out.
"The fuss is all about voice, and voice is no longer the main use case for smartphones," Hazelton explained. "People buy smartphones for data."