John Paczkowski

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Apple’s Insanely Great Quarter: 3.05  Million Macs, 7.4 million iPhones Sold

steve_moneybagsApple’s September quarter saw, among other things, the release of Snow Leopard, the latest upgrade to its OS X operating system and the first public appearance of CEO Steve Jobs, who’d been on a medical leave of absence for a liver transplant. It was also the first full period since the company launched the iPhone 3GS, in late June.

No wonder it was a blowout quarter.

After market close Monday, Apple reported a fiscal fourth-quarter profit of $1.67 billion, or $1.82 a share, on revenue of $9.87 billion. That topped the estimates of analysts surveyed by Thomson Reuters, who’d expected the company to earn $1.42 a share on revenue of $9.2 billion.

The company sold 3.05 million Macs during the quarter, a 17 percent increase over last year. It sold 10.2 million iPods, an eight percent decline from the year-ago quarter.

And iPhones? Apple (AAPL) sold 7.4 million of those–seven percent more than during the same period last year. So much for those supply-chain issues that some analysts warned might undermine iPhone sales.

“We are thrilled to have sold more Macs and iPhones than in any previous quarter,” said CEO Jobs. “We’ve got a very strong lineup for the holiday season and some really great new products in the pipeline for 2010.” [Editor's Note: "...really great new products"--is that code for a tablet?]

Apple shares, which closed at $189.86 today, are spiking as I write this. At $203.90, they’re up more than seven percent in extended trading.

Looking ahead to its fiscal first quarter, Apple estimates it will earn between $1.70 and $1.78 a share on revenue in a range of $11.3 billion to $11.6 billion. That’s comically lower than the $1.91 a share on $11.45 billion in sales that analysts are forecasting. But as today’s results clearly demonstrate, Apple subscribes to the underpromise-and-over-deliver school of guidance theory, so there’s likely little cause for concern.

So, to recap: Apple sold more Macs and more iPhones than in any previous quarter in the company’s history. Before the holiday quarter. And in midst of the worst economy we’ve seen in 50 years.

Notes From the Earnings Call:

  • Apple COO Tim Cook and CFO Peter Oppenheimer are handling the earnings call. CEO Steve Jobs will not be attending.
  • Oppenheimer says this was Apple’s second-highest quarterly revenue ever. Highest-ever operating margin. “We are thrilled with these record-breaking results, particularly given the economic environment around us.” Obviously.
  • Macs are showing “fantastic momentum,” says Oppenheimer. Sales have outpaced the market in 19 of the past 20 quarters. Quarterly sales were up 17 percent; portable sales, 35 percent. Interesting: 42 percent growth in Asia.
  • Moving on to iPods: Sales were down to 10.2 million from 11 million a year ago. But iPod touch sales doubled. MP3 market share in the U.S. is now more than 70 percent (according to NPD, I think).
  • iPhone sales were up seven percent. Apple will begin selling iPhones in China later this month. More than 85,000 apps in App Store. Two billion downloads.
  • Apple opened 15 new stores during the quarter. Now has 273. Will soon open first two stores in France, including one at the Louvre.
  • Moving on to the Q&A. Asked about those iPhone 3GS supply issues I mentioned earlier, Cook acknowledges that demand did outstrip supply in a number of countries. But the situation improved “markedly” in September. How are things looking for China? Cook: “I would have liked to have had more, honestly, because we were still short in some countries at the end of the quarter.”
  • Apple is obviously very excited about the iPhone’s impending debut in China. “There’s a good opportunity, and we’re really excited to get started,” says Cook. “It’s the largest market in the world in terms of total phones.”
  • No comment on the broader economy. “We just spend our time projecting our business and leave the economy to the economists.”
  • Does Apple worry about iPhone rivals? Android? Not really, says Cook. “We feel very good about suiting up and competing against anyone.” Our competitors are still trying to catch up with the first iPhone, he adds.
  • Snow Leopard? Cook says the company’s been “pleasantly surprised” by sales of Apple’s latest OS.
  • How does Apple benefit from carrier-exclusivity iPhone deals? Cook says carriers with exclusivity deals are willing to invest more in the platform and that means greater innovation. Visual voicemail is an example of that. That said, he adds, “We’ve found no lack of people wanting to sell iPhones, frankly.”
  • International store revenue up more than 20 percent, on average.
  • More on iPhone supply issues. Cook insists this is not a component issue, though he notes that silicon can sometimes be hard to get. “We feel good about our position now.”
  • And still more on iPhone supply issues: How many iPhones would Apple have sold if it had an adequate supply? Impossible to say, really, Cook says, adding that 3GS units were in short supply virtually everywhere in September.
  • Enterprise demand for the iPhone is very strong. It’s either being deployed or already in use at some 50 percent of Fortune 100 companies. Same with Europe and the FT 100. Widely used in higher ed and government as well.
  • But perhaps not widely enough. Asked about institutional sales, Cook says Apple isn’t seeing much stimulus funding. The company’s worried about state spending. Says Cook, “We may see more this quarter, but it’s too early to tell.”

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