John Paczkowski

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Monster Earnings From Apple

Apple posted earnings for its third fiscal quarter after the closing bell today, and like most of the company’s recent reports, they were massive.

According to Apple’s guidance, earnings per share were to be $5.03 on $23 billion in revenue. Consensus estimates called for EPS to be $5.83 on $24.9 billion in revenue. And amateur estimates predicted $6.72 EPS on $26.69 billion in revenue.

Apple obliterated all three.

For its third quarter, it reported record revenue of $28.57 billion on a record net quarterly profit of $7.31 billion, or $7.79 per share.

Astonishingly, Apple made more money in its June quarter than it did in its December quarter — without a new iPhone.

The third quarter was an outstanding one for Apple hardware. The company sold 3.95 million Macs, a 14 percent unit increase over the year-ago quarter. It sold 20.34 million iPhones — 142 percent more than it did a year ago. And it sold 9.25 million iPads, a 183 percent spike over the year-ago quarter.

The company is now sitting on $76 billion in cash. Astonishingly, that’s more than $10 billion more than it was 90 days ago.

“We’re thrilled to deliver our best quarter ever, with revenue up 82 percent and profits up 125 percent,” CEO Steve Jobs said in a statement. “Right now, we’re very focused and excited about bringing iOS 5 and iCloud to our users this fall.”

Looking ahead to the fourth quarter, Apple said to expect revenue of about $25 billion and earnings per share of $5.50, comically low considering the blowout it just posted.

Apple shares have spiked on the news and are now up $26.39, or 6 percent, at $403.24.

NOTES FROM THE EARNINGS CALL:

  • Apple CFO Peter Oppenheimer and COO Tim Cook will be presiding over today’s call.
  • Oppenheimer runs through the quarter’s numbers, noting that Net income grew faster than revenue.
  • Oppenheimer says Lion is coming tomorrow.
  • Apple’s monster earnings were “fueled primarily by dramatic growth in iPhone and iPad,” says Oppenheimer. Apple sold 20.3 million iPhones, a 142 percent YOY increase. It sold 9.25 million iPads, a 183 percent increase.
  • iTunes revenues up 36 percent year over year. There are now 225 million iTunes accounts through which people have downloaded over 15 billion songs.
  • 86 percent of Fortune 500 companies are testing or deploying iPads.
  • On app store: 425,000 apps. More than 15 billion downloads. Over $2.5 billion paid to iOS developers.
  • Traffic to Apple Stores is up 22 percent at 73.7 million.
  • Moving on to the Q&A: First question about 12 percent revenue guidance, which is very conservative. Oppenheimer dodges, stresses that the company has its best lineup of Macs ever and expects sales increases for iPhone, iPad. Then he notes that a future product transition may affect the company’s September quarter.
  • Tim Cook on Mac cannibalization : “We do believe some customers chose to buy an iPad over a Mac, but we think more of them bought an iPad over a Windows PC.”
  • Cook: “Sales of iPad 2 have absolutely been a frenzy.”
  • Apple has 222 million iOS devices in the market.
  • Cook on China: “China was very key to our results … revenue was up over 6 times and the revenue was approximately $3.8 billion during the quarter. That makes the year-to-date numbers for the three quarters we’ve had thus far around $8.8 billion. Asia Pacific is a substantial opportunity for Apple and I firmly believe we are just scratching the surface right now.”
  • Cook on patent litigation in the mobile space: “We have a very simple view. We love competition, but we want people to invent their own stuff. And we’re going to defend our portfolio when we need to.”
  • Apple added 42 new iPhone carriers and 15 new countries this quarter.
  • Cook on the iPad: “We sold every iPad 2 we could make this quarter. There is no shortage of demand. … We’ve been able to ramp up production so that the iPad is finally at a supply-demand balance.”
  • Cook on Apple TV: “It’s doing well, but I don’t want to mislead people by saying that. We still refer to it as a hobby because we don’t want anyone to conclude it’s another leg of the stool. … We love Apple TV and so do our customers. … We continue to invest in it because we believe there’s somthing there.”
  • Interesting. Cook says there are 115,000 non-Apple points of sale in the retail channel.
  • Cook on tablet competition: “It doesn’t appear that other tablets are getting any traction to speak of.”
  • Cook thinks some folks have delayed their Mac purchase because they’ve been waiting for Lion to launch.
  • Last quarter for the first time Apple sold more iPads than Macs in the K-12 market. “We would have never predicted this,” Cook said. “It’s clear the iPad has a universal appeal in any market from consumer to business to government.”
  • Cook on prepaid smartphones in emerging markets like China: “We haven’t figured out how to play perfectly in that environment. And we do have more to learn, but I feel very, very good about our progress.”


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