Apple posts first quarter 2008 results

Filed under: Apple Financial, AppleWe are in the process of liveblogging Apple's financial conference call, but Apple has already posted their quarterly results for all to read. Here's what Apple sold this quarter: 2,319,000 Macs (44% more than last quarter) 22,121,000 iPods (5% more than last quarter) 2,315,000 iPhones Revenues clocked in at $9.6 billion and a net profit of $1.58 billion.Best. Quarter. Ever.Read | Permalink | Email this | Comments

Filed under: Apple Financial, AppleWe are in the process of liveblogging Apple's financial conference call, but Apple has already posted their quarterly results for all to read. Here's what Apple sold this quarter: 2,319,000 Macs (44% more than last quarter) 22,121,000 iPods (5% more than last quarter) 2,315,000 iPhones Revenues clocked in at $9.6 billion and a net profit of $1.58 billion.Best. Quarter. Ever.Read | Permalink | Email this | Comments

  • Apple posts $1.58B profit, buys monocle, top hat

    Filed under: Misc. GadgetsWell, the holidays were pretty happy down Cupertino way this year -- Apple just posted its Q108 financials and they're impressive. Spurred by sales of 2.3 million iPhones, 22 million iPods, and 2.3 million Macs, Steve and the boys raked in $9.6 billion in total revenue, which translates to $1.58 billion in pure, glorious profit. That represents Apple's latest best quarter ever, with a 35 percent jump in revenue year-over-year -- a $2.5 billion increase from last December. The $1.76 profit per share also beat consensus analyst estimates of $1.63 a share, and, as Piper Jaffray's Gene Munster pointed out in his notes, Mac sales have increased 43 percent since last year. All in all, quite a quarter for a fruit company -- we'll let you know what else we find out during the conference call later today. Read | Permalink | Email this | Comments

  • Apple Q408 results out: 6.9m iPhones sold, record Mac sales UPDATE: Steve answers analysts' questions

    Filed under: Cellphones, Desktops, LaptopsHey, turns out that people seem to like a little thing called the iPhone 3G. Apple just announced that it's sold 6.9 million of 'em during its financial fourth quarter, beating out the 6.1 million total first-gen iPhones sold in the previous five quarters -- and beating RIM's total sales this quarter, which Apple seems excited about. Of course, that represents worldwide availability in 51 countries vs the initial US-only launch, so it's not totally unexpected that the numbers are up, but it means that Apple's hit its goal of 10 million iPhones sold in 2008, which should cause some celebration in Cupertino. Apple also seems pleased with Mac sales, which are up 21 percent over a year ago to 2.6 million -- more than it's sold in any other quarter ever. All that combines with 11 million iPods sold for a total profit of $1.1 billion on revenues of $7.9 billion -- that's a lot of scratch. Still, times are tough, so Steve, do you have a seemingly-cautious statement about the US economy that also doubles as a smug shot at your competitors? "We don't yet know how this economic downturn will affect Apple. But we're armed with the strongest product line in our history, the most talented employees and the best customers in our industry. And $25 billion of cash safely in the bank with zero debt." Yeah, we thought you might.PS.- The analyst call just finished with a special appearance from Steve Jobs, who took questions. Head past the break for our semi-liveblog transcript of the good parts. Continue reading Apple Q408 results out: 6.9m iPhones sold, record Mac sales UPDATE: Steve answers analysts' questionsRead | Permalink | Email this | Comments

  • Apple reports highest Mac Sales EVER

    Apple just issued the press release for their 3rd Quarter Financial results, and things couldn't be going any better for Macs. Revenue is up 38% year-over-year, and Mac Sales are at an all time high. Apple shipped 2,496,000 Macs during the quarter, representing 41% growth from the previous year. That's absolutely amazing. Full press release after the jump. CUPERTINO, Calif., July 21 /PRNewswire-FirstCall/ — Apple(R) today announced financial results for its fiscal 2008 third quarter ended June 28, 2008. The Company posted revenue of $7.46 billion and net quarterly profit of $1.07 billion, or $1.19 per diluted share. These results compare to revenue of $5.41 billion and net quarterly profit of $818 million, or $.92 per diluted share, in the year-ago quarter. Gross margin was 34.8 percent, down from 36.9 percent in the year-ago quarter. International sales accounted for 42 percent of the quarter's revenue. Apple shipped 2,496,000 Macintosh(R) computers during the quarter, representing 41 percent unit growth and 43 percent revenue growth over the year-ago quarter. The Company sold 11,011,000 iPods during the quarter, representing 12 percent unit growth and seven percent revenue growth over the year-ago quarter. Quarterly iPhone(TM) units sold were 717,000 compared to 270,000 in the year-ago-quarter. “We're proud to report the best June quarter for both revenue and earnings in Apple's history,” said Steve Jobs, Apple's CEO. “We set a new record for Mac sales, we think we have a real winner with our new iPhone 3G, and we're busy finishing several more wonderful new products to launch in the coming months.” “We're extremely pleased with the growth of our business and the generation of almost $5.4 billion in cash in the first three quarters of fiscal 2008,” said Peter Oppenheimer, Apple's CFO. “Looking ahead to the fourth quarter of fiscal 2008, we expect revenue of about $7.8 billion and earnings per diluted share of about $1.00.” Apple will provide live streaming of its Q3 2008 financial results conference call utilizing QuickTime(R), Apple's standards-based technology for live and on-demand audio and video streaming. The live webcast will begin at 2:00 p.m. PDT on Monday, July 21, 2008 at www.apple.com/quicktime/qtv/earningsq308/ and will also be available for replay. This press release contains forward-looking statements including without limitation those about the Company's estimated revenue and earnings per share. These statements involve risks and uncertainties, and actual results may differ. Risks and uncertainties include without limitation potential litigation from the matters investigated by the special committee of the board of directors and the restatement of the Company's consolidated financial statements; unfavorable results of other legal proceedings; the effect of competitive and economic factors, and the Company's reaction to those factors, on consumer and business buying decisions with respect to the Company's products; war, terrorism, public health issues, and other circumstances that could disrupt supply, delivery, or demand of products; continued competitive pressures in the marketplace; the Company's reliance on sole service providers for iPhone in certain countries; the continued availability on acceptable terms of certain components and services essential to the Company's business currently obtained by the Company from sole or limited sources; the ability of the Company to deliver to the marketplace and stimulate customer demand for new programs, products, and technological innovations on a timely basis; the effect that product transitions, changes in product pricing or mix, and/or increases in component costs could have on the Company's gross margin; the effect that product quality problems could have on the Company's sales and operating profits; the inventory risk associated with the Company's need to order or commit to order product components in advance of customer orders; the effect that the Company's dependency on manufacturing and logistics services provided by third parties may have on the quality, quantity or cost of products manufactured or services rendered; the Company's dependency on the performance of distributors and other resellers of the Company's products; the Company's reliance on the availability of third-party digital content; and the potential impact of a finding that the Company has infringed on the intellectual property rights of others. More information on potential factors that could affect the Company's financial results is included from time to time in the Company's public reports filed with the SEC, including the Company's Form 10-K for the fiscal year ended September 29, 2007; its Forms 10-Q for the quarters ended December 29, 2007 and March 29, 2008; and its Form 10-Q for the quarter ended June 28, 2008, to be filed with the SEC. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the mobile phone market with its revolutionary iPhone. (C) 2008 Apple Inc. All rights reserved. Apple, the Apple logo, Mac, Mac OS, Macintosh, iPhone and QuickTime are trademarks of Apple. Other company and product names may be trademarks of their respective owners.

  • Why Dan Frommer and Scott Moritz Are Wrong on iPhone Sales

    Daniel Eran DilgerSilicon Alley Insider's Dan Frommer says Apple's announcement of reaching its million mark goal in iPhone sales three weeks early is actually bad news for Apple and is convolutedly "below plan." He also says the announcement only props up the speculative conjecture by Scott Moritz of the Street that Apple's iPhones sales are somehow woefully below expectations. They're wrong, here's why.The PremiseFrommer wrote that Apple isn't selling iPhones as fast as planned and is set to only sell around half of its 2008 goal.His premise revolves around the idea that if Apple were selling iPhones at "a constant rate," a million phones in 74 days would be five million per year. However, because it sold over a quarter of those in the opening day and a half at the end of June, Frommer calculates that sales of the remainder in the 72 days since the first of July mean that Apple is only hitting a "3.6 million annual run rate."By the end of 2008, that would only result in 5.8 million units instead of the ten million goal Apple. [Silicon Alley Insider: Apple's iPhone: 1 Million Is Below Plan]Strike One: The Run Rate Myth.The most obvious problem with that idea is the fact that devices don't sell at a constant “run rate." Apple's iPhone sales took off at launch much faster than the original iPod due to the fact that a swell of early adopters were ready to buy it after being convinced over six months of anticipation. At the same time, many potential buyers held off on plans to buy the iPhone until they could read reviews and get a real sense of how it worked. Many were also locked into contracts with Verizon or Sprint. With only six months of advanced notice, it will still be a few more months before the majority of buyers who want an iPhone even get the chance to buy one without having to pay outrageous fees to cancel their existing mobile contract. iPhone sales are also now taking on the network effect of the iPod, as early adopters show their friends. All these factors have difficult to estimate impacts upon sales that make trying to figure a static “run rate� a very simplistic and pointless exercise.However, there is another factor that simply blows the entire idea of a static “run rate� out of the water. Last November, I predicted that sales of the Zune would bomb that winter because Microsoft had failed to critically examine Apple's historical sales patterns. Sure enough, the Zune was thrown against the rocks by Apple's riptide. Frommer's idea ignores that same reality by imagining that iPhone sales will schlep along at a linear pace. Had Frommer tried to calculate an "annual run rate" for the iPod based on a portion of third quarter sales at any point over the last half decade, he would never have been close to accurate. That’s because Apple’s iPod sales roughly triple every winter quarter.In 2002, it sold nearly as many iPods in its winter quarter as it did the first three quarters combined: 219,000In 2003, it actually sold more iPods in its winter quarter than in the first three combined: 733,000In 2004, it again sold more iPods in its winter quarter than in the first three: 4,580,000In 2005, it sold more than 4 million units every quarter, but still sold nearly three times as many in the winter: 14,480,000.In 2006, it sold more than 8 million units every quarter, and then sold over 21 million in the winter quarter.In 2007, it has maintained quarterly sales between 10.5 and 9.8 million per quarter.[Strike 3: Why Zune will Bomb this Winter]Strike Two: The Have it Both Ways Myth.One particularly annoying bit of analysts' talk about Apple's expectations is that they can't seem to decide if Apple's projections are bad because they are conservative lowballs, or if they are bad for being overly enthusiastic figures the company won't be able to reach. They often try to describe them as both, loading contempt on both sides of the scale. This makes them look very foolish. Do they think we have no memory, or are they just changing their stories back and forth in sheer desperation?Frommer tried to argue both sides at once in the same article. Recall that Apple only ever gave two iPhone sales goals: one million by the end of the first quarter of sales, and ten million by the end of 2008. In his piece, Frommer suggests Apple will only be able to sell 5.8 million iPhones by the end of 2008, based on that fallacious "run rate." That would be just over half of Apple's ten million goal. However, he then says that Apple's immediate short term goal was an unimpressive low ball, no doubt because Apple reached it three weeks early.Apple's stated goals must be a greatly frustrating logical conundrum for Frommer, because even at a “run rate" of one million in a quarter, Apple could only ever hope to sell six million iPhones by the end of 2008, another five quarters later. No wonder he's faced with trying to say that the immediate goal was too low and the longer term one is too high! Frommer needs to stop trying to pound round facts into square holes just so they can be stacked up like bricks the way he would like them to be.Strike Three: The Market Bearing Price Myth.While Frommer and Moritz are enamored with the idea that iPhone prices could only be cut if sales were in crisis, a variety of obvious market realities don't support that simpleton idea. Between now and the end of 2008, Apple has just two holiday seasons. If it wants to dramatically exploit its historical potential for selling roughly three times as many gadgets during the winter season, it makes sense to trade off unit pricing for volume sales, even if it could perhaps sell fewer at a higher price and make more short term profits doing so.Such a strategy isn't unique. Microsoft and Sony currently lose money on their new game consoles in desperate bids to establish their gaming and HD video playing platforms. Even so, this year they both cut prices again to accelerate volume demand. Nintendo purposely aimed low to capture volume sales using a more attractive price point. Given high demand for the Wii and extremely constrained availability, Nintendo "should" seemingly raise its console price and profiteer. It hasn't. While prices are clearly linked to demand, it is a common fallacy to think that the "right price" is always the highest the market will bear. Jobs' 99 cent pricing in the iTunes store is clearly not the top price consumers will pay for downloads. Music labels are fuming that other licensees such as Verizon will collect $2.50 or more for portions of a song sold as a ringtone. Jobs wants media prices low to induce volume sales and attract buyers to the legitimate market for music and movie downloads. Labels and studios want "market pricing," in part so they can jack up the price of popular music to exploit consumers, and in part so they can exploit artists by threatening to release their work at lower tiered prices and signal to the market that their careers are over.[Universal vs Apple in the iTunes Store Contracts][Nintendo Wii vs Microsoft Xbox 360 and Sony PS3]This All Happened Before.Dial back the clock twenty years, and you'll discover that Steve Jobs also fought with Apple CEO John Sculley over the price of the original Macintosh. The desire to use an expensive but pioneering amount of RAM and a futuristic new processor had inflated the price of the Mac, but the design team was still able to deliver it at a fairly attractive price point of $1,995. Scully determined that the Mac would still sell at $2495, delivering high profits to fund splashy advertising. Nothing on the market was really similar to the Mac apart from Apple's $9,995 Lisa. VisiOn for the PC similarly cost nearly $10,000 and did far less. Sculley thought that the market would bear anything Apple might charge. Andy Hertzfeld recalled on Folklore.org that in October 1983, "Steve Jobs strode into the software area one evening, looking angry. 'You're not going to like this,' he told us, 'but Sculley is insisting that we charge $2495 for the Mac instead of $1995, and use the extra money for a bigger marketing budget. He figures that the early adopters will buy it no matter what the price. He also wants more of a cushion to protect Apple II sales. But don't worry, I'm not going to let him get away with it!'"Jobs fought Sculley over the price increase, but Sculley prevailed. Sure enough, Macs did sell well out of the gate to early adopters at the higher price, but sales then began to stall. While Jobs couldn't cut the price for the original Mac to induce wider adoption in the mid 80s, he could choose to cut the price of the iPhone early and use interest in the iPod Touch to ramp users toward the iPhone. That price cut will dramatically boost sales this winter, just as iPod price cuts and feature refreshes do every year.Apple will earn less profit on individual hardware sales of the iPhone, and may even earn slightly less money overall this quarter than it might have selling the iPhone at $599. However, a $399 iPhone will dramatically boost the company's sustainable subscriber revenues and devastatingly cut into stationary rivals like Palm and the Windows Mobile licensees, giving them little opportunity retool and strike back with copycat products.  [Price Fight - Folklore.org][Office Wars 3 - How Microsoft Got Its Office Monopoly]Strike Four: The Myth of Unlimited Availability.Another problem with idea that iPhone sales were in crisis--and that a price cut is a conspiracy to hide the truth--is that Apple sold out of iPhones in many of its retail stores throughout the first three weeks on sale.Carl Howe of Blackfriar's Communications tracked iPhone availability every day through July, and then animated the results in a movie that depicts just how constrained iPhone inventories in Apple's retail stores were. So not only did Apple meet its 94 day goal 20 days early, but it did so despite having no or few iPhones to sell in many of its stores during the first 21 days. Price isn't just related to demand, but also to supply.That also demonstrates the fallacy of Scott Moritz' assertion that Apple secretly planned to sell a million iPhones in a day and a half, and was sorely disappointed after failing to do so. How could Apple have planned on selling a million units in one day when it didn't even have a million units on the shelves of its stores during the first month? Remember, Moritz wasn't saying Apple had a delivery problem in getting enough units to stores as Nintendo is experiencing with its constrained supplies of the Wii. Instead, he tried to suggest that interest in the iPhone was far below Apple's estimates, and buyers were leaving it on the shelf like Windows Vista. The result, he claimed, was that "rivals were rejoicing."The only real rejoicing by rivals was that Moritz was volunteering to repeat the talking points handed to him by Verizon shill Roger Entner of IAG Research. Just hours before Apple announced it had sold a million units, Moritz tried to get some traction out of the idea that Apple had dropped the price in desperation to find another half million or so customers over the next three weeks. Apple isn't the typical tech company being run by visionless bean counters. It it were, it would have continued selling $600 iPhones at least through the end of September and then announced that it had sold its million. Apple had to push out new iPods in early September and fit the iPhone into the price range because next month it will be rolling out Leopard and a series of new software updates. Apple feeds the press in small, consistent, and regular feedings so reporters know what to write. If Apple were a big stupid company such as, say HP, it would parade out a mix of dozens of consumer and business products all together in one big event, and nobody would ever hear about any of it. HP did.[Why a million iPhones in 74 days is better than you think- Blackfriars][HP's marketing this week: fashionable but ineffective - Blackfriars][Unraveling Anti-Apple Panic: the iPhone Launch Success] [More on Scott Moritz and the Jim Cramer Misinformation Engine]Strike Five: It's Too Late to Deny the iPhone.The most comical part of Frommers’ analysis is that he’s trying to stuff a cat back into a bag and explain that there was never really any cat, long after everyone in the room heard the purr and pet the thing. Sorry, but the windows of opportunity to doubt the iPhone have long since closed.Real Windows Enthusiasts were aware of the need to deny the iPhone well before its release. They all chimed in with reasons why the iPhone wouldn't work, wouldn't offer what consumers want, and wouldn't sell well, all hoping that their non-stop misinformation campaigns would act as a self-fulfilling prophesy. They failed miserably.John Dvorak began his smear campaign immediately, appearing on CNBC to say that the iPhone was "trending against what people are really liking in phones nowadays, which are those little keypads.� He explained, “The BlackJack, the Samsung, the BlackBerry obviously pushes this kind of thing. The Palm, all of these. I guess some of these stocks went down on the Apple announcement, thinking that Apple could do no wrong. But I think Apple can do wrong, and I think this is it." Reader Jim Barrow sent in a link to a MarketWatch article from March, where Dvorak scribed a rambling diatribe entitled "Apple should pull the plug on the iPhone." He offered no factual basis for worrying that the iPhone might not work out apart from the offhanded comment that "there is no likelihood that Apple can be successful in a business this competitive," words which echoed Dvorak's 1984 observation that "the Macintosh uses an experimental pointing device called a 'mouse.' There is no evidence that people want to use these things."In April, Dvorak inflamed his 'pull the plug' rhetoric further in a TWiT podcast, where he reported to an audience of hundreds of thousands that the iPhone only delivered "40 minutes of talk time" and "the interface fouls up constantly.� Dvorak said that his inside information on the iPhone came from a "guy at Cingular who’s testing the product," adding, "he’s telling me confidentially and I shouldn’t be telling anybody."[John Dvorak: How Wrong Can One Guy Be?][Readers Write: Don't Write About John Dvorak Anymore]It'll Be the Death of You.Dvorak was joined by Rob Enderle, who called the iPhone “damned� and “not a very good phone� at every opportunity in the months before its launch, despite not really knowing anything about it, or even ever offering any rational criticism. Instead, Enderle appealed to fantasy fears of sexual assault, murder, and the violent death of children, all of which he suggested might somehow be related to the iPhone. Unaware that a password protected iPhone--or even a unauthorized unit without a configured service plan--can still be used to make emergency phone calls, Enderle wrote about, "an emergency situation where, say, a woman was being raped and couldn’t call for help because she didn’t remember her iPhone password." As I understand, with a Windows Mobile phone, even if the unit crashed while trying to place the call, at least the victim could use it like a brick as a blunt weapon. Enderle also feared that being unable to take out the battery would somehow making recharging it impossible, resulting an a scenario where one might end up on “the wrong side of town� with a dead iPhone and be murdered because of it. Being on the wrong side of town was apparently the source of most murders prior to the arrival of the cell phone, which somehow made it safe to be in bad neighborhoods. For those who unfazed by the prospect of one's own own grizzly death in relation to the iPhone, Enderle appealed to his readers to please think of the children, particularly the potential for their brutal decapitation in an iPhone-related collision. "If you are buying this phone for a child or another member of your family," Enderle warned, "please emphasize that entering data on this phone while driving is dangerous." In contrast, operating the slide out keyboards of an HTC brick phone, or using both hands to thumb type on a BlackBerry may or may not save your children as they drive off an embankment, but at least you'll know they didn't die at the hands of Apple's "damned" iPhone.[SCO, Linux, and Microsoft in the History of OS: 1970s][Mac OS X vs Linux: Third Party Software and Security]Pure Concentrated Evil with a Multitouch Screen.Brian Lam of Gizmodo published an impassioned plea to boycott the iPhone shortly before its launch, due to the fact that Cingular had purchased the AT&T name, a brand Gizmodo's writer correlated with "monopoly tactics" in the late 70s. Gizmodo hasn't ever called for the boycotting of Verizon Wireless, which is well known for its anti-consumer tactics and which shares just as much blood with the old AT&T as its Baby Bell sibling Cingular, nor has it ever urged the boycott Microsoft products due to "monopoly tactics." Gizmodo also failed to boycott any other GSM phones that are tied to AT&T.Gizmodo's Lam and Enderle then teamed up with Slate's David Sessions in an article purporting to expose Apple's rated battery life for the iPhone. Sessions complained about the attention the iPhone was getting, and tried to dismiss Apple's announcement of a two fold increase in battery life over what was originally advertised. Unbelievably, Sessions and friends could only explain away the iPhone's jump in talk time by crediting its glass screen, saying that "glass transmits light more efficiently than plastic." That and some witchcraft.However, all of these individuals sharply reduced their squirt rate of false information after the iPhone's successful launch. In day and a half, Apple sold 270,000 iPhones compared to the 500,000 Palm OS Treos, 1.03 million RIM BlackBerrys, and 1.51 million Windows Mobile phones that were sold worldwide in the first 90 days of 2007.Apple has since nearly matched highflying RIM in sales during July, despite being limited to a single carrier and only offered for sale in the US. At this point, denying the iPhone is like saying the Earth is flat. It might be fun to do at a Renaissance Faire, but pretending to seriously doubt reality is not a good career move unless you work for the Street--or perhaps Rupert Murdoch, as Dvorak does.[Secret iPhone Details Lost in a Sea of Hype and Hate][iPhone Sales vs Zune, Palm, RIM, Symbian, Windows Mobile]And Now: a Warning.Let it be known that anyone who publishes further misinformation or blows out similar inanity will risk being instantly awarded a Zoon on the spot. No complicated voting, no tedious application process. New Zoon nominees will be rubber stamped with the same effortless fast tracking as the ECMA declaring Microsoft technology as an international standard.In fact, I’m going to totally Zoon Dan Frommer and Scott Moritz right now, as well as John Dvorak, Rob Enderle, Brian Lam, David Sessions, and even Roger Entner. And John Sculley. And while I’m handing out an intellectual property construct that costs me nothing to distribute, I will also award Steve Jobs with a Zoon for the whole two month “just kidding� iPhone pricing situation, although I might take half of it back if I get a $100 coupon that doesn’t force me to spend $500 to actually use it. So let that be a warning to you out there on the Tubes thinking about how to linkbait an article at the expense of the progress of technology. I have a rapid firing gun full of Zoons and I’m not shy about cranking them out. Be sure to post any nominees.What do you think? I really like to hear from readers. Comment in the Forum or email me with your ideas. Like reading RoughlyDrafted? Share articles with your friends, link from your blog, and subscribe to my podcast! Submit to Reddit or Slashdot, or consider making a small donation supporting this site. Thanks!

  • ★ The Phone Company

    For a long time — the entire decade of the ’90s and the first few years of this decade — the story of Apple was the story of a company searching for a way to be something other than “the Mac company”. From a financial perspective of revenue and profit, the Mac was Apple, and Apple was the Mac. This was problematic on two fronts. First, it was an “all of their eggs in one basket” scenario. If the Mac had sunk, the company would have gone under. Second, the potential for growth was severely limited by the fantastic success of Windows. The iPod was Apple’s first breakthrough success after the Macintosh. During some quarters in recent years, iPod revenue has run even with or (in holiday quarters) exceeded Mac revenue. The iPod solved both of the problems Apple faced as “the Mac company”: its eggs were now divided between two baskets, and they’d entered a field with room for significant growth. Last year, immediately after its debut, Steve Jobs began describing the iPhone as the third leg of the company. The numbers Apple released yesterday for its fourth quarter of financial year 2008 (July through September) back this up. The main thing you must keep in mind regarding Apple’s reported numbers for the iPhone is that they’re using subscription-based accounting for it. When you buy a Mac or an iPod today, Apple reports the entire sale as revenue for this quarter. When you buy an iPhone today, however, Apple reports the revenue split evenly over eight quarters. Apple’s interpretation of U.S. accounting regulations is that this is only way they can provide free feature upgrades over the course of two years. That’s why iPhone OS 2.0 was a free update for existing iPhone owners, but a paid update for iPod Touch owners. In the long run, Apple doesn’t make any more or less money from this. It’s just a method of accounting for the money they have made. (Indirectly, Apple clearly hopes that it helps sell additional iPhones, on the grounds that people enjoy getting “free” OS upgrades.) But in the short run, Apple’s iPhone revenue and profit are underrepresented in the company’s quarterly results — only one-eighth of the revenue from iPhones sold during the just-completed quarter appear in the quarter’s results. It also makes the iPhone numbers hard to compare against those of the Mac and iPod. So, Apple is now providing two sets of quarterly numbers. First, GAAP results with subscription-based accounting for iPhones and Apple TV. (GAAP stands for Generally Accepted Accounting Principles.) Second, a new set up numbers — non-GAAP results — which, more or less, show what Apple’s quarterly numbers would look like if they weren’t using subscription-based accounting for the iPhone and Apple TV. Here’s what Apple CFO Peter Oppenheimer said during his opening remarks of yesterday’s analyst conference call: As we reported in our press release, iPhone unit sales grew significantly in the September quarter, resulting in a material increase in the amount of iPhone revenue and product costs that had been deferred for recognition in future periods. Specifically, deferred revenue from iPhone and Apple TV sales grew to $5.8 billion at the end of the September quarter, an increase of nearly $3.8 billion from the end of the June quarter. If iPhone revenue was not deferred, iPhone would have represented 39% of Apple’s revenue in the September quarter. This means, I think, that Apple generated more revenue last quarter from iPhone sales than from either Mac or iPod sales. The iPhone, just 15 months old, is perhaps already the strongest of the company’s three legs. And it’s not like iPod or Mac sales are down — compared to the year-ago quarter, Mac sales are up 21 percent in terms of units and 17 percent in terms of revenue, and iPods are up 8 percent in units and 3 percent in revenue. And in terms of the momentum of the iPhone OS as a platform, keep in mind that the iPod Touch is put on the books as an iPod, not an iPhone. (And Apple does not break those “iPod” numbers out into specific models; no one other than Apple’s top executives know exactly how many iPod Touches have been sold.) Steve Jobs rarely appears on Apple’s quarterly analyst calls. I’m pretty you can count on one hand Jobs’s appearances on these calls over the last 10 years. Typically, Jobs has appeared when Apple has bad news to announce. (His appearance yesterday seems to have been about addressing Apple’s plans for weathering the current worldwide economic downturn.) Here’s what Jobs had to say in his prepared remarks regarding Apple’s revenue and profit from the iPhone: As you can see, the non-GAAP financial results are truly stunning. By eliminating subscription accounting, adjusted sales for the quarter were $11.68 billion, 48% higher than the reported revenue of $7.9 billion, while adjusted income was $2.44 billion, 115% higher than the reported net income of $1.14 billion. Adjusted net income that is more than double our reported income — if this isn’t stunning, I don’t know what is, all due to the incredible success of the iPhone 3G. I would like to now highlight two remarkable milestones resulting from iPhone’s outstanding performance last quarter. The first is that Apple beat RIM. In their most recent quarter, Research in Motion, or RIM, reported selling 6.1 million BlackBerry devices. Compared to our most recent quarter sales of 6.9 million iPhones, Apple outsold RIM last quarter and this is a milestone for us. RIM is a good company that makes good products and so it is surprising that after only 15 months in the market, we could outsell them in any quarter. But even more remarkable is this — measured by revenues, Apple has become the world’s third-largest mobile phone supplier. I know this sounds crazy, but it’s true — as measured in revenues, not units, Apple has become the third largest mobile phone supplier. Let’s look at the ranking — Nokia is clearly number one at 12.7 billion; Samsung number two at 5.9 billion; Apple is number three at 4.6 billion; Sony Ericsson, number four at 4.2; LG, number five at 3.4 billion; Motorola, number six at 3.2; and RIM number seven at 2.1. Pretty amazing. So, last quarter: (1) the iPhone was a bigger revenue and profit generator than either the iPod or Mac; (2) Apple sold more iPhones than RIM sold BlackBerrys; and (3) Apple trailed only Nokia and Samsung in worldwide mobile phone handset revenue (and they’re not far behind Samsung). Jobs followed with this caveat: Now, both of these things, beating RIM in units and becoming the third largest mobile supplier in revenues are amazing feats but part of this was the result of expanding into over 50 countries and there’s no guarantee that sustained sales will equal initial sales. And who knows what the future results will be, given the worldwide economic slowdown but we actually outsold RIM last quarter and ranked as the third largest mobile phone supplier in revenues. Not bad for being in the market for only 15 months. He’s right that no one knows what the results will be for the current quarter (which start three weeks ago, and runs through the end of December) — but we can make an educated guess. Because it encompasses the entire holiday season, Apple’s October-December quarter has always been the strongest for iPod sales. A year ago, iPod sales went from 10.2 to 22.1 million from Q4 (Jul.–Sep.) to Q1 (Oct.–Dec.). Two years ago, they went from 8.7 to 21.0 million. Three years ago, 6.5 to 14.0 million. In terms of a multiplier, that works out to 2.17, 2.41, and 2.15, respectively. I.e., Apple consistently sells a little more than twice as many iPods in the holiday quarter than in the preceding quarter. We only have one year of data for the iPhone. Last year, Apple sold 1.1 million iPhones in Q4 2007. It went on to sell 2.3 million iPhones in Q1 2008 — a multiplier of 2.09, very much in line with previous years of holiday-quarter iPod sales. So, it seems quite possible that Apple could sell twice as many iPhones during the current quarter as it did in the just-reported quarter. If they did, that would be 13.8 million iPhones. Even if they fall short of that mark, they seem poised to sell about 20 million iPhones in calendar year 2008 — more than double their oft-stated goal of 10 million. Many analysts doubted that 10 million iPhone goal for the year; Apple might in fact sell 10 million iPhones in a single quarter. Even if sales are flat in the current quarter, it seems almost certain they’ll sell more than 10 million units in the first six months after the iPhone 3G went on sale. As for where this growth positions the iPhone industry-wide, recall Microsoft’s projections for Windows Mobile licenses this year: The warning signs were there. After boldly proclaiming that it would sell “more than” 20 million licenses to its Windows Mobile operating system by the end of its fiscal year on June 30, Microsoft later scaled that prediction back to “nearly” 20 million units. This week, however, the software giant conceded it did not hit its target: The company sold just 18 million units in the fiscal year. So not only is Windows Mobile growth significantly slower than what Microsoft had publicly anticipated, but the iPhone seems set to surpass unit sales of all Windows Mobile phones combined next year. In fact, given that Apple acknowledged during yesterday’s conference call that, including October sales to date, they’ve already surpassed 10 million iPhones sold for calendar year 2008, the iPhone may well already be outselling all Windows Mobile phones combined. The entire iPhone platform is only 15 months old. The cheapest model still costs $199. The room for growth in this market is unlike anything Apple has ever seen. So the question is: Despite continuing strong iPod sales and record-breaking Mac sales, how long until the iPhone is undeniably the primary product and platform made by Apple? My answer: Not long. And I think Apple’s executive team sees it the same way.

  • Wall Street to AAPL: Get bent

    Filed under: Apple FinancialOK, I get it. Equity investments are bets on the future, not rewards for the past, and a stock like Apple's with such stratospheric growth over the past 12 months is vulnerable to gloomy outlooks in a way that more plodding investments might not be. Still and all: another record quarter. Best sales, best revenue in Apple's history. More than 2.3 million Macs sold, and nearly as many iPhones (!). Over twenty-two million freakin' iPods. Year over year, the December quarter gained almost 2.5 billion dollars in revenue -- my goodness, it was a 9.6B quarter, which would have been a spectacular entire year for the Apple of recent memory. Apple beat the internal guidance by $0.34 a share... there's no way to describe this financial performance except "stunningly good" -- unless you're Doug Krizner of Marketplace Morning Report, who characterized the results today as "less than stellar." Man, I am so happy they made that guy stop signing off with "Make it a good day," because the way he said it made me want to get back in bed and hide my money under a mattress.But I digress. With these results in mind, why would after-hours traders respond with the fiscal equivalent of "Go crawl in a hole and die, you hippie freaks?" Granted, Apple's CFO is anticipating earnings per share for next quarter around a dollar, which is less than analysts were hoping for and may point to some drag on the business from deteriorating economic conditions. It still seems to me that with iPhone revenue growing (remember, it takes two years to extract all the profit from those iPhone sales, so there's an upslope out there as the sales and new markets accumulate) and new streams coming in from iTunes rentals and the so-hot-it's-untouchable retail operation, we've gone from irrational exuberance to a gang initiation beatdown.Oh well. If I wanted peace and quiet I probably should have bought Dell stock.Disclaimer: I hold shares in AAPL.Read | Permalink | Email this | Comments

  • ★ Apple Reports First Quarter 2008 Results

    Apple’s just-announced Q1 2008 results made for the best quarter in company history: The Company posted revenue of $9.6 billion and net quarterly profit of $1.58 billion, or $1.76 per diluted share. These results compare to revenue of $7.1 billion and net quarterly profit of $1 billion, or $1.14 per diluted share, in the year-ago quarter. […] Apple shipped 2,319,000 Macintosh computers, representing 44 percent unit growth and 47 percent revenue growth over the year-ago quarter. The Company sold 22,121,000 iPods during the quarter, representing five percent unit growth and 17 percent revenue growth over the year-ago quarter. Quarterly iPhone sales were 2,315,000. A few remarks, based on Apple’s new Q1 2008 and year-ago Q1 2007 summary data PDFs: iPod: Unit Sales vs. Revenue Growth Five percent year-over-year unit growth for iPod holiday sales is a clear sign that iPod unit sales growth is no longer explosive; last year’s unit sales number for the holiday quarter (21 million) was 50 percent higher than the previous year’s. Expect to see this number get jumped on, like it was by Dan Frommer at Silicon Alley Insider, who writes, “The iPod, which helped Apple revive its fortunes just five years ago, is on its way out.” But here’s the thing: iPod revenue growth continues to grow at about the same pace. Last year, iPod revenue was up 18 percent over the previous year; this year, it was up 17 percent. (Compare and contrast to Apple’s Mac hardware sales, which are up 44 percent in units and an almost identical 47 percent in revenue.) Think about that: a year ago, iPod unit sales were up 50 percent but revenue was up just 18 percent; this year, unit sales are up just 5 percent but revenue is still up 17 percent. How do you grow revenue faster than unit sales? By selling more iPods at the high-end of the product line. Can you say “iPod Touch”? Look at the numbers and it breaks out like this: last year, Apple booked $163 in revenue (not profit) per iPod sold; this year, the number was $181. The conventional wisdom, for years, has held that the problem Apple faces in the iPod’s market is that even if they manage to hold on to a large market share, the entire market is destined for commodity status — music and video players are going to get cheaper and cheaper every year, Apple is going to face increased competition on price, and the players Apple does sell will have to be cheaper as well. Think about what happened with, say, Sony’s Walkman, which debuted at a high price in the late 70s but within 20 years was selling for $30. What this line of thinking misses is that it’s wrong to think of the iPod simply as a digital Walkman. Better to think of the iPod as, say, “the best pocket-sized anti-boredom device Apple can make”. In 2001, that device was a simple hard-drive based 5 GB MP3 player. Today, it’s the iPhone and iPod Touch. The OS Without a Name Speaking of the iPhone, Apple sold almost exactly the same number of iPhones as Macs: 2,315,000 vs. 2,319,000. That’s impressive in and of itself. For comparison, Apple sold 1,119,000 iPhone during the preceding (debut) quarter. The price drop and expanding into non-U.S. markets certainly helped drive that growth, but it’s worth noting that many iPhone doubters dismissed the initial demand as nothing more than proof that Apple could sell iPhones to fanatics willing to wait in line on the opening day. I don’t see how anyone could doubt that the iPhone is a smash hit at this point. But here’s the other thing: Apple’s completely separate accounting for the iPhone and iPod Touch is merely an accounting distinction. In practical terms, they constitute a single software platform, that of the touch-screen based “OS X” that doesn’t really have a name. Apple doesn’t break down iPod sales by model, so we don’t know how many iPod Touches Apple has sold. But, presumably, that number is quite a bit larger than 4,000, and so thus, even in a quarter with 44 percent higher year-over-year Mac unit sales, Apple sold more “iOS X” (if you will) devices than Macs. The market for third-party software for the iPhone and iPod Touch is already big, and I expect that by this time two years from now, there will be more iPhones/iPod Touches in use than Macs. (Imagine the unit sale numbers for a $199 iPhone two years from now.) And one big difference, from Apple’s financial perspective, between the Mac and upcoming iPhone/iPod Touch software markets is that Apple will get some sort of cut from every app sold — assuming it works the way I expect it to, where approved third-party apps will be sold through the iTunes Store. This is a potential gold rush for indie Mac developers. iTunes Store Growth The other number from Apple’s data summary which indicates that Apple’s music-and-video business is thriving is the revenue growth for “Other Music Related Products and Services”, which is up 27 percent year-over-year. Apple says this category consists of “iTunes Store sales, iPod services, and Apple-branded and third-party iPod accessories.” 27 percent growth sounds pretty damn solid for the four-year-old market-leading music store. I’m happy as hell to see the Mac numbers growing, but the plain truth is that the Mac clearly has a ton of room to grow — the iTunes Store’s 27 percent revenue growth strikes me as at least as impressive as the Mac’s 47 percent.

  • Apple announces Q4 Results - 6.9 Million iPhones Sold

    Full Press Release below — Apple(R) today announced financial results for its fiscal 2008 fourth quarter ended September 27, 2008. The Company posted revenue of $7.9 billion and net quarterly profit of $1.14 billion, or $1.26 per diluted share. These results compare to revenue of $6.22 billion and net quarterly profit of $904 million, or $1.01 per diluted share, in the year-ago quarter. Gross margin was 34.7 percent, up from 33.6 percent in the year-ago quarter. International sales accounted for 41 percent of the quarter's revenue. In accordance with the subscription accounting treatment required by GAAP, the Company recognizes revenue and cost of goods sold for iPhone(TM) and Apple TV(R) over their economic lives. Adjusting GAAP sales and product costs to eliminate the impact of subscription accounting, the corresponding non-GAAP measures* for the quarter are $11.68 billion of “Adjusted Sales” and $2.44 billion of “Adjusted Net Income.” Apple shipped 2,611,000 Macintosh(R) computers during the quarter, representing 21 percent unit growth and 17 percent revenue growth over the year-ago quarter. The Company sold 11,052,000 iPods during the quarter, representing eight percent unit growth and three percent revenue growth over the year-ago quarter. Quarterly iPhone units sold were 6,892,000 compared to 1,119,000 in the year-ago-quarter. “Apple just reported one of the best quarters in its history, with a spectacular performance by the iPhone — we sold more phones than RIM,” said Steve Jobs, Apple's CEO. “We don't yet know how this economic downturn will affect Apple. But we're armed with the strongest product line in our history, the most talented employees and the best customers in our industry. And $25 billion of cash safely in the bank with zero debt.” “We're very pleased to have grown revenue 35 percent and to have generated $9.1 billion in cash in fiscal 2008,” said Peter Oppenheimer, Apple's CFO. “Looking ahead, visibility is low and forecasting is challenging, and as a result we are going to be prudent in predicting the December quarter. We are providing a wide range for our guidance, targeting revenue of $9.0 to $10.0 billion and earnings per diluted share between $1.06 and $1.35.” Apple will provide live streaming of its Q4 2008 financial results conference call utilizing QuickTime(R), Apple's standards-based technology for live and on-demand audio and video streaming. The live webcast will begin at 2:00 p.m. PDT on Tuesday, October 21, 2008 at http://www.apple.com/quicktime/qtv/earningsq408/ and will also be available for replay for approximately two weeks thereafter.

  • Apple reveals Record Second Quarter Results

    Apple today announced the financial results for its second fiscal 2008 quarter, which ended on March 28th, 2008. The company posted “revenue of $7.51 billion and net quarterly profit of $1.05 billion, or $1.16 per diluted share. These results compare to revenue of $5.26 billion and net quarterly profit of $770 million, or $.87 per diluted share, in the year-ago quarter. Gross margin was 32.9 percent, down from 35.1 percent in the year-ago quarter. International sales accounted for 44 percent of the quarter's revenue.” Apple shipped 2,289,999 Macs during the quarter, representing a 51% growth and 54% revenue growth over the year-ago quarter. 10,644,000 iPods were sold during the quarter, representing 1% unit growth, and quarterly iPhone sales were 1,703,000. “We're delighted to report 43 percent revenue growth and the strongest March quarter revenue and earnings in Apple's history,” said Steve Jobs, Apple's CEO. “With over $17 billion in revenue for the first half of our fiscal year, we have strong momentum to launch some terrific new products in the coming quarters.” “We're thrilled to have generated $4 billion in cash flow from operations in the first half of fiscal 2008, yielding an ending cash balance of $19.4 billion,” said Peter Oppenheimer, Apple's CFO. “Looking ahead to the third quarter of fiscal 2008, we expect revenue of about $7.2 billion and earnings per diluted share of about $1.00.” Apple's live financial results conference call will be streaming today at 2:00pm PDT. It will also be available for a replay. Click here to bookmark the link.

  • Apple Q4 Earnings Call Liveblog

    Filed under: Apple Financial, LiveblogWe're covering the Apple earnings call live via CoverItLive, starting at 5 pm ET; you can listen to the call in QuickTime here.Topline results from Apple: 1.26 per share on revenue of 7.9B, net quarterly profit of 1.14B. 34.7 % gross margin. 2.6M Macs shipped in the quarter, 11M iPods, 6.9M iPhones. Sold more phones than RIM (!). For up-to-the minute coverage of AAPL, check out AOL Money or BloggingStocks.Read | Permalink | Email this | Comments

The Comments Go Here

Software Releases