Piper: Q2 Mac sales on pace to decline

Based on one month of data, Mac sales could decline on a year-over-year basis for the first time since 2003 unless Apple has new products up its sleeve, according to Piper Jaffray.

Based on one month of data, Mac sales could decline on a year-over-year basis for the first time since 2003 unless Apple has new products up its sleeve, according to Piper Jaffray.

  • Mac sales going strong, but iPod sales down

    Filed under: Apple FinancialImmediately after the iPad's introduction, Piper Jaffray analyst Gene Munster predicted that the iPad would have a minimal effect on sales of the Mac. "The gadget is a premium mobile device, not a computer," Munster said. "Consumers looking for an affordable portable computer will likely stick with the MacBook lineup." The latest NPD data has proven Munster's prediction correct. US Mac sales were up 39 percent year-over-year in April, and Munster believes Mac sales will continue to grow from 19-23% over 2009 sales. At that rate, Apple may sell as many as 3.2 million Macs during the current quarter. Part of that sales increase can be attributed to recent updates to the MacBook Pro, with forthcoming updates for the MacBook and MacBook Air also expected any day now. Sales data for the iPod is less encouraging, but this is also in line with Munster's January prediction that the iPad would likely cannibalize sales of Apple's lower-priced media players. iPod sales are down by 17% year-over-year, which is an even worse dropoff than what Munster predicted. However, there's an upshot to the decline in iPod sales: according to the data, many people deciding against buying an iPod are buying an iPad instead, leading to increased revenue for Apple. With an average price four times that of the average iPod, Munster calls iPad cannibalization of iPod sales "a net positive for Apple's business." There's no indication from NPD of what effect, if any, the iPad is having on the iPhone's sales. However, it seems unlikely that the iPad is significantly affecting the iPhone's sales compared to other factors. Numerous media leaks have pretty much cemented the notion that iPhone updates are due soon, with coverage so widespread and mainstream that even average consumers must be well aware that it's a good idea (for them) to hold off on buying an iPhone until the likely update next month. Apple reportedly told police that Gizmodo's leak was "immensely damaging" to Apple for that very reason; we'll probably have to wait until Apple's next earnings release sometime in July before we know just how immense the damage has been. TUAWMac sales going strong, but iPod sales down originally appeared on The Unofficial Apple Weblog (TUAW) on Mon, 17 May 2010 18:30:00 EST. Please see our terms for use of feeds.Read | Permalink | Email this | Comments

  • Wall Street Breakfast: Must Know News

    Jobs growth arrives. Nonfarm payrolls rose by 162K in March, the biggest monthly advance in three years and the first convincing evidence since the recession began that the job market is recovering. Job creation was spread across industries, suggesting the uptick reflects broad economic momentum. Still, the duration of unemployment remains near record highs, and the number of long-term unemployed (+27 weeks) rose by 414K to 6.5M. Economist Heidi Shierholz summed up the Street's cautious optimism: "We have had this massive disaster, but we're at a place now where things are stabilizing. But it's nowhere near the level of growth we need to start moving the dial." Stock markets were closed Friday, giving investors the long weekend to mull the data's significance going into the new week. Geithner delays call on China currency manipulation. Treasury's Tim Geithner is delaying his April 15 report to Congress on the exchange rate policies of major U.S. trading partners, buying time to decide whether to label China as a currency manipulator. Geithner urged China to move toward a more flexible currency, and said the goal of the delay is to capitalize on "the G-20 and S&ED meetings with China to make material progress in the coming months." In another indication of a possible China-U.S. detente over the yuan, Li Daokui, a member of China's central bank monetary policy committee, said the countries' currency disagreement can be easily solved as long as the U.S. respects China's "core interests." The delay, and Li's comments, come ahead of Chinese President Hu Jintao's trip to Washington D.C. on April 12-13. NBER official says recession has ended. There's been no official word from the National Bureau of Economic Research, but a key official says the recession is likely over. Robert Hall, head of the NBER's Business Cycle Dating Committee, referencing Friday's payrolls figure, said he "personally put lots of emphasis on employment. I would say 'pretty clear' is a good description" for whether the economic contraction has ended. An official announcement from the NBER may still be some time away, however, as the committee won't make a declaration until it can assign a precise end date to the recession, a process which usually takes 6-18 months. Criminal charges unlikely in AIG probe. Two years after federal prosecutors launched an investigation into the role of AIG's (AIG) executives in the insurer's collapse, the probe will likely end without a single criminal charge, sources say. Former AIG executive Joseph Cassano has been at the center of the probe, but the case against him has reportedly "hit a brick wall," with investigators unable to uncover evidence that Cassano lied to his bosses or shareholders about the company's financial problems. iPad debut. Apple (AAPL) enthusiasts lined up Saturday morning to get their hands on a spanking new iPad (teardown), but once doors opened things were relatively tame, with some reports of sellouts, but many store managers saying they were well stocked. Piper Jaffray analyst Gene Munster - a respected Apple authority - estimates first-weekend sales at 600-700K, vastly stronger than his initial projection of 200-300K. But launch sales could be tempered by the fact that customers have been able to pre-order the iPad for home delivery, and because 3G-enabled iPads only begin selling later this month. Backlash against iron ore pricing. The China Iron and Steel Association (CISA) has asked domestic steel companies and traders with import licenses not to buy iron ore from Vale (VALE), Rio Tinto (RTP) and BHP Billiton (BHP) in the next two months, in protest of the new quarterly iron ore pricing system. CISA believes global iron ore producers have made "unreasonable requests for price hikes," and Chinese steelmakers have enough iron ore inventory to sustain a two-month buying moratorium. Faulty paperwork at center of foreclosure probe. Docx, a unit of Lender Processing Services (LPS) - which provides backoffice services for banks in the foreclosure process - is being investigated by federal prosecutors for criminal violations. A U.S. government lawyer who monitors bankruptcy courts believes some of LPS's loan documents were "patently false or misleading"; among the docs being reviewed is one that names "Bogus Assignee" as the owner of a loan (a company spokesman says that this phrase is used as a placeholder and was inadvertently not updated). Faulty paperwork has been an ongoing issue in foreclosure proceedings since the housing crisis began. Signs of life in real estate? Two possible signs of a possible real-estate rebound, one each from the west and east coasts. Home prices in so-called sand states - the sandy, sunny retreats that lured investors during the boom and were among the hardest hit in the bust - are starting to recover. In areas of California, prices for single-family homes are up 8.5%-14.7%, and in Arizona prices are up 7.4%. Florida and Nevada, in contrast, have yet to see a meaningful bounce. And in Manhattan, apartment sales doubled in Q1 as bargain hunters scooped up condos at prices about 29% below the peak. CEO pay falls for the second year. Pay czar Kenneth Feinberg is making his mark. A report analyzing the compensation for 200 chief executives of public companies found that pay dropped 15% in 2009, the second annual decline. The average total was $9.5M in 2009, roughly comparable with 2004. However, last year's drop was largely due to a decline in the value of stock and option awards, which means a handful of lucky CEOs received a windfall when share prices rose. Alan Mulally of Ford (F), for example, saw his 2009 options package grow nearly 10 times in value, to more than $50M. Today's MarketsIn Asia, Japan +0.5%. Hong Kong closed. China closed. India +1.3%. In Europe at midday, London closed. Paris closed. Frankfurt +1.3%.Futures: S&P +0.23%. 10-yr -0.05%. Euro -0.21% vs. dollar. Crude +0.57% to $85.35. Gold +0.04% to $1126.60. Monday's Economic Calendar Monday's economic calendar: 10:00 ISM Non-Manufacturing Index 10:00 Existing Home Sales 10:00 Employment Trends Index Seeking Alpha editors Rachael Granby and Eli Hoffmann contributed to this post.

  • Wall Street Breakfast: Must-Know News

    Skype to get new owner. eBay (EBAY) is expected to announce this morning that it has reached a deal to sell its Skype unit to a group of private investors. The investment group likely includes new venture capital firm Andreessen Horowitz, as well as early Skype investor Index Ventures and private-equity firm Silver Lake Partners. The price of the deal is still unknown, but eBay has said previously that it wants around $2B for Skype. Shares +2% premarket (7:00 ET). BoA ready to repay? Bank of America (BAC) is reportedly offering to repay part of its bailout money, and the U.S. is pressuring the bank to pay at least $500M to cancel a potential loss-share deal with the government. Sources said both sets of discussions relate to extra aid Bank of America received to complete its acquisition of Merrill Lynch. If Bank of America repays the additional $20B it was given in January, it will no longer be considered an 'exceptional' aid recipient and therefore won't be subject to the intense scrutiny of Congress and pay czar Kenneth Feinberg. Shares -2.4% premarket (7:00 ET). Disney's marvelous acquisition. Disney (DIS) agreed to acquire Marvel Entertainment (MRVL) in a stock-cash transaction worth around $4B, a 29% premium for Marvel shareholders. Disney will begin to feature Marvel's portfolio of over 5,000 characters in Disney movies, theme park rides, TV shows and merchandise, a move which may help Disney better target the demographic of boys from their preteen years into young adulthood. S&P warned it may downgrade Disney because the relatively expensive acquisition, combined with stock buyback plans and the potential for continued recession-related declines, could lead to "debt leverage remaining above our threshold for an extended period." The deal is a setback for Paramount (VIA), which will be able to complete but not extend a recent distribution deal with Marvel, and for Electronic Arts (ERTS), which some analysts had thought might be acquired by Disney, a deal that no longer seems likely in the short term. (Read Disney's press release) AIG loses Starr case. A federal judge ruled against AIG (AIG) in its efforts to win $4.3B in damages from Starr International, the company run by former AIG chief Hank Greenberg. The judge affirmed a jury verdict that found no breach of trust by Starr for selling AIG stock rather than using its AIG shares to fund an executive retirement program for generations of the insurer's employees. Separately, AIG, Greenberg and former CFO Howard Smith agreed to enter binding arbitration by October 15 to settle various outstanding legal disputes. Shares -6.9% premarket (7:00 ET). Citi sheds credit card portfolios. As part of its effort to shed weak businesses, Citigroup (C) said it sold three credit card portfolios representing $1.3B in managed assets, but didn't disclose the terms of the deal. Though the sale is relatively small, the lack of transparency didn't sit well with critics, who noted the taxpayer-funded bank "said it had sold undisclosed assets to an undisclosed buyer for an undisclosed price, resulting in an undisclosed profit or loss." Sources said the buyer is likely U.S. Bancorp (USB). C -3.6% premarket (7:00 ET). PetroChina buys Canadian oil stake. PetroChina (PTR) moved forward in its quest for overseas expansion, agreeing to pay C$1.9B ($1.7B) to closely-held Athabasca Oil Sands Corp. for a stake in a Canadian oil sands project. PetroChina's deals represent around 20% of China's $17B in spending on overseas energy assets since December, and this is PetroChina's largest North American acquisition to date. Icahn offloads Yahoo shares. Activist investor Carl Icahn disclosed in a regulatory filing that he sold 12.7M shares of Yahoo (YHOO) at the end of August, bringing his stake down to 4.48%. Icahn said he remains 'optimistic' about Yahoo's long-term outlook and the sales were only meant to 'provide a more desired balance' in his portfolios. Sony goes Chrome. Sony (SNE) plans to put Google's (GOOG) Chrome browser on Vaio laptops in the U.S., the first such deal for Chrome since it was announced last year. Google declined to disclose details of the deal, which went into effect this summer, and said it's looking to reach similar arrangements with other computer makers. Without those partnerships, Google's Sony deal may be too small to matter. Apple may opt for more carriers, face SEC probe. Piper Jaffray analyst Gene Munster wrote in a research note that Apple (AAPL) is likely to add new U.S. carriers for its iPhone within a year. Repeated speculation points to Verizon (VZ) as a likely addition, while AT&T (T) faces questions about how much it really gained from its role as exclusive carrier. Separately, the Huffington Post reported the SEC is investigating possible insider-trading offenses in shares of Apple, including whether anyone was given enhanced insight into Steve Jobs' health condition or if some investors had advanced notice of iPod sales results. Both Apple and the SEC declined to comment. AAPL -1.3% premarket (7:00 ET). JetBlue, Lufthansa to share codes. JetBlue (JBLU) and Lufthansa announced a code-sharing agreement allowing the airliners to expand their networks through connecting flights. Lufthansa holds a 19% stake in JetBlue, but the relationship has raised some concerns among rivals and this latest move will likely exacerbate those concerns. The deal must be approved by the Department of Transportation. Big Tobacco files free speech suit. Tobacco company R.J. Reynolds (RAI) joined other tobacco makers in suing the FDA, challenging the regulator's new authority over tobacco. The companies say their First Amendment rights to free speech have been violated and the law's provisions "severely restrict the few remaining channels we have to communicate with adult tobacco consumers." Charities scammed by Madoff face clawbacks. Madoff liquidator Irving Picard said he may sue charities that were Madoff clients to reclaim the fake profits they withdrew. By law, Picard must file clawback suits against investors that profited from Madoff's scam, even if they did so unknowingly. Picard, who until now hadn't outlined his strategy for dealing with charities, said charitable organizations aren't exempt from such 'avoidance actions.' Cities are gloomy on shrinking revenues. City revenues fell in FY '09 for the first time in seven years, according to a report by the National League of Cities to be released later today. Weak growth in property taxes and sharp declines in sales taxes, income taxes and state aid contributed to a 0.4% decline in city revenues even as expenses rose 2.5%, creating the worst outlook in the 24 years since surveying began. Nor is relief in sight, as tax revenue is expected to lag any economic recovery. European leaders target bank pay. German Chancellor Angela Merkel and French President Nicolas Sarkozy promised to fight excessive pay in financial firms and to toughen regulation of the financial sector. The U.K.'s Gordon Brown echoed those sentiments, saying excessive pay must be reined in and compensation should be based on long-term success rather than short-term speculative gains. The comments come ahead of a G-20 meeting in Pittsburgh on Sept. 24-25. Commercial mortgage defaults rising. The commercial mortgage default rate more than doubled in Q2 as compared to the year before, reaching 2.88% of outstanding balances. Commercial mortgage-backed securities [CMBS] account for 22% of the $3.4T in commercial real estate debt, and researchers believe defaults on CMBS could pass 7% by the end of the year. Chicago business activity improves (.pdf). The Chicago Purchasing Managers Index registered at 50 in August, better than the consensus of 48 and up from 43.4 in July. This is the index's highest level since September 2008. New orders were up 4.5 to 52.5, while prices paid jumped 15 points to 50. European joblessness climbs (.pdf). Unemployment in the 16-nation eurozone climbed to a new ten-year high of 9.5% in July even as the economy began to signal a recovery. Across the entire 27-nation European Union, unemployment rose to 9% in July. Spain leads the bloc in joblessness, with nearly one in five workers without a job. Earnings: Monday After Close Benihana (BNHN): FQ1 EPS of $0.05 misses by $0.05. Revenue of $96M (+2%) vs. $97M. Sees full-year EPS of $0.40-0.45 vs. $0.46, and full-year revenue of $305M-310M vs. $323M. (PR) Culp (CFI): FQ1 EPS of $0.15 beats by $0.03. Revenue of $46M (-23%) vs. $45M. Sees Q2 revenue down 5%. (PR) Sina (SINA): Q2 EPS of $0.29 in-line. Revenue of $90M (-1%) vs. $88M. Sees Q3 revenue of $91M-94M vs. $96M. (PR) Today's MarketsIn Asia, stocks managed to pull back into positive territory after yesterday's selloff. European markets and U.S. futures are slipping.

  • Wall Street Breakfast: Must-Know News

    MSFT, Yahoo reach search deal. At long last, sources say Microsoft (MSFT) and Yahoo (YHOO) have reached a search deal and will announce it within the next 24 hours. Yahoo will use Microsoft's Bing search-engine technology on its own sites, including the Bing brand, and will supply search text ads on its sites and some of Microsoft's. The deal appears to be structured as a revenue share with no upfront fee, with Yahoo taking 110% the first two years and 90% in the third. The deal is on a smaller scale than previously envisioned, but both Microsoft and Yahoo are hoping that a combined attack will be more effective against Google (GOOG). UPDATE: Microsoft, Yahoo officially announce the deal. Premarket: MSFT +0.8%, YHOO -5.8% (8:30 ET). Say-on-pay makes headway. A congressional committee approved a bill that would put new restrictions on executive pay, giving shareholders the right to cast non-binding annual votes on executive compensation and special pay packages, and enabling regulators to ban pay structures that incentivize inappropriate risk-taking. The House of Representatives is expected to vote on the measure on Friday. Santander plans bank IPO. Banco Santander (STD) will spin off its Brazilian unit in an initial public offering that could raise at least $3B, creating one of the biggest publicly listed banks in Latin America. The listing will likely occur in the next three months. Nasdaq backs flash trading ban. As the debate on flash trading heats up, Sen. Charles Schumer said the Nasdaq Stock Market supports a ban on the trading practice and only 'reluctantly' started offering flashes early last month. Meanwhile, the SEC was apparently investigating the practice even before Schumer's letter calling for action, and may move to ban flash trading 'within the next couple of weeks.' Sprint buys Virgin Mobile. Sprint (S) agreed to buy Virgin Mobile USA (VM) for $5.50/share ($483M) in an all-stock deal, and will retire $205M of Virgin's debt. Sprint already owns 13.1% of Virgin, which offers cheap prepaid wireless plans. Sprint is hoping the cheaper, non-contract service will help stem a tide of customer defections. IBM buys software maker. IBM (IBM) will buy SPSS for $1.2B, a 42% premium on SPSS' closing price on Monday. The deal, the latest in a series of IBM acquisitions, expands IBM's software portfolio and is a further sign of improvement in the technology sector deal market. The deal should be completed by year-end. NJ sues Merrill. New Jersey is suing Merrill Lynch, alleging the firm sold the state's investment division $300M in preferred stock based on misleading information. New Jersey officials said if the state's investment unit "had known Merrill's true financial condition, it would not have participated in the January 2008 offering and would not have agreed to a conversion in July 2008." GM returns to car loans. After a year-long hiatus, General Motors plans to get back into the car-leasing business and is said to be eyeing August 1 as its re-entry date. GM has said credit availability is still hurting auto sales, and that its exit from the leasing business forced many customers to defect to other automakers. Rivals including Ford (F) and Toyota (TM) have scaled back their leasing but haven't pulled out of the business entirely. Apple bars Google Voice app. Apple (AAPL) banned two iPhone applications based on Google Voice (GOOG) as the rivalry between the two tech giants grows. An Apple representative said some of the applications offered functions too close to what the iPhone already provides. American Air expects alliance approval. American Airlines (AMR) said it expects to win approval by October to form an alliance with British Airways (BAIRY.PK) and Iberia. The airline is betting on intra-alliance competition and global partnerships to help it survive. KKR preps Dollar General IPO. Kohlberg Kravis Roberts is reportedly in advanced preparations for an initial public offering of Dollar General and will also serve as one of the lead underwriters of the deal. It marks the first time KKR will underwrite one of its own IPOs as it tries to strengthen its reputation ahead of its own planned listing. SEC files fraud charges. The SEC filed suit against four individuals, accusing them of fraud in connection to over $197M raised from at least 900 investors nationwide which was funnelled to a commercial real estate venture. The SEC contends the defendants made "material misrepresentations to investors," including false claims about the use of the funds and the safety of investments. Home prices improve (.pdf). The S&P/Case-Shiller 20-City Home Price Index was -17.1% in May vs. last year, narrower than last month's 18.1% drop, and the fourth monthly improvement in a row as "the pace of descent in home price values appears to be slowing." The 0.5% month-on-month increase was the first uptick in three years. Consumer confidence. Conference Board's July Consumer Confidence came in at 46.6 vs 49.0 consensus, down from 49.3 in June. The decline was aggravated by a worsening job market, as the percentage of consumers claiming jobs are hard to get rose sharply. According to ABC's poll, consumer confidence registered at -47, up from last week's -50 and breaking the -50 threshold for the first time since mid-June. Twenty-six percent of Americans say it's a good time to buy things, up from 22% last week, while 44% rate their personal finances positively. Retail sales. Chain store sales fell 1.6% in the first three weeks of July, Redbook said, worse than the -0.9% expected. According to ICSC, weekly sales were up 1%, but July sales will be off around 5.5% Y/Y with "leaner clearance than last year hurting the reported sales pace." Earnings: Wednesday Before Open American Tower (AMT): Q2 EPS of $0.14 misses by $0.03. Revenue of $423M (+7.5%) vs. $414M. (PR) ArcelorMittal (MT): Q2 net loss of $792M ($0.57/share) vs. +$5.84B a year ago and vs. consensus of +$336M. Sales of $15.2B (-60%). Sees Q3 Ebitda of $1.4-1.8B. Says it achieved annualized fixed-cost cuts of $8.4B by the end of Q2. Shares -4.2% in Amsterdam. (Bloomberg) Arrow Electronics (ARW): Q2 EPS of $0.31 beats by $0.02. Revenue of $3.4B (-22%) in-line. (PR) Brookfield Properties (BPO): Q2 FFO of $0.38 beats by $0.03. Revenue of $619M (-13.5%) vs. $527M. (PR) Coca-Cola Enterprises (CCE): Q2 EPS of $0.67 beats by $0.16. Revenue of $5.9B (-0.4%) vs. $6B. Issues upside EPS guidance for FY '09 of $1.44-1.49 vs. $1.33 consensus. Shares +5.9% premarket (8:00 ET). (PR) EQT Corp. (EQT): Q2 EPS of $0.20 misses by $0.03. Revenue of $238M (-29%) vs. $236M. (PR) General Dynamics (GD): Q2 EPS of $1.61 beats by $0.04. Revenue of $8.1B (+11%) in-line. Shares +2% premarket (8:00 ET). (PR) Hecla Mining (HL): Q2 EPS of $0.00 beats by $0.02. Revenue of $75M (+10.5%) vs. $53M. Shares +2% premarket (8:20 ET). (PR) Hess (HES): Q2 EPS of $0.31 beats by $0.30. Revenue of $6.8B (-42%) vs. $7.4B. Shares +1.6% premarket (8:00 ET).(PR) Honda (HMC): FQ1 net profit fell 96% to Ą7.56B ($79.9M), vs. consensus of -Ą56.4B, and vs. a FQ4 net loss of Ą186.1B. Sees full-year earnings of Ą55B, down 60% from last year, but 38% higher than its previous outlook of Ą40B. Revenue of Ą2T (-30%). (WSJ) Hospira (HSP): Q2 EPS of $0.73 beats by $0.13. Revenue of $957M (+6.1%) vs. $878M. (PR) IAC/InterActiveCorp (IACI): Q2 EPS of $0.02 misses by $0.07. Revenue of $340M (-4%) vs. $335M. Shares +0.5% premarket (8:10 ET). (PR) Jones Apparel Group (JNY): Q2 EPS of $0.29 beats by $0.22. Revenue of $804M (-3%) vs. $777M. Shares +9.5% premarket (8:10 ET). (PR) MeadWestvaco (MWV): Q2 EPS of $0.22 vs. consensus of $0.01 (may not be comparable). Revenue of $1.4B (-16%) vs. $1.5B. (PR) Medco Health Solutions (MHS): Q2 EPS of $0.69 beats by $0.04. Revenue of $14.9B (+17%) vs. $14.5B. (PR) Moody's (MCO): Q2 EPS of $0.43 beats by $0.03. Revenue of $451M (-7.6%) vs. $427M. (PR) New York Community Bancorp (NYB): Q2 EPS of $0.16 vs. consensus of $0.25 (may not be comparable). Non-performing assets of $341.6M at the end of June, representing 1.04% of total assets, vs. $176.8M, or 0.55% of total assets, at the end of March. (PR) Nissan (NSANY): FQ1 net loss of Ą16.5B vs. a net profit of Ą52.8B a year ago, and vs. consensus of -Ą108.5B. Last quarter Nissan posted a Ą276.9B loss. Sales of Ą1.51T (-36%). Still sees full-year loss of Ą170B. Sources say Nissan will announce today a new China plant capable of producing 240,000 vehicles/year. (WSJ) Penske Automotive Group (PAG): Q2 EPS of $0.22 beats by $0.07. Revenue of $2.3B (-30%) vs. $2.4B. (PR) Praxair (PX): Q2 EPS of $0.96 misses by $0.03. Revenue of $2.3B (-26%) vs. $2.1B. (PR) Qwest Communications International (Q): Q2 EPS of $0.13 beats by $0.03. Revenue of $3.1B (-9%) in-line. (PR) SAP AG (SAP): Q2 net profit of €423M vs. €408M a year ago and consensus of €385M. Revenue of €2.58B (-10%) vs. €2.64B. Software revenue of €543M (-40%) vs. consensus of €556M. Operating margin 27.7%. Sees full-year operating margin of 25.5-27%, up from previous guidance of 24.5-25.5%. Shares +1.8% in Frankfurt. (DJ) Sealed Air (SEE): Q2 EPS of $0.34 in-line. Revenue of $1B (-20%) vs. $1.1B. (PR) Scotts Miracle-Gro Company (SMG): FQ3 EPS of $2.32 beats by $0.07. Revenue of $1.3B (+9%) in-line. (PR) Sprint Nextel (S): Q2 EPS of -$0.13 misses by $0.11. Revenue of $8.1B (-10%) in-line. (PR) Wyndham (WYN): Q2 EPS of $0.41 beats by $0.04. Revenue of $920M (-19%) vs. $917M. Issues downside Q3 EPS guidance of $0.53-0.57 vs. $0.58 consensus. Issues in-line guidance for FY '09, sees FY '09 revenue of $3.5-3.9B vs. $3.6B consensus. Earnings: Tuesday After Close American Financial Group (AFG): Q2 EPS of $1.09 beats by $0.16. Revenue of $1.1B (+8%) vs. $815M. (PR) Brandywine Realty Trust (BDN): Q2 FFO of $0.56 beats by $0.10. Revenue of $146M (-3%) in-line. Raises full-year FFO to $1.75-1.80 from $1.60-$1.74, vs. $1.71. (PR) Carter's (CRI): Q2 EPS of $0.23 beats by $0.17. Revenue of $318M (+5%) vs. $300M. Sees Q3 EPS growth in mid to high single digits. (PR) Chicago Bridge & Iron (CBI): Q2 EPS of $0.45 beats by $0.05. Revenue of $1.2B (-14%) in-line. (PR) Dreamworks Animation SKG (DWA): Q2 EPS of $0.30 beats by $0.14. Revenue of $132M (-7%) vs. $117M. (PR) Fidelity National Information Services (FIS): Q2 EPS of $0.42 beats by $0.06. Revenue of $835M (-4%) vs. $832M. Raises full-year EPS view to $1.71-1.75 vs. $1.62. (PR) FMC Technologies (FTI): Q2 EPS of $0.84 beats by $0.23. Revenue of $1.1B (-6%) in-line. Sees full-year EPS of $2.55-2.65 vs. $2.36. (PR) Hertz Global Holdings (HTZ): Q2 EPS of $0.12 beats by $0.06. Revenue of $1.8B (-23%) in-line. (PR) Integrated Device Technology (IDTI): FQ1 EPS of $0.02 beats by $0.02. Revenue of $116M (-38%) vs. $113M. (PR) Life Technologies (LIFE): Q2 EPS of $0.79 beats by $0.13. Revenue of $833M (+126%) vs. $803M. Sees full-year EPS of $2.70-2.80 vs. $2.63. (PR) Massey Energy Company (MEE): Q2 EPS of $0.24 beats by $0.08. Revenue of $698M (-16%) vs. $661M. (PR) McKesson (MCK): FQ1 EPS of $1.06 beats by $0.20. Revenue of $27B (flat) in-line. (PR) Nalco Company (NLC): Q2 EPS of $0.11 misses by $0.13. Revenue of $913M (-14%) vs. $950M. (PR) Norfolk Southern (NSC): Q2 EPS of $0.66 beats by $0.02. Revenue of $1.9B (-33%) vs. $2.1B. (PR) Panera Bread Company (PNRA): Q2 EPS of $0.65 beats by $0.01. Revenue of $331M (+3%) in-line. Company targets 15-20 new unit openings in Q3. (PR) Parametric Technology (PMTC): FQ3 EPS of $0.03 misses by $0.13. Revenue of $226M (-17%) vs. $223M. Sees Q4 EPS of $0.25-0.30 vs. $0.31. (PR) Psychiatric Solutions (PSYS): Q2 EPS of $0.63 beats by $0.07. Revenue of $471M (+6%) vs. $469M. Reaffirms full-year EPS of $2.24-$2.32 vs. $2.23. (PR) Questar (STR): Q2 EPS of $0.54 in-line. Revenue of $613M (-26%) vs. $525M. (PR) SBA Communications (SBAC): Q2 EPS of $0.25 beats by $0.42. Revenue of $136M (+22%) vs. $137M. (PR) STMicroelectronics (STM): Q2 EPS of -$0.36 misses by $0.04. Revenue of $2B (-16%) vs. $1.8B. Sees Q3 revenue of $2.07B-2.27B vs. $2.02B. (PR) Superior Energy Services (SPN): Q2 EPS of $0.35 misses by $0.09. Revenue of $361M (-21%) vs. $392M. (PR) TECO Energy (TE): Q2 EPS of $0.29 beats by $0.04. Revenue of $825M (-7%) vs. $864M. (PR) THQ (THQI): FQ1 EPS of $0.10 beats by $0.18. Revenue of $244M (+77%) vs. $203M. Sees Q2 revenue of $85M-95M vs. $123M. (PR) Total System Services (TSS): Q2 EPS of $0.27 in-line. Revenue of $415M (-4%) vs. $401M. Sees full-year decline in revenues of 3-5% and in net income of 11-13%. (PR) Trimble Navigation (TRMB): Q2 EPS of $0.31 misses by $0.01. Revenue of $290M (-23%) vs. $300M. Sees Q3 EPS of $0.25 vs. $0.27. (PR) Western Digital (WDC): FQ4 EPS of $0.76 beats by $0.48. Revenue of $1.9B (-5%) vs. $1.6B. (PR) XL Capital (XL): Q2 EPS of $0.96 beats by $0.34. Revenue of $1.73B (-19%) vs. $1.71B. (PR) Today's MarketsAsian markets were broadly down, but Europe is off to a strong start. U.S. futures have dipped into negative territory.

  • Wall Street Breakfast: Must-Know News

    Stress tests may reveal banks' capital needs. As the May 4 reveal date for stress tests draws closer, officials are considering releasing assessments for each of the 19 banks and may require those that need more capital to disclose how they plan to raise additional funds. Under that scenario, lenders would have to specify whether they want to convert government preference shares, issue more stock or rely on an additional bailout. The push for disclosure is meant to help the public better discern between the health of individual banks. Sources say regulators want the banks to have at least 3% tangible common equity. Lewis: Fed, Treasury urged Merrill silence. According to a recently obtained copy of CEO Ken Lewis' February testimony to New York's attorney general, Bernanke and then-Treasury chief Paulson pressured Bank of America (BAC) to stay silent on its increasingly troubled deal to acquire Merrill Lynch. Despite an obligation to disclose any material financial hits to shareholders, officials pressed Lewis to keep quiet during government-funding negotiations to ensure important financial institutions wouldn't fail. Publicizing Merrill's losses would have allowed Bank of America's shareholders the opportunity to stop the deal and let Merrill collapse. Counter-counter-offer on Chrysler debt. After rejecting a too-rich counter-offer from Chrysler creditors, the Treasury has reportedly raised its own offer in an effort to reach a deal with lenders by the end of the month. The new deal would see lenders get $1.5B of first-lien debt and a 5% equity stake in a restructured Chrysler in exchange for the $6.9B of debt they now hold. The Treasury had previously suggested lenders write off all but $1B of the debt and receive no stock. GM to miss debt payment, idle plants. Trying to avoid bankruptcy ahead of the government's June 1 deadline, General Motors (GM) may rush to close dealerships, scrap models and could idle most of its plants for around two months this summer. The moves could help GM break even with annual sales as low as 10M vehicles. Meanwhile, CFO Ray Young said the company doesn't plan to pay off $1B of debt due June 1, and will instead swap the debt for shares or rely on bankruptcy protection. The tougher public stance towards bondholders is meant to lay the groundwork for what promises to be an ugly debt-for-equity swap GM expects to launch by next week. Hard times for Hartford. Hartford Financial Services (HIG) is said to be seeking bids from rivals including Travelers Companies (TRV) for its flagship property insurance business. Sources said Hartford has been shopping the unit after losses in its life division led to credit downgrades, and that damage from the financial crisis may ultimately lead to a breakup of the insurer. The property unit is estimated to be worth $4B-$8B. Obama meets with credit card chiefs. Obama will meet with executives from the credit card industry today, one day after a congressional panel approved legislation to curb credit card fees and limit consumer penalties. The American Bankers Association is concerned such restrictions will tighten the availability of consumer credit and make it more expensive. Bank of America (BAC), American Express (AXP), Citigroup (C), Wells Fargo (WFC), JPMorgan Chase (JPM), Capital One (COF), Visa (V) and Mastercard (MA) will be among the 13 companies represented. NY cracks down on pension agents. New York State's public pension fund will ban the use of middlemen who help private-equity funds and other investors secure its business. The state is investigating whether these middlemen, called placement agents, were involved in a scheme to receive illegal payments from firms trying to win state business. As one of the nation's largest public pension funds, New York's decision could prompt other states to follow suit. Morgan mulls TARP repayment. Despite reporting a larger-than-expected quarterly loss, Morgan Stanley (MS) CFO Colm Kelleher said the company will 'consider' repaying $10B to the government. The statement comes less than a month after CEO John Mack told employees 'it's the wrong time' to return the money. Morgan Stanley had a Tier 1 ratio of 16.4% at the end of March, or 12.9% if the bank repays TARP funds. Shares +2.9% premarket (7:00 ET). Credit Suisse profit beat. Credit Suisse (CS) posted a better-than-expected Q1 profit, bouncing back from several quarterly losses in 2008. The bank saw a net profit of 2B Swiss francs ($1.72B), more than double analysts' forecasts. Though short on details for its 2009 outlook, the bank said it is "in a position to weather the storms and perform well when market opportunities arise." Shares +10.5% premarket (7:00 ET). Apple shines on iPhone sales. Apple's (AAPL) quarterly earnings easily beat consensus estimates (see details below) as strong sales of iPods and iPhones held up despite the weak economy. Profit was also helped by declining commodity prices for key product components like aluminum and memory chips. This was the company's first quarter since CEO Steve Jobs went on medical leave. eBay gets okay on Gmarket buy. eBay (EBAY) won regulatory approval from South Korea's antitrust watchdog to proceed with its planned purchase of Gmarket (GMKT). A majority of Gmarket shareholders have already agreed to the cash tender offer. Glaxo to release study after long delay. GlaxoSmithKline (GSK) will release the first study comparing its cervical cancer vaccine with Merck's (MRK) blockbuster Gardasil at a May 10 medical meeting. The fact that the results are being released 14 months after the study concluded and at a relatively unknown meeting have left investors and analysts puzzled. Freddie CFO takes his own life. Acting CFO of Freddie Mac (FRE) David Kellerman was found dead in his home in what appears to be a suicide. Kellerman had worked at the mortgage giant for 16 years. House prices rise slightly (.pdf). FHFA's House Price Index showed U.S. home prices rose 0.7% in February M/M, bringing the twelve-month total to -6.5%. January's previously reported 1.7% gain was revised down to 1.0%. Earnings: Thursday Before Open AmerisourceBergen (ABC): FQ2 EPS of $0.95 beats by $0.06. Revenue of $17.31B (-2.5%) vs. $17.93B. Sees full-year EPS of $3.18-3.30 vs. $3.19. (PR) Alexion Pharmaceuticals (ALXN): Q1 EPS of $0.16 beats by $0.02. Revenue of $81M (+78.7%) vs. $82M. (PR) AU Optronics (AUO): Q1 EPS of -$0.71 misses by $0.04. Revenue of $1.5B (-66.7%) in-line. Expects utilization rates to improve substantially in Q2. (PR) AutoNation (AN): Q1 EPS of $0.23 beats by $0.07. Revenue of $2.47B (-35.6%) vs. $2.74B. Says it reduced debt by $500M in Q1, and remains in compliance with all debt covenants. Sees sales improving in H2. (PR) Black & Decker (BDK): Q1 EPS of $0.22 beats by $0.14. Revenue of $1.07B (-28.2%) vs. $1.16B. Sees full-year EPS of $1.50-1.90 vs. consensus of $1.79. (PR) Bunge (BG): Q1 EPS of -$1.76 misses by $2.25. Revenue of $9.2B (-26.2%) vs. $11B. (PR) Canadian Pacific Railway (CP): Q1 EPS of C$0.39 misses by C$0.09. Revenue of C$1.07B (-6.6%) vs. C$1.04B. "The unprecedented temporary decline in traffic in some of our key markets (as measured by carloads), particularly potash (-70%), Canadian coal (-30%), and automotive (-43%) has resulted in more than 2,400 employee layoffs to date." (PR) Celestica (CLS): Q1 EPS of $0.13 beats by $0.04. Revenue of $1.47B (-20%) vs. $1.51B. Q2 guidance in line. (PR) CIT Group (CIT): Q1 EPS of -$1.30 misses by $0.84. Tier-1 capital ration 9.3%. (PR) CME Group (CME): Q1 EPS of $3.20 in-line. Revenue of $647M (+3.5%) vs. $656M. Average rate per contract increased 12% to $0.83. (PR) ConocoPhillips (COP): Q1 EPS of $0.56 beats by $0.14. Revenue of $30.7B (-44.1%) vs. $26.34B. Shares +4.3% premarket. (PR) CONSOL Energy (CNX): Q1 EPS of $1.08 beats by $0.15. Revenue of $1.22B (+18.8%) in-line. "Energy companies with less than stellar financial positions could find it very difficult to obtain reasonable financing terms to maintain their operations. We believe that this will impact supply and could set the stage for higher coal and natural gas prices as early as '10." Shares +3.5% premarket. (PR) Cooper Industries (CBE): Q1 EPS of $0.47 beats by $0.01. Revenue of $1.26B (-18.7%) vs. $1.32B. Sees Q2 EPS of $0.50-0.60 vs. $0.60 and full-year EPS of $2.30-2.60 vs. $2.40. (PR) Danaher (DHR): Q1 EPS of $0.72 misses by $0.01. Revenue of $2.63B (-13.2%) vs. $2.67B. (PR) Diamond Offshore Drilling (DO): Q1 EPS of $2.51 beats by $0.29. Revenue of $886M (+12.7%) vs. $878.5M. (PR) EMC (EMC): Q1 EPS of $0.16 in-line. Revenue of $3.15B (-9.2%) vs. $3.25B. Sees global IT spending down in the low-double-digits for 2009. Expects $450M in cost reductions, up from a previous estimate of $350M, but says margins will decline due to weaker IT spending. (PR) ENSCO International (ESV): Q1 EPS of $1.56 beats by $0.04. Revenue of $514M (-9.6%) in-line. (PR) Exelon (EXC): Q1 EPS of $1.20 beats by $0.07. Revenue of $4.75B (+3.6%) vs. $4.62B. Reaffirms full-year EPS guidance. Shares +0.4% premarket. (PR) Fifth Third Bancorp (FITB): Q1 EPS of -$0.04 beats by $0.23. Tier 1 capital ratio of 10.9%. Tangible equity ratio of 7.9%. (PR) Goodrich (GR): Q1 EPS of $1.35 beats by $0.28. Revenue of $1.7B (-2.8%) in-line. Sees full-year EPS of $4.50-4.75 vs. $4.63, and revenue of $6.9B vs. $7.1B consensus. (PR) Hershey Foods (HSY): Q1 EPS of $0.38 beats by $0.03. Revenue of $1.24B (+6.5%) vs. $1.19B. Reaffirms 2009 net sales growth of 2-3%. Sees EPS increasing at less than its long-term objective of 6-8%. (PR) JetBlue Airways (JBLU): Q1 EPS of $0.08 beats by $0.05. Revenue of $793M (-2.8%) vs. $810M. Operating margin of 9.3% vs. 2.2% a year ago. First profitable Q1 since 2005. Shares +9.9% premarket. (PR) L-3 Communications (LLL): Q1 EPS of $1.66 beats by $0.03. Revenue of $3.64B (+3.7%) in-line. Reaffirms full-year guidance. (PR) Logitech (LOGI): FQ4 EPS of -$0.20 misses by $0.26. Revenue of $408M vs. $496M. Gross margin fell to 25% from 35.6% last quarter. "Our sales were negatively impacted by the combination of weak consumer demand and the accelerating reset by our channel partners of their weeks of supply." Shares -11.3% premarket. (PR) Marriott International (MAR): Q1 EPS of $0.24 beats by $0.10. Revenue of $2.5B (-14.8%) in-line. Issues downside EPS guidance for Q2 of $0.20-0.23 vs. $0.26 consensus. Maintains guidance for FY '09 of $0.88-1.02 EPS. (PR) Marshall & Ilsley (MI): Q1 EPS of -$0.44 misses by $0.11. Revenue of $M in-line. Q1 loan-loss provision of $478M. Shares +5.6% premarket. (PR) National-Oilwell Varco (NOV): Q1 EPS of $1.13 beats by $0.07. Revenue of $3.48B (+29.6%) vs. $3.29B. "Though the pace of new capital equipment orders has slowed in the short run, we believe investment in drilling equipment will resume, to enable the industry to explore new oil and gas frontiers. Nevertheless market conditions remain very challenging, and the timing of a recovery is uncertain." Shares -4.4% premarket. (PR) NII Holdings (NIHD): Q1 EPS of $0.43 beats by $0.07. Revenue of $M (+961%) in-line. Shares +2.3% premarket. (PR) Novartis (NVS): Q1 earnings of $1.96B ($0.87/share) vs. consensus of $1.89B. Sales fell 2% to $9.71B. Sees drug sales up mid-to-high single-digits. Shares +4.7% premarket. (Bloomberg) Occidental Petroleum (OXY): Q1 EPS of $0.50 beats by $0.13. Revenue of $3.07B (-49%) vs. $3.18B. Production was up almost 8% in Q1. (PR) Philip Morris (PM): Q1 EPS of $0.74 beats by $0.05. Revenue of $5.6B (-5.5%) vs. $5.48B. Reaffirms full-year guidance of $2.85-3.00 vs. consensus of $3.02. (PR) PNC Financial Services (PNC): Q1 EPS of $1.03 beats by $0.61. Revenue of $3.9B (+112.6%) vs. $3.5B. (PR) Potash (POT): Q1 EPS of $1.02 beats by $0.16. Revenue of $922.5M (-51.2%) vs. $975.5M. Issues downside EPS guidance for Q2 of $1.10-$1.50 vs. $2.21 consensus, and FY '09 EPS of $7.00-$8.00 vs. $9.65. (PR) RadioShack (RSH): Q1 EPS of $0.34 beats by $0.12. Revenue of $1B (+5.6%) vs. $0.94B. Comps were up 5% vs. Q1 2008. (PR) Raytheon (RTN): Q1 EPS of $1.11 beats by $0.10. Revenue of $5.88B (+9.9%) vs. $5.6B. Full-year guidance in line. Shares +2.4% premarket. (PR) Royal Caribbean Cruises (RCL): Q1 EPS of -$0.17 beats by $0.17. Revenue of $1.33B (-7.2%) in-line. Sees full-year EPS of $1.35 vs. consensus of $0.97. Shares +13.5% premarket. (PR) Sigma-Aldrich (SIAL): Q1 EPS of $0.68 beats by $0.04. Revenue of $519M (-8.8%) vs. $532M. Full-year guidance in line. (PR) Suncor Energy (SU): Q1 EPS of $0.24 beats by $0.12. The decrease in earnings was primarily from lower price realizations, with benchmark commodity prices significantly weaker in Q1 '09 vs. Q1 '08. (PR) SunTrust Banks (STI): Q1 EPS of -$0.46 beats by $0.19. Revenue of $2.24B (+16.3%) vs. $2.06B. Majority of loss was due to a $715M goodwill impairment charge. Tier-1 ratio estimated at 11%, up 13 points from last quarter. (PR) Supervalu (SVU): FQ4 EPS of $0.87 beats by $0.08. Revenue of $10.82B (+4.2%) in-line. (PR) Thermo Fisher (TMO): Q1 EPS of $0.62 misses by $0.08. Revenue of $2.26B vs. $2.42B. Sees full-year EPS of $2.80-3.10 vs. $3.15, and revenue of $9.6-9.9B vs. $10.14B. "Our customers are clearly delaying their capital purchases in the current environment." Shares -7.6% premarket. (PR) Union Pacific (UNP): Q1 EPS of $0.72. beats by $0.06. Revenue of $3.42B (-20%) vs. $3.55B. "The difficult economic conditions continue to affect our business volumes. During this challenging time, we are reducing costs across the board..." Shares +2.7% premarket. (PR) UPS (UPS): Q1 EPS of $0.52 misses by $0.04. Revenue of $10.94B (-13.7%) vs. $11.44B. Sees Q2 EPS of 0.45-0.55 vs. consensus of $0.65. "Economic indicators tell us recovery in the U.S. might begin late this year, but more likely not until 2010." Shares -3.7% premarket. (PR) US Airways (LCC): Q1 EPS of -$2.28 beats by $0.10. Revenue of $2.46B (-13.6%) in-line. "Our first quarter loss reflects the weakness in the global economy that has negatively impacted revenues throughout our industry. The steps we have taken to adapt to this environment are having a significant positive impact, though, as evidenced by our significant improvement in earnings excluding special items and fuel hedges." Shares +6% premarket. (PR) Zimmer (ZMH): Q1 EPS of $0.95 beats by $0.01. Revenue of $993M (-6.3%) vs. $1B. Sees full-year EPS of $3.85-4.00 vs. $3.88. (PR) Earnings: Wednesday After Close Apple (AAPL): FQ2 EPS of $1.33 beats by $0.24. Revenue of $8.16B vs. $7.96B. Sees FQ3 EPS of $0.95-1.00 vs. consensus of $1.12, and revenue of $7.7-7.9B vs. $8.28B. Mac sales of 2.22M (-3% Y/Y). iPod sales 11M (+3%). iPhone sales 3.79M (+123%). (PR) Alliance Data Systems (ADS): Q1 EPS of $1.19 beats by $0.09. Revenue of $480M (-3.8%) vs. $488M. Sees Q2 EPS of $1.05 vs. $1.22. (PR) eBay (EBAY): Q1 EPS of $0.39 beats by $0.05. Revenue of $2.02B (-7.8%) vs. $1.94B. (PR) Equifax (EFX): Q1 EPS of $0.58 beats by $0.04. Revenue of $453M (-10%) vs. $448M. (PR) F5 Networks (FFIV): FQ2 EPS of $0.38 in-line. Revenue of $154M (-3.1%) in-line. Says Feb. sales were particularly slow, but March improved significantly. (PR) Leggett & Platt (LEG): Q1 EPS of $0.06 misses by $0.01. Revenue of $718M (-28.1%) vs. $807M. Sees full-year EPS of $0.60-0.90 vs. $0.72, and revenue of $2.9-3.3B vs. $3.39B. (PR) Lam Research (LRCX): FQ3 EPS of -$0.71 misses by $0.05. Revenue of $174.4M (-71.6%) vs. $175.9M. (PR) Noble (NE): Q1 EPS of $1.62 beats by $0.16. Revenue of $896M (+4%) in-line. (PR) Novellus Systems (NVLS): Q1 EPS of -$0.47 beats by $0.04. Revenue of $98.9M (-68.6%) vs. $101.7M. Says it's cautiously optimistic order activity has stabilized. (PR) Pactiv (PTV): Q1 EPS of $0.69 beats by $0.23. Revenue of $766M (-5.2%) vs. $732.5M. Sees Q2 EPS of $0.54-0.58 vs. $0.51 and full-year EPS of $2.15-2.25 vs. $1.89. "Compared with the first quarter of last year, we benefited from lower raw material costs, as well as lower logistics costs, and improved productivity." (PR) Robert Half International (RHI): Q1 EPS of $0.06 in-line. Revenue of $823M (-32.8%) vs. $844M. (PR) SLM Corp. (SLM): Q1 EPS of -$0.03 vs. consensus of $0.12. Loss was partly the result of ongoing dislocation in the commercial paper market. (PR) VMware (VMW): Q1 EPS of $0.25 beats by $0.05. Revenue of $470M vs. $474M. Sees Q2 revenue flat to down vs. a year ago. (PR) Xilinx (XLNX): FQ4 EPS of $0.26 beats by $0.08. Revenue of $395M (-17%) vs. $383M. (PR) Yum! Brands (YUM): Q1 EPS of $0.48 beats by $0.08. Revenue of $2.22B (-8.1%) vs. $2.33B. Sees full-year EPS of $2.10 vs. $2.08. Says Q2 likely to be its most challenging quarter. (PR) Today's MarketsOverseas markets moved higher Thursday, giving a boost to futures.

  • 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!

  • Apple’s iPod is Not Dead and Not Dying

    Apple's iconic iPod digital music player is credited for reviving the company and helping the it dominate consumer mind share and spending over the past decade. It still amazes me when I think about all of the MP3 players and companies who failed and the music stores that are now on life support and how badly Apple has hurt Sony, Microsoft and other companies who bet millions on defeating the iPod. One of my greatest fears has started to come true where analysts are now throwing the notion out there that the iPod is dead or dying. We all knew this was coming when analysts first asked that same question upon the introduction of iPhone then iPad but now we're at a point where it's clear that the iPod isn't key to Apple's success in earnings and shareholders don't have to worry about consumers growing tired of the iPod or music in general (as if that's ever going to happen). The iPhone, iPad and Mac are the largest legs of Apple's business and iPod is just iPod. Of course, Apple has sold hundreds of millions of iPods and a solid 50 percent of its stock value as it skyrocketed from 2004-2008 is due to the iPod, but its impact on Apple's bottom line is dropping with every new iPhone release. I was enthralled in a piece featured on AppleInsider written by Andy Zaky. The piece took a logical and very up front look at Apple's iPod segment in how it relates to the market, Apple's bottom line and raw sales and opened my eyes to just how well the nine year old music player is holding up. Before I review a bit of the findings in Andy's research, I'd like to point out that Apple is approaching a 10 year dominance in a huge market with one product line. Yes, I know the iPod has seen many revisions and form factors but it's digital music and Apple still maintains 70 percent market share for MP3 players. That's incredible when you think of the thousands of competitors and dozens of music stores aimed directly at Apple and let's hope the same fate is in store for iPhone. If you ever had an argument whether a closed system is good for the consumer, look no further than iPod's success. Health of the iPod and Apple's bottom line Analysts who measure Apple's stock value based on trends, market health, future products and current sales will look at this figure when calling the death of iPod: This chart shows the iPod's decline in percentage of Apple's revenue has dropped from 55 percent during 2005′s Winter sales to 24 percent upon the introduction of the first iPhone. Naturally, analysts were freaking out a bit and today's 8.6 percent for a product that once made up for half of their revenue is a reason to be quite worried. Prior to the iPhone 3G's release in 2008, I did see a few reports that spurred a sharp decline in AAPL that year, mostly because the iPod was selling to a saturated market where everyone that wanted one already had one and features like an FM receiver weren't enough for most users to upgrade. Of course, anyone reading this blog knows that the iPhone has iPod built right in and, of the iPods sold, the App Store enabled iPod touch completely dominates sales compared to the nano, shuffle or classic models. Apple sells an iPod every time you buy an iPhone, but it's clear that the iPod isn't the golden egg for Apple any more, but have people stopped buying iPods? Is the iPod dead? This data proves otherwise. Compared to 2006 numbers, when the iPod was nearly half of Apple's quarterly profit, iPod sales have actually risen from 8.5 million units per quarter (non-holiday) to an average of 10 million per quarter. This is huge and over half of iPod sales in the past year (based on rumors and Apple Store public iPod sales chart review), the iPod touch makes up for a majority of iPod sales. The iPod is stronger than it was in 2006, which was a year before the iPhone came out. The iPod isn't dead or dying; it's stronger than ever. Why does it feel like the iPod is dead? I may have a bit of bias here, but in big cities, the iPod is a device you simply don't see anymore. Instead, you see one or two iPods for every 10 iPhones or iPads. The reason is that the iPod is a part of our touch devices and we don't need the extra device in our bag or pocket. Another fact is that, other than Apple's yearly iPod event (that happens every September like clockwork), Apple doesn't push the iPod at every keynote like it did before the iPhone. Now, the App Store, iPhone and iPad get all of the attention, and rightly so. You may pay $199 for an iPhone 4, but that's after carrier subsidy. In fact, AT&T (s att0 pays the rest of the bill, which to Apple is between $499 and $699 for every iPhone sold for a product that costs less than $200 in parts to build, so profits of the iPhone are significantly higher than the sale of an iPod nano, and paired with Apple's 30 percent cut of the sales of every app you buy for the iPhone and it's obvious which device is more profitable. It's too early to call the death of iPod. Its impact on Apple's earnings may get smaller, especially if the iPad sales continue to rise and Apple's next TV appliance is the killer iOS based device that we're all hoping for, but 10 million units a quarter is not small potatoes and iPod continues to do well for the foreseeable future. That shrinking percentage of iPod's impact on Apple's sales is only because the amount of money Apple is making from its other segments is growing at an astronomical rate as seen here: This was mostly a summary of the data Andy reviewed over at AppleInsider. Both parts one and two are worth a read for anyone that follows Apple closely and enjoys data that backs up the usual speculation. Do you still own an iPod? Do you also have an iPhone and do you use both on a daily basis?

  • TCO: New research finds Macs in the enterprise easier, cheaper to manage than Windows PCs

    Shocking: A recent survey of enterprise IT managers that administer both PCs and Macs finds that Macs have a better TOC (total cost of ownership) than Windows boxes, and require less user training and help. The respondents were given the option to select from a range of cost differences. Not only did the administrators across the board say that Macs were less expensive, in all but one category the majority of administrators who said Macs cost less said they were more than 20 percent less expensive to manage than PCs. Of those who asserted that PCs cost less, the majority always asserted that PCs were between 0 and 20 percent less expensive to manage than Macs. The Enterprise Desktop Alliance survey took results from organizations that had 50 or more servers or over 100 Macs, what the organization said were enterprises, academic sites and government agencies. The figures that pop out from the chart are those for the time spent troubleshooting problems (16 vs 65 percent, PC and Macs, respectively), dealing with help desk calls (16 vs 54 percent), training users (16 vs 48 percent) and managing system configs. (25 vs 50 percent). At the Macworld Expo last month, I spoke to T. Reid Lewis, president of the EDA and CEO of Group Logic, a maker of network software and Mac integration products such as ExtremeZ-IP. He pointed out that important enterprise service and back-end platform companies were coming on board the multiplatform bandwagon. That includes IBM, which joined the EDA in Feb. Big Blue's Informix database, Rational software delivery automationware and Lotus messaging and collaboration platform support Macs, and the company had a booth at the Expo. Absolute Software, the maker of LoJack and Absolute Manage also joined the EDA in Feb. Macs are coming into the enterprise and support for them in familiar software management and delivery consoles is catching up. While IT management remains suspicious of the Mac platform and most admins focus on Microsoft certification programs rather than Mac OS X certifications, users continue to purchase Macs and request support. According to Gene Munster, Piper Jaffray analyst, the year-to-year retail sales of Macs climbed 39 percent during January and February. He said this means some 2.8 to 2.9 million Macs were be sold in the quarter. Another recent EDA survey found that 66 percent of IT administrators in large organizations that currently have both Macs and PCs will increase the number of Macs in their sites. The reasons? In addition to the ease of support (and the associated cost reductions found in the survey above), user preference, and increased productivity. Check Out: Are Mac OS X and Apple servers making inroads with the Feds? We can point to many places for the rise in the Mac's status: Apple's continuing execution on its Mac OS X platform; the company's focus on hardware quality and technological advances in a time when PC makers have raced to the bottom of the market with netbooks and crappy low-cost systems; support for Intel processors and Windows virtualization; the halo effect of the iPod and iPhone platforms; the terrible introduction of Windows Vista; the Apple Store strategy; or others. Whatever the combination of reasons or just the fact that the Mac is better, users seem to have shaken off the past FUD from Redmond and Intel that fell on the Apple platform. I spoke to a white-collar professional yesterday who is looking at buying a new notebook. He has never used anything other than a PC. But now, he's seriously looking at a Mac. I told him to go to the local Apple retail store and get a tour. IT managers will have to deal. They can be thankful that integration is easier than ever and getting better all the time. Check Out: Yes, based on Mac history, Windows 7.5 will suck less Check Out: Updates that boost Mac searching and content discovery

  • Apple 2010 Q1 earnings announced... and they're magnificent

    Filed under: Apple FinancialApple's press release discussing the FY10 Q1 earnings (the December '09 calendar quarter) has been transmitted to the ether, and the SEC has the form 10-Q. You can read the whole thing at Apple's investor relations page, but let us sum up: goodness gracious. Earnings per share (under GAAP rules) were at $3.67, with a total revenue number of $15.68B; net profit was $3.38B. Mac sales for the quarter hit 3.36 million and iPhone sales came in at 8.7 million (under analyst estimates of 9.1 million). The company has over $23B in cash and short-term investments. Ahead of today's earnings news, AAPL was up over 2.5 percent for the day, closing at 202.87; market mood monitor Piqqem had analyst estimates largely bullish at $2.07 EPS and $12.05B in revenue. Join us momentarily for our liveblog of the analysts' call at 5 pm ET. One more thing: a quote from Steve Jobs. "The new products we are planning to release this year are very strong, starting this week with a major new product that we're really excited about." Us too. Disclosure: I hold a small, long-term position in AAPL. See the full release below.Apple Reports First Quarter Results All-Time Highest Revenue and Profit New Accounting Standards Adopted CUPERTINO, California-January 25, 2010-Apple(R) today announced financial results for its fiscal 2010 first quarter ended December 26, 2009. The Company posted revenue of $15.68 billion and a net quarterly profit of $3.38 billion, or $3.67 per diluted share. These results compare to revenue of $11.88 billion and net quarterly profit of $2.26 billion, or $2.50 per diluted share, in the year-ago quarter. Gross margin was 40.9 percent, up from 37.9 percent in the year-ago quarter. International sales accounted for 58 percent of the quarter's revenue. Apple sold 3.36 million Macintosh(R) computers during the quarter, representing a 33 percent unit increase over the year-ago quarter. The Company sold 8.7 million iPhones in the quarter, representing 100 percent unit growth over the year-ago quarter. Apple sold 21 million iPods during the quarter, representing an eight percent unit decline from the year-ago quarter. During the quarter Apple elected retrospective adoption of the Financial Accounting Standards Board's amended accounting standards* related to certain revenue recognition. Adoption of the new accounting standards significantly changes how the Company accounts for certain items, particularly sales of iPhone(R) and Apple TV(R). "If you annualize our quarterly revenue, it's surprising that Apple is now a $50+ billion company," said Steve Jobs, Apple's CEO. "The new products we are planning to release this year are very strong, starting this week with a major new product that we're really excited about." "We are very pleased to have generated $5.8 billion in cash during the quarter," said Peter Oppenheimer, Apple's CFO. "Looking ahead to the second fiscal quarter of 2010, we expect revenue in the range of about $11.0 billion to $11.4 billion and we expect diluted earnings per share in the range of about $2.06 to $2.18." Apple will provide live streaming of its Q1 2010 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. PST on January 25, 2010 at www.apple.com/quicktime/qtv/earningsq110/ and will also be available for replay for approximately two weeks thereafter. *Retrospective Adoption of Amended Accounting Standards On September 23, 2009, the Financial Accounting Standards Board ratified Emerging Issues Task Force (EITF) Issue 08-1 and EITF Issue 09-3, resulting in the issuance of accounting standard updates ASU 2009-13 and ASU 2009-14. Apple was required to adopt the new accounting standards no later than the first quarter of fiscal 2011. Apple elected to adopt the new standards during the first quarter of fiscal 2010, as reflected in its Quarterly Report on Form 10-Q for the quarter ended December 26, 2009, which was filed with the SEC on January 25, 2010. The Company also filed a Form 10-K/A to amend its Form 10-K for the year ended September 26, 2009 solely to reflect the retrospective adoption of the new accounting standards to the periods presented in that report. Additionally, Apple filed a Form 8-K that included selected quarterly financial schedules reflecting the impact of retrospective adoption of the new accounting standards and reconciling the application of old and new accounting principles to historical income statements, balance sheets, cash flow from operations, deferred revenue and summary data information. These financial schedules will also be available on the Company's website at www.apple.com/investor. The new accounting principles result in the Company's recognition of substantially all of the revenue and product cost for iPhone and Apple TV when those products are delivered to customers. Under historical accounting principles, the Company was required to account for sales of both iPhone and Apple TV using subscription accounting because the Company indicated it might from time to time provide future unspecified software upgrades and features for those products free of charge. Under subscription accounting, revenue and associated product cost of sales for iPhone and Apple TV were deferred at the time of sale and recognized on a straight-line basis over each product's estimated economic life. This resulted in the deferral of significant amounts of revenue and cost of sales related to iPhone and Apple TV. Because Apple began selling both iPhone and Apple TV in fiscal 2007, the Company retrospectively adopted the new accounting principles as if the new accounting principles had been applied in all prior periods. Consequently, the financial results of each quarter from fiscal 2007 through fiscal 2009 have been revised. The Company believes retrospective adoption provides analysts and investors the most comparable and useful financial information and better reflects the underlying performance of the Company's business. For additional information refer to the "Explanatory Note" in Apple's Amendment No. 1 to its Annual Report on Form 10-K for the year ended September 26, 2009. 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 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; continued competitive pressures in the marketplace; 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 inventory risk associated with the Company's need to order or commit to order product components in advance of customer orders; the continued availability on acceptable terms, or at all, of certain components and services essential to the Company's business currently obtained by the Company from sole or limited sources; 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 reliance on the availability of third-party digital content and applications; the potential impact of a finding that the Company has infringed on the intellectual property rights of others; the Company's dependency on the performance of distributors and other resellers of the Company's products; the effect that product and service quality problems could have on the Company's sales and operating profits; the Company's reliance on sole service providers for iPhone in certain countries; the continued service and availability of key executives and employees; war, terrorism, public health issues, and other circumstances that could disrupt supply, delivery, or demand of products; 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; and unfavorable results of other legal proceedings. 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 26, 2009 and its Form 10-Q for the quarter ended December 26, 2009. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. TUAWApple 2010 Q1 earnings announced... and they're magnificent originally appeared on The Unofficial Apple Weblog (TUAW) on Mon, 25 Jan 2010 16:47:00 EST. Please see our terms for use of feeds.Read | Permalink | Email this | Comments iPhone - Apple - Steve Jobs - Financial Accounting Standards Board - IPod

  • Wall Street Breakfast: Must-Know News

    FDIC wants in on the action. After auctioning off more than 100 failed banks this year, the FDIC wants a bigger slice of the pie. Starting next year, it will ask bidders on some seized banks to offer the agency a chance to profit if the deal is well-received by the buyer's shareholders. Earlier this month, the FDIC collected $23.3M from New York Community Bancorp (NYB) based on an unusual condition in its bid that gave the FDIC the ability to reap gains from a rally in New York Community's stock price after it announced its purchase of AmTrust; shares rose more than 16% in the two weeks following the deal. GMAC looks for $3.5B lifeline. GMAC will likely receive another $3.5B injection, adding to the $12.5B the feds have already used to stabilize the ailing auto lender. Sources say the additional money will help GMAC absorb losses related to its mortgage operations and return to profitability by Q1 2010. The Treasury has said it will provide GMAC with as much money as it needs to plug its leaks, and earlier this year predicted it could require another $5.6B; the lower figure now being discussed is in part because the impact from the bankruptcies of GM and Chrysler has not been as severe as originally projected. Japan lays out 10-year plan. Japan's four-month-old government vowed to enlarge the economy by Ą150T and draw the nation out of a "long, downward-sloping tunnel" with a new strategy it said would deliver annual real GDP growth of at least 2% between now and 2020. The scheme is an attempt to quash rising domestic concerns over the country's gargantuan public debt, which equals about 180% of GDP. The ambitions plan, which some investors said "smacked of desperation," pledged to expose Japan more closely to growth in Asia; despite its proximity to China, Japan has not managed to fully leverage itself to external growth. (ETF: EWJ) JAL bankruptcy worries mount. Enterprise Turnaround Initiative Corp., the Japanese-government-backed corporate turnaround fund charged with the rescue of Japan Airlines, told JAL's main creditors it was leaning toward a restructuring under bankruptcy protection, sending investors into a panic and shares down 24%. A bankruptcy could wipe out JAL's shares and trigger large losses for creditors - including Japan's biggest banks - who own much of JAL's $16B in debt. A bankruptcy filing could also impact talks with American Airlines (AMR) and Delta Air Lines (DAL), which are courting JAL with rival offers of financial aid. Speculation over a JAL bankruptcy helped send the Nikkei down almost 0.9%. GM reopens Saab factories as it mulls bids. General Motors dropped its Dec. 31 deadline for bids on its Swedish car brand Saab, which will restart some production lines as it continues to talk with potential bidders. "We are preparing the wind-down process. At the same time we are open to options, to bids that come in. Therefore the deadline has also been dropped," Saab said, noting it has orders for its 9-3 and 9-5 models. Flight demand still growing. International air passenger demand rose 2.1% in November from a year ago, IATA said, while air freight climbed a healthy 9.5%. IATA was cautious about the rise, noting the improvement was accentuated by a sharp drop in traffic at the end of 2008. "Demand continues to improve, but we still have a lot of ground... to recover. We cannot anticipate any significant improvement in yields in the coming months," the trade group said. Demand is now 6.4% higher than the Q1 bottom, but is still 6% lower than its early 2008 peak. Credit-card delinquencies tick higher. November U.S. credit card chargeoffs rose half a percentage point to 10.56%, halting a two-month run of improvement, Moody's said. Delinquencies also rose, to 6.2%. Trends suggest bad debts will continue to rise through much of the winter, and support Moody's outlook that chargeoffs will peak at 12-13% in mid-2010. The payment rate, or percentage of the principal balance cardholders repaid, fell to 16.4% from 17.3%, largely due to November being a shorter month. Fewer shoppers finish holiday buying. An unprecedented 22% of U.S. consumers didn't finish their Christmas shopping this year, as fewer discounts kept many wallets closed, according to a report by Britt Beemer. "This is the lowest number of consumers finishing shopping in all my 26 years of tracking retail sales during the holiday season," Beemer said. Typically, 82-88% of shoppers make it to the finish line. Many said they couldn't afford to spend more, while others opted to give cash instead of presents. Nokia fires new strike against Apple. Nokia (NOK) opened up a new front in its patent fight with Apple (AAPL), filing a complaint with the U.S. International Trade Commission saying that Apple infringes on seven Nokia patents in nearly all of its consumer products. The patents relate to Nokia's technology to create features in user interface, camera, antenna and power management technologies. Analysts say the dispute reflects a shift in the balance of power as cellphones morph into handheld computers. Consumer confidence grows, in a sense. The Conference Board's Consumer Confidence Index rose to 52.9 from 50.6 in November, just short of the consensus estimate of 53. The increase was fueled by a rise in the Consumer Expectations Index to 75.6 from 70.3, while the Present Situation Index declined to 18.8 from 21.2 - somewhat surprising given that the present situation index is highly correlated with the labor markets, which have improved significantly in recent readings. The index suggests consumers may be skeptical about recent employment data. Home price recovery flattens. The decline in U.S. home prices improved for the ninth straight month in October, according to S&P/Case-Shiller, but monthly growth flattened in most markets. Year-on-year prices in the index's 10-city and 20-city readings declined 6.4% and 7.3%, while prices remained flat from last month. "Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip," the report said. "Before jumping to conclusions, recognize that the one time that happened, at the beginning of the 1980s, Fed policy saw dramatic reversals, which is very different from the stable and consistent Fed policy we have today."Suit alleges Morgan sold garbage as gold. A Virgin Islands pension fund sued Morgan Stanley (MS), alleging the investment bank marketed a $1.2B CDO, and collaborated with credit raters to ensure AAA ratings, while shorting nearly all the assets. The Libertas CDO was backed mainly by residential mortgage-backed securities. The complaint said Morgan Stanley knew securities in the CDO were suffering a dramatic rise in delinquencies, but provided a misleading risk factor in its prospectus, noting rising delinquencies "may" hurt values in the RMBS market, which the complaint compared to "Captain Smith's telling passengers of the Titanic that some ships have 'recently sunk' in the Atlantic, and therefore 'our ship may sink,' without mentioning the facts that his ship struck an iceberg, had a hole in it, and was filling with water." Today's Markets Tuesday recap: Stocks edged lower while bonds rose after successfully digesting another dollop of supply. The dollar rose on strong consumer confidence figures. Oil rose as a cold-snap in the North East fueled expectations for a drop in inventories, and gold fell, hit by the dollar's strength.

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