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Mark your calendar: Apple reveals what could be its biggest quarter ever on Jan. 24

Erica Ogg — Wed, 04 Jan 2012 14:18:56 +0000

It’s not usually news that Apple has scheduled its quarterly earnings call with analysts and investors, but this quarter is a bit different. Expectations are sky-high for the iPhone and iPad maker. The reason? CEO Tim Cook and CFO Peter Oppenheimer put them there. At the last earnings call, in October — in which Apple missed investors’ expectations — the pair went on record that the fiscal first quarter of 2012 (October through December) would be the company’s biggest yet.

The call is set for 2 p.m. PST on Jan. 24.

Specifically, Cook stated in October, “I’m confident that we will set an all-time record for iPhone this quarter.” Oppenheimer put a bold forecast out there to match: He said Apple would hit $37 billion in revenue for the holiday quarter — up 38 percent from the $26.74 billion of the same quarter last year — and earnings per share of $9.30, up from $6.43.

Those numbers are not at all out of the realm of possibility, thanks to the events of the quarter: It began with the iPhone 4S going on sale, saw the mobbed opening of a new flagship retail store, and ended with the all-important Christmas shopping and gift-giving period that has historically been good for the iPhone/iPod/iPad business units.

Analysts are expecting Cook’s promise of an all-time high for iPhone sales to hold true. There are estimations of up to 30 million iPhones sold, which is 10 million more phones than Apple’s previous quarterly record. There is reason to feel confident in that too: In just the first weekend in October that the iPhone 4S went on sale, Apple sold 4 million of them. And by early December, iPhone carrier AT&T was already saying it was on the cusp of breaking its own record for quarterly iPhone sales with 6 million, with several weeks in the quarter to go.

IPads won’t be too shabby either. Analysts are expecting between 13 and 14 million iPads sold, which would easily beat the previous quarter’s record of 11.2 million.

We will be covering the announcements here on Jan. 24, so be sure to join us. Besides just talk of records broken, expect discussion around China (Apple’s second-most-important market), enterprise use of the iPhone and iPad, and investors’ favorite topic: the long-sought dividend.

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Verizon iPhone sales nip at AT&T’s heels in Q3

Erica Ogg — Fri, 21 Oct 2011 15:09:13 +0000

Verizon sold 2 million iPhones during its fiscal third quarter, the carrier announced Friday. AT&T said Thursday it activated 2.7 million iPhones during the same time period. Though Verizon is still a newcomer to this iPhone-selling business compared to AT&T, its earnings results show it’s building iPhone momentum and gaining on its rival.

The 2 million Verizon iPhones sold actually represents a dip in iPhone activations compared to the previous quarter, but they weren’t alone: AT&T and Apple itself also saw sales of the smartphone drop off as customers were reportedly anticipating the iPhone 4S, which went on sale last week. Last quarter, AT&T sold 3.6 million iPhones compared to Verizon’s 2.3 million, both higher than this quarter’s tallies. But Verizon is closing the gap: Last quarter they trailed Verizon’s iPhone sales by 1.3 million; this quarter they trailed by a mere 700,000. And it should be pointed out that AT&T’s numbers include iPhone 3GS sales as well, which incidentally, are selling really well.

Verizon has been selling the iPhone since February, and while it appears Apple’s smartphone has been a decent tool for acquiring new customers, it has been more effective as a way to upsell its existing customers. Verizon revealed Friday that during the quarter, 20 percent of iPhone customers came to them from a different carrier, and the remaining 80 percent were already Verizon subscribers, according to a Bloomberg report.

Overall, the iPhone continues to help Verizon’s bottom line, but it’s not the sole reason the carrier doubled its overall earnings during the quarter to $1.38 million, from the $659 million it reported a year earlier, when it was iPhone-less. On Friday, it said it sold 5.6 million smartphones during the quarter, half of which were Android phones.

Although it said it “sold out” of iPhone 4S units on the first day it was available, Verizon didn’t offer any further insight into how many of the devices it has sold so far. AT&T said it has activated “more than 1 million” iPhone 4S devices already.

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China is now Apple’s second-most important market

Erica Ogg — Wed, 19 Oct 2011 13:45:14 +0000

Apple Store in Shanghai

China isn’t just where Apple manufactures products. It’s now the country that delivers the most revenue for the company after the U.S. Over the last year, Apple and its executives have emphasized China and its surrounding areas as an important part of its sales strategy. But Tuesday during Apple’s fiscal fourth-quarter 2011 earnings call, CEO Tim Cook shed more light on just how important China has become.

Calling the progress in China “amazing,” Cook said that if you count the greater China region as a whole (which includes Hong Kong and Taiwan) it now accounts for 12 percent of Apple’s full-year revenue for 2011. That’s up from just 2 percent in fiscal year 2009, he said. That makes it Apple’s “fastest-growing region by far.”

For the fourth quarter of 2011, China contributed $4.5 billion, or 16 percent of the $28.7 billion in total revenue the company reported. It’s even more astounding when you compared that to Europe, which contributed $7.4 billion to Apple’s bottom line — that means China and its surrounding areas are accounting for a little over half of what Europe is.

Cook also reiterated the stats on its retail stores in area that he presented at the iPhone 4S event two weeks ago. There are now six Apple Stores in greater China (compared to 64 in Europe), and the Hong Kong location, which opened last month, saw more visitors on opening day than any other Apple Store. All the greater China locations are the company’s most-visited and highest-grossing retail stores, and there will be more China stores to come.

Cook made it clear Apple is going to ride the momentum in China as far as it can:

“In my lifetime I’ve never seen a country with as many people rising into the middle class aspiring to buy products that Apple makes. It’s an area of enormous opportunity. It has quickly become No. 2 on our lists of top revenue countries very, very quickly.”

Image courtesy of Flickr user adactio

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Why Apple sold only 17.1 million iPhones

Erica Ogg — Tue, 18 Oct 2011 23:22:20 +0000

Apple sold a lot of iPhones, iPads and Macs during the most recent quarter, yet Wall Street is very displeased. Since Apple announced its fourth quarter 2011 fiscal earnings of $6.6 billion in profit and $28.7 billion in revenue earlier Tuesday the stock has been pummeled by investors, sending it down $28 or about 6.5 percent. While Apple’s numbers were slightly below what those analysts had expected, it’s still above what Apple had forecast. So what gives? Based on the questions from analysts during the company’s investor call Tuesday, concern seems to center on the number of iPhones Apple sold during the quarter: 17.1 million versus the 20.1 million the previous quarter.

Here’s why that number concerns them and why it’s likely just a minor blip:

Apple says that this was a “record” September quarter for them. You would think that would mean record iPhone sales too. Sure, 17.1 million is a lot, but it’s still fewer than the 20.1 million iPhones Apple sold in the previous quarter, and perhaps more importantly to those keeping score on Wall Street, below the 18-21 million smartphones Samsung is believed to have sold last quarter. Samsung is Apple’s chief competitor, in many ways, and any sign of a slip is going to resonate with the investors who are closely watching Apple and its competition.
Apple, not surprisingly, said they saw this dip in iPhone sales coming. On the earnings call, CEO Tim Cook, looking on the bright side, said people were holding out for the iPhone 4S:

[It was] much less of a reduction than what we were expecting and that was a large factor in our revenue exceeding our guidance…We knew that there was great anticipation of a June or July new iPhone because that was the pace we had been on for the last several years. As we predicted, that sell-through decline did occur, but not really to the extent that we thought. So we significantly beat our guidance.

But besides the established schedule for a new iPhone, Cook, along with CFO Peter Oppenheimer also lay some of the blame at the feet of Apple rumor bloggers. ”The reduction [in sales] happened largely in the back half of the quarter as speculation hit extreme highs,” said Cook. Oppenheimer later added, “The biggest impact was the rumors, which were very pervasive, especially at the end of the quarter.” In other words, it seems that the crush of Apple rumors and speculation recorded by blogs that drive up intense and frenzied interest in the company’s products are a double-edged sword for the company.
No matter who’s to blame, are lower-than-expected iPhone sales a harbinger of Apple being off its game? Very unlikely. Some things to remember: The company sold 4 million iPhone 4S units alone in the first three days it was available last week. So there’s clearly a demand for the new iPhone. About 25 million iOS devices were updated in the first five days the iOS 5 update hit Apple’s servers, which means older model device owners are keeping their products up to date with the latest software. And really, we’re talking about the slowing of sales of a 13- to 15-month old phone. Things could be worse.

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Apple Q4 2011 earnings by the numbers

Erica Ogg — Tue, 18 Oct 2011 20:39:41 +0000

Updated. Apple released its fourth quarter 2011 earnings Tuesday, reporting revenue of $28.7 billion, and earnings of $6.62 billion or $7.05 per share. That misses what Wall Street analysts had been expecting — revenue of $29.45 billion and earnings of $7.28 per share — but is above what Apple had forecast: revenue of $25 billion and earnings per share of “about $5.50.”

Here’s a quick breakdown of the devices the company sold between July and the end of September of this year.

iPhones sold: 17.07 million. Note: The fourth quarter ended on September 30 for Apple, so this total doesn’t include those monster iPhone 4S numbers Apple reported on Monday.

iPads sold: 11.12 million

Macs sold: 4.89 million

iPods sold: 6.62 million

There will be a conference call with Apple analysts at 2 pm PT, so check back for further analysis later today.

Update: Wall Street did not react kindly at all to Apple’s revenue not meeting their expectations. Apple stock has dropped 5.6 percent or $23.73 in after-hours trading as of 2 pm PT.

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Apple shares close above $400

Erica Ogg — Tue, 26 Jul 2011 20:43:38 +0000

Apple shares hit a milestone on Tuesday, closing at $403.61. It’s the first time the company’s stock has ever closed above $400.

The stock price of the iPhone and iPad maker hit $400 a few times Monday, but closed at $398.50. Today shares opened at $400 and peaked earlier this morning at $404.48.

There’s no mystery where the boost is coming from. Apple’s stock value has been swinging steadily upward since the introduction of the original iPad in late January 2010. Since then, Apple shares have grown 96 percent. Most recently, Apple reported blow-out third-quarter 2011 earnings last week, on the back of sales of more than 20 million iPhones and 9 million iPads in just three months.

Apple’s market capitalization is the number that Wall Street has been eyeing perhaps even more closely. As of Tuesday, Apple is worth $374.18 billion, making it the second-most valuable company in the world after ExxonMobil. While Apple is close, Exxon still has a pretty sizable lead, closing today with a valuation of $415.52.

But there’s at least one good reason to believe Apple’s value for shareholders isn’t going to lose steam anytime soon: Still expected sometime later this year is the next iteration of the iPhone.

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How the iPad is driving Apple’s business

Erica Ogg — Wed, 20 Jul 2011 01:23:19 +0000

When Apple released its third-quarter 2011 earnings results on Tuesday, the numbers were, as is becoming almost customary for the Cupertino crew lately, a huge blow-out. Success was spread over many parts of the business, particularly the company’s flagship products, the iPhone and the Mac. Both are growing and show that Apple is on a tear with the entirety of its business. But those iPad results? Those were fairly stunning.

While Android phones are outpacing the iPhone in market share, it’s clear that Apple is not anywhere close to giving up its lead in the tablet race. And despite the seemingly endless train of new tablets popping up, Apple is putting more space between its tablet and the rest of the field.

Here are the most important numbers from Apple’s earnings that show that the iPad is seemingly unstoppable, and clearly Apple’s most important product.

$6 billion. That’s how much money Apple made from the iPad just in April, May and June of this year. The key is that Apple now makes more money off the iPad, a product slightly more than one year old, than its Mac lineup. Apple pulled in just under $5 billion in revenue from Mac desktops and notebooks during the same quarter.

The people scooping up iPads are not just gadget hounds and consumers with expendable income. Buyers include large corporations who are handing them out to employees to help them do their job, something Apple has been actively pushing for a while. But Apple is also getting a boost in iPad sales even from sources the company didn’t anticipate.

“We sold more iPads to K–12 [schools] than we did Macs, which is absolutely shocking,” said Apple COO Tim Cook on a conference call with analysts on Tuesday. “We never would have predicted that.”

Shocking, perhaps. But probably not unwelcome. Apple very likely doesn’t mind getting kids used to working on iPads in elementary school.

9.25 million. That’s how many iPads Apple sold during the quarter. That blows away what Apple sold a year ago, just 3.3 million iPads, and is a 183 percent bump. So what’s changed in the past quarter? Apple’s obviously had more than a year to advertise the product and build a customer base. But an important step is that Apple’s gotten its iPad supply-chain act together. If you’ll recall the situation a year ago, the original iPad was extremely hard to find. Last year Apple didn’t catch up on the seemingly insatiable demand for the original iPad until later in the summer.

Apple admitted earlier this year that it couldn’t make iPad 2s fast enough to keep up with demand. Now Apple is still selling “every iPad 2 it makes,” but it also said it was able to make more iPads 2s during the most recent quarter than it did in the same period a year ago. So while demand is still ahead of supply (“Sales of the iPad 2 have been absolutely a frenzy,” said Cook), they’re getting closer to meeting it. Cook went as far as to say that in some markets they had actually caught up and were able to be in some sort of an equilibrium with demand and supply. He did not, however, expand on which markets.

14 percent. That’s actually not an iPad number. That’s how much Mac sales grew during this most recent quarter compared to the same quarter a year ago. While iPads are outgrowing Macs, they’re doing it without significantly affecting the Mac business.

Sure, Cook allowed, “we do believe that some customers chose to purchase an iPad instead of a new Mac during the quarter. But we also believe that even more customers purchased an iPad over a Windows PC. There’s a lot more of the PC business to cannibalize over the Mac.”

Apple has been banging the “post-PC” drum pretty hard since it introduced the iPad, and at least some of its tablet competitors are selling the tablet as a PC in a different form factor. Surging iPad sales in addition to steadily growing Mac sales could mean that Apple customers are buying into Apple’s view of the computing world, too.

222 million. That’s the total number of iOS-based devices that are floating around in people’s pockets, purses and briefcases: iPhones, iPads and iPod touches. That’s compared with 130 million Android devices that Google recently announced. While the iPhone has a three-year head start on the iPad, it’s clear that Apple’s tablet is pushing those numbers up.

$2.5 billion. That’s the money Apple paid back to developers whose apps sold through its store so far. That, along with the previous iOS device tally, are meant to be siren calls for developers.

The number of iOS devices represents the continued viability of the iPhone as a platform for selling apps and the growth of the iPad. These are numbers Apple likes to remind app makers of regularly. It’s a strategy to remind those who are or might be attracted to the growing number of Android gadgets floating around that not only is iOS continuing to grow, it’s also good for business.

Photo courtesy of Flickr user William Hook

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By the numbers: Apple’s third quarter 2011 earnings & revenues

Om Malik — Tue, 19 Jul 2011 20:51:00 +0000

Apple just reported the results for its fiscal third quarter 2011 that ended on June 25, 2011. It was a blow out quarter led primarily by the booming demand for iPhones and iPads, though Mac computers were no slouches either.

Revenue of $28.57 billion vs $15.70 billion (Q3 2010)
Net profit of $7.31 billion vs $3.25 billion (Q3 2010)
Earnings per share of $7.79 per diluted share vs $3.51 per diluted share
Gross margin was 41.7 % vs 39.1% (Q3 2010)

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

Sold 20.34 million iPhones up 142% in unit terms over the year-ago quarter.
Sold 9.25 million iPads during the quarter, a 183% unit increase over the year-ago quarter.
Sold 3.95 million Macs during the quarter, a 14% unit increase over the year-ago quarter.
Sold 7.54 million iPods, a 20% unit decline from the year-ago quarter.

“Looking ahead to the fourth fiscal quarter of 2011, we expect revenue of about $25 billion and we expect diluted earnings per share of about $5.50.” Peter Oppenheimer, Apple’s CFO.

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Motorola Only the Latest of Apple’s Many Legal Woes

Darrell Etherington — Wed, 06 Oct 2010 20:10:36 +0000

Today, Motorola filed suit regarding three complaints against Apple over patent infringements. The complaints deal with antenna design and other associated smartphone technologies covered in 18 patents held by Motorola. According to Kirk Daily (via CNNMoney), Motorola Mobility’s corporate VP of intellecual property, legal action was a last resort taken after licensing negotiations with Apple broke down.

But that’s hardly the end of Apple’s legal problems. The company was slapped with $625 million in legal penalties this week for infringing on three patents, at a rate of $208 million per infraction. Obviously, Apple’s already challenged the verdict, as would any corporation, but the ruling is blood in the water for Cupertino’s foes.

The case was brought by Mirror Worlds, and presents a legitimate case, not just the usual patent trolling fare. Mirror Worlds, a company founded by Yale computer science professor David Gelernter, claimed it held patents infringed upon by Apple through its Time Machine and Cover Flow features, among others. Mirror Worlds held patents regarding automated backups and flipping through digital album covers that are remarkably similar to the tech used in today’s Macs and iOS devices.

The verdict was rendered by jury in a Texas district court, and would represent one of the largest ever awards in patent suit history in the U.S., if upheld. Even a $625 million pay out won’t really dent Apple’s $40 billion on hand, but that’s not where the real hurt lies.

Apple is currently embroiled in a large number of legal disputes over patents. Here’s a list of some of the more high-profile cases:

Microsoft co-founder Paul Allen’s company Interval Licensing filed suit against Apple, along with Google, Facebook, Yahoo and others in August for infringing on a number of patents relating to fundamental web technology developed in the early 90s.
Kodak accused Apple in January of this year of using on of its digital imaging patents regarding previews in the iPhone, along with smartphone rival RIM. Apple is also singled out for two more infringement suits from the camera pioneer, including one regarding the ability to process images of differing resolutions.
Apple, along with Google and others, is named in a suit brought by NTP, a patent holding firm, in June 2010. The suit concerns patents held by NTP about wireless email delivery, and an earlier suit against RIM resulted in a $612 million settlement.
Perhaps the most highly publicized, Nokia is suing Apple over 10 patents it owns regarding wireless handset technology. The suit came after negotiations regarding licensing fees with Apple broke down. Apple is countersuing over 13 of its own patents.
Tune Hunter named Apple along with a whole slew of others in its 2009 suit regarding music recognition tech. Tune Hunter holds a patent for a music identification and purchasing system that is says resembles far too closely the tech in use by Shazam.

This isn’t an exhaustive list, but it’s representative of the kind of heat Apple’s been facing since becoming a top dog in the tech realm. Now that one of these efforts has hit paydirt, it’s unlikely the tide will be stemmed anytime soon. The smell of money is a heady intoxicant.

As unseemly as it might be, Apple has the right idea with its countersuit of Nokia. The only way to deal with this kind of issue is to defend your patents vigorously, or face losing the farm. While things definitely won’t get better in the near future for Apple as its star continues to rise, whether or not this latest verdict is upheld will determine if things get much worse, and possibly begin to have an impact on the company’s ability to do business.

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A Safari User’s Switch to Chrome

Alex Layne — Fri, 24 Sep 2010 22:00:02 +0000

I’ve used Safari as my default browser since 2008, but lately I’ve decided to give Google Chrome a shot at becoming my new standby. The main reason I chose to give Chrome a chance was that one of the sites I use every day loads like molasses in Safari, yet loads quickly in Chrome.

Since I know some of you are going to mention Firefox, I’ll tell you right now that I’ve ruled it out. It just doesn’t feel right to me. I’ll use Firefox on Windows, but on a Mac it’s just… weird. Feel free to disagree in the comments.

Interface

I suppose Chrome has an attractive interface, but I do think it looks better on Windows, partly because it feels designed for it rather than OS X (look at Chrome’s bookmarks manager and you’ll see what I mean). It just looks better with Aero.

Some aspects of Chrome’s tabs implementation annoy me. Mostly, I’m pretty happy with them, but there are two drawbacks. One being that, because the tabs take up the title bar, there’s less room to drag the window. This isn’t a problem for people who maximize their browser windows, but I like to keep my windows a certain size and I move them around a lot, since I’m always dragging images onto my desktop.

Another side effect of having the tabs in the title bar means that Chrome’s title bar doesn’t really function like one; you never actually see the full title of a web page unless it fits within the tab, which seems like a small complaint, but it’s still annoying.

Features

There were several features I missed from Safari when I switched to Chrome. Probably the one I missed most was Safari’s Reader view, which lets you reformat a long passage of text in an attractive drop-down that cuts out the clutter.

Fortunately, there’s an extension for Chrome that mimics Reader, and actually surpasses it in some ways. The extension’s called iReader and is available in the Chrome extensions gallery. When you hit the arrow keys to scroll through something in Reader for Safari, the cursor doesn’t disappear like it does in normal web pages, but it does in the iReader extension, which is less distracting for me.

Speaking of extensions, there aren’t any extensions I’ve come across for Chrome that aren’t available for Safari, or that I absolutely can’t live without. The opposite isn’t true. In fact, one of the unofficial Safari extensions that I love, ClickToFlash, isn’t available for Chrome, and it looks like that’ll be the case for some time.

Performance

It’s almost a crapshoot here. I can tell you that using Chrome feels faster than using Safari, but only a little. They both use the same rendering engine, WebKit, but they use different JavaScript engines, and from what I’ve learned about both Safari’s Nitro and Chrome’s V8, V8 is superior, but the difference in speed is also small.

On the interface performance side, I’ve noticed that when I have about six tabs open in Chrome, dragging the tabs around gets laggy. I don’t experience this lag with Safari, which I think has the best implementation of tab-dragging in any browser.

Bugs

I can generally say that I’ve experienced more bugs in Chrome than I have in Safari. For instance, in Chrome, almost every time I go back to a Google search result from, say, a Wikipedia page, the page doesn’t display and I’m left with the cute little dead tab face, then I have to re-enter the search in Google. It’s almost a deal-breaker for me.

There are other bugs, of course, but none that are as annoying or pervasive as the above.

Security

Chrome wins here, bar none. Safari is notorious for being a vector of vulnerability attacks, having famously been hacked in just 10 seconds at the annual Pwn2Own contest in 2009, while Chrome was the only browser that wasn’t hacked. However, security isn’t enough to make me switch to Chrome, as there’s very little chance I’d get a virus anyway, since there aren’t many viruses developed for the Mac and I’m a pretty safe surfer.

Will I stay with Chrome?

After using Chrome for a couple of weeks and getting accustomed to all its quirks on the Mac, I’ve decided to switch back to Safari. There just isn’t enough reason for me to stick with Chrome, and the Google search bug mentioned above is a huge annoyance, one that outweighs the poor performance of Safari on the one page that had me considering a switch to begin with.

Did I make the right choice? How’s your experience with Chrome been?

Apple 10-K: Rise of the iPhone

Charles Jade — Thu, 29 Oct 2009 14:58:17 +0000

Apple has released its Form 10-K (PDF) for the fiscal year 2009, the annual report providing a summary of the company’s performance. A number of interesting details can be found within the long and tedious document, but the biggest news is the increasing importance of the iPhone to Apple’s bottom line.

Apple sold 20.7 million iPhones in the fiscal year, $6.75 billion in net sales, which includes accessories and carrier agreement revenue. Comparing that with just $123 million in 2007 shows just how important the iPhone is to Apple. The iPhone now accounts for about 18 percent of Apple’s sales revenue, but that’s using subscription accounting to spread the revenue over 24 months. Using non-GAAP numbers, the Mac and the iPhone now each account for about a third of Apple’s net sales.

As for the Mac, during the fiscal year Apple sold 10,396,000 computers, a new base-ten record, while the iPod continues to sell around 54 million units a year. However, unlike the iPhone, both the Mac and the iPod apparently have been affected by the recession. Of the other product categories, the iTunes Store, or “other music and product related services,” and software continue to show steady growth.

Browsing the rest of the Form 10-K, a few other points of interest for fiscal year 2009 include:

Net sales were $36.5 billion for the fiscal year, $5.7 billion in net income, bringing Apple’s cash on hand to $34 billion.
Apple has 34,300 full-time employees.
R&D has grown from $782 million in 2007 to $1.3 billion in 2009.
Apple spent half a billion dollars on ads, up slightly from the previous year.
Regarding the patent lawsuit with Nokia, Apple “intends to defend the case vigorously.”
An investment of $100 in AAPL in 2004 would be worth $957 today.
The Americas account for 44 percent of net sales.
Unit sales of Macs were up 40 percent in Europe.
The total number of Apple Stores was 273, up from 247 and 197 for the previous two years.

2009 was an amazing year for Apple by pretty much any metric. However, the introduction of the iPhone in China and possible end of carrier exclusivity in the U.S., the addition of a tablet product, and continued growth in Mac sales all suggest 2010 will be even better.

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Apple Conference Call: Maybe, Just Maybe Cheaper Macs

Charles Jade — Mon, 19 Oct 2009 23:34:36 +0000

Capping the most profitable quarter ever with the most Macs sold in a quarter, the conference call to discuss Apple’s fourth fiscal quarter for 2009 may have been the most boring ever, too. However, distilling the tedium into bullet points is more interesting.

iPhone

Total sales for the year were 21 million, up 78 percent, average selling price around $600. There are more than 85,000 apps in the App Store, 2 billion downloads, 500 million in the last quarter.
The iPhone 3GS, available in 64 countries last quarter, will match the iPhone 3G with availability in 80 countries by year’s end.
China gets the iPhone on October 30 with approximately 1,000 points of sale to begin with. Plans will range from the equivalent of $18 to $85 per month, the phone being free at the higher end.
Korea will be getting the iPhone soon, and there will be multiple carriers in Canada and the UK.
The iPhone 3GS shortage over the summer may have been the result of sales exceeding Apple’s expectations. Changing the inventory mix between the 3G and the 3GS may have caused component issues, but those were solved as of early October.
According to Apple, “people are trying to catch up with first iPhone,” so apparently no worries about Droid, Storm2, and the Pre.
In some instances, the benefit of exclusive carrier agreements allows for greater levels of innovation, like visual voicemail, and in some cases exclusive carriers “invest more.” Apple execs must be using jailbroken phones on carriers besides AT&T.

Mac

3.05 million Macs sold, up 440,000 YOY. For 19 out of the last 20 quarters, the Mac grew faster than the rest of the market. For the quarter, 74 percent of Macs sold were portables, up 35 percent YOY — wow.
Snow Leopard has twice the upgrade rate of Leopard over its first five weeks. In response to a comment about the lower price working for Snow Leopard, the reply was, “yes, it did.”
The Back-to-School promotion was the strongest ever for the Mac.
Due to demand for the new portables last quarter and Snow Leopard being launched, it wasn’t quite hinted that sales of Macs might be down for the holiday quarter.

iPod

The iPod controls over 70 percent of the media player market, and is gaining YOY in every country tracked.
50 percent of buyers are purchasing their first iPod.
iPod touch sales were up 100 percent YOY — again, wow.

Finally, there were two interesting comments, the first being about the Apple Stores and Mac sales. For the first time I can recall, an Apple executive did not say “half or more than half” of Mac buyers were new to the platform. This time it was “about half.” Interpret freely.

Besides that, the most interesting comment came regarding expected margin declines. The rationale included the seasonality of greater iPod sales, fewer Snow Leopard sales than the previous quarter, higher component and other expenses, and this quote:

For the new products we have and will announce, we are delivering greater value to our customers, and these products have lower gross margins than their predecessors.

That would be in keeping with rumors about price reductions on some Macs, including the Mac mini. Start refreshing your browser window on the Apple Store tomorrow, early.

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What to Expect From Apple’s Quarterly Report on Tuesday

Charles Jade — Fri, 17 Jul 2009 18:28:19 +0000

The conference call date for Apple’s latest quarterly numbers was finally announced this week as being at Tuesday at 2:00 p.m. PDT. The biggest question isn’t about profit or sales, however, but who will be doing the speaking: Could it be Steve Jobs?

Jobs was last heard on an Apple conference call in October 2008. While no reason was given for his presence then, it could be argued that his participation was designed to assuage concerns about his health. In January, Jobs took a leave of absence to deal with those health issues, and was later revealed to have undergone a liver transplant. Since returning to work at Apple in June, his highest-profile appearance has been as a spectator at a concert. Even if Jobs is not at the call, expect analysts to ask about his health. But that won’t be the only topic discussed.

In terms of revenue and profit, the consensus is around $1.15 EPS on revenue of around $8 billion. As Apple has a history of setting the bar low on guidance, expect the company to beat that.
Mac sales estimates are all over the place. IDC and Gartner have Mac sales down and flat, respectively. Individual analysts are projecting numbers from just over 2 million to as high as 2.5 million. Estimates have been trending up based on higher than expected sales of the new 13″ MacBook Pro. For the same period last year, Apple sold 2.496 million Macs.
iPod sales are thought to be in the range of 11 million units sold, same as last year. However, the iPod touch has been doing increasingly well for Apple, selling approximately the same number of units as the iPhone in recent quarters.
iPhone sales will likely be down or flat from the previous quarter, which saw nearly 3.8 million sold, the reason being anticipation of the iPhone 3GS. Sales of the original iPhone dropped by more than half in the quarter immediately before the release of the iPhone 3G.

Since the iPhone 3GS went on sale during the current quarter, Apple may comment on sales beyond the first weekend of one million units sold, but probably not. Don’t expect the company to be forthcoming about the rumored tablet for October, either, though there will no doubt be pejorative remarks about netbooks. As always, what is said, and who says it, will be reported by TheAppleBlog.

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Reading Between the Lines: Some Takeaways From Apple’s Q1 2009 Conference Call

Darrell Etherington — Thu, 22 Jan 2009 18:00:14 +0000

Apple’s quarterly earnings call is primarily a retrospective affair. They report their numbers for the previous quarter, discuss strengths and weaknesses (and what made them strengths and weaknesses), and spend a little bit of time talking about how they plan on continuing and repeating success next time out. In the end, the only clear message they present is that they’ll keep doing what’s working, and improve on what isn’t. At the same time, they’re dropping hints about the future. Here are some of those hints, and what I think they mean.

We Love the $199 Price Point

On the subject of iPhone pricing, Tim Cook, Apple COO standing in as CEO while Jobs is recuperating, made clear that their $399 and $199 price points were working well for the company. Quite specifically, he emphasized the company’s love for the $199 price point, which is clearly leading to high sales numbers. Interestingly, he didn’t talk about storage size, just pricing.

We could see a pricing move based on strong sales and a shrinking consumer smartphone market that may result in a $199 price point for the 16GB iPhone to stimulate sales. Whether this also leads to a lower cost 8GB phone or a 32GB model, I can’t guess, but we will mostly likely see a pricing change when sales start to dip.

We Have Some Ideas, But Right Now We Think Those Products Are Inferior

The netbook saga/flirtation/denial continues. They’re spot on about the hardware deficiencies when they point out that the keyboards on these devices are still too small, and about the software not being well-tailored to the platform as of yet. Which shows that they’re thinking much more deeply about those issues than the offhand remarks would seem to suggest.

Make no mistake, Apple is developing a device for this space. And they’ve targeted the specific issues their competitors have so far failed to address, which means they probably intend to come to the market late but with a superior product. This could be the reason they sought to separate “OS X” from the “Mac” moniker, if they’re preparing a version of the OS specifically designed to run on netbook hardware.

We Feel Extremely Good About Our Product Pipeline

This comment was made in reference to their projections about iPhone seasonality. They also made a followup comment noting that Apple has fear in terms of the danger of the economy affecting smartphone adoption, considering the higher monthly rates that come with them.

References to the product pipeline in this context are extremely tantalizing. What does Apple have in its pocket to offset the threat of smartphone contract prices? Two possibilities come to mind. Either they think that upcoming iPhone iterations will be impressive enough to attract consumers anyway, or they’re planning on moving away from the smartphone market to take advantage of lower contract costs. In either case, references to product pipelines should not be taken lightly.

That’s my take on some of the more salient points of the Q1 conference call, the content of which I reviewed thanks to CNNMoney’s transcript of their live blog of the event. You may think some of my predictions are reaching or far-fetched, but they all come from an analysis of the context within which the statements were made. Whether you agree with me or not, share you own interpretations below.

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Examining the Battery/AC Performance Gap on MacBooks and MacBook Pros

Darrell Etherington — Tue, 25 Nov 2008 19:00:57 +0000

Back in the dark ages, when I used to have a Toshiba laptop, I would always remove the battery when running off of AC power, out of what may have been misguided superstition. I was told, and I fervently believed, that doing so would extend the life of my battery considerably by reducing the total number of cycles. When I got a MacBook, I just stopped the curious practice cold turkey. I didn’t have a reason for it at the time, but it looks like I was right to do so, as users are reporting significant drops in performance on Apple notebooks with the battery removed.

This issue is getting a lot of virtual ink around the blogosphere. Most of the scuttlebutt is actually misleading, too. ZDnet blogs, the Apple Gazette, and TrustedReviews all feature articles that reference the problem as affecting new model MacBooks and MacBook Pros, which is true, but only tells half the story. In fact, the issue is not limited to the aluminum and glass model machines. Gearlog, who ran the tests, doesn’t mention any limit to the models affected, and the Apple Support article officially noting and explaining the issue is actually dated from before the release of the new notebooks, so it must reference previous models as well.

Gearlog’s tests, which put hard numbers on the problem, are indeed conducted with a late-2008 model 2.53Ghz MacBook Pro with 4GB of RAM on board. In their test, which used Cinebench R10 benchmarking software to gather results, processor performance experienced a 37 percent drop running off of AC power with the battery removed, as opposed to with the battery in. A Gearlog reader ran the same test on his white 2.4Ghz Core 2 Duo MacBook and noticed a 50% drop without the battery inserted.

Apple’s official position, according to the support article, is that the processor speed is automatically reduced to prevent the computer from automatically shutting down if it wants more power than the AC adapter provides on its own.

The measure seems designed with the safety of laptop owners’ data in mind, and is probably not a bad thing, in the end. Some commenters, however, feel the move might be an intentional ploy to speed up the rate at which MacBook batteries reach end-of-life, thus requiring replacement. The bottom line is, should you be planning on undertaking processor-intensive activities, best leave the battery in.

What do you think? Do you run your MacBook without the battery? Does this constitute a minor annoyance, a major grievance, or will it have no affect on your computing habits at all? Do you think its possible that Apple is purposely shortening battery lifespans to increase replacement sales?

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Apple’s Quarterly Earnings Call Summary

David Appleyard — Wed, 22 Oct 2008 15:00:28 +0000

Apple announced their quarterly earnings report yesterday, including some great news surrounding iPhone and Mac sales. Steve Jobs also made an appearance on the earnings call — a rare occurrence for this type of event. Much of the financial news was centered around the screaming success of the iPhone this year. Apple’s summary of the quarter is as follows:

For its fiscal 2008 fourth quarter, Apple today posted revenue of $7.9 billion and net quarterly profit of $1.14 billion, or $1.26 per diluted share. Gross margin was 34.7%. In one of the best quarters in its history, Apple shipped 2.6 million Macintosh computers (an all-time high), 11 million iPods, and 6.9 million iPhones.

iPhone

This (financial) quarter, Apple announced sales of 6.9 million iPhones — a huge jump from a total of 6.1 million sales in the previous five quarters. This can be put down to the worldwide launch of the product, huge increase in availability, and customers upgrading to the latest 3G model. This successful quarter means that Apple has already beaten the aim of selling 10 million iPhones in 2008, even before the start of the holiday season — their busiest period of the year.

Taken from another angle, Apple is now selling more devices than RIM (the makers of BlackBerry). They sold 6.1 million, a full 700,000 fewer phones than Apple in the previous quarter. When compared by revenue, Apple is the third-largest mobile phone supplier in the world, behind only Nokia and Samsung. Considering the iPhone only launched around 15 months ago, this is a significant achievement.

In a series of post-call questions, Steve Jobs highlighted that Apple has 5,500 apps in the iPhone App Store, and that Apple should sell its 200 millionth app tomorrow. He stated that the speed of adoption was “unlike anything we’ve seen in our careers.”

Mac

While much of the talk was surrounding iPhone, Mac sales have also had a fantastic quarter. Sales are up 21 percent over a year ago to 2.6 million — more than any other previous quarter. Consider this was in a period with no new major Mac introductions, it would be logical to expect the revamped notebook lineup and holiday season will guarantee another record breaking quarter to come.

Netbooks

When questioned about the possibility and suitability of producing a Netbook, Steve shared his feeling that the iPhone could be considered an entrant into the netbook market, since it can browse the web. This, to me, echoes back to Jobs explaining how online applications would be the best possible way to develop for iPhone — before promptly turning tail and announcing the SDK. It will remain to be seen whether Apple considers a similar turn around of opinion in this developing market, as they do apparently have “some interesting ideas there if it does evolve.”

When pressed further, Jobs clarified that “We don’t know how to make a $500 machine that’s not a piece of junk, and our DNA won’t let us do it.” Not even with your new manufacturing process, ever shrinking components and your patented multi-touch technology that’s aching to be used in something more than the iPhone? We’ll see…

Economic Perspective

Obviously, the outcome of these results were always going to be used as an indicator of how Apple is weathering the first stages of an economic downturn. It would seem that initial impressions are good, though the real test will come in the long term. When challenged about the financial turbulence, Steve remarked:

I wouldn’t trade our customers for any other company’s customers in the entire world. They are some of the smartest, most product aware customers in the market and they have chosen Apple’s quality, hardware and software products. While they may postpone purchases in tough times, they are unlikely to abandon the quality and seamless integration which they have personally experienced and become accustomed to with Apple’s products.

We don’t yet know how this economic downturn will affect Apple. But we’re armed with the strongest product line in our history, the most talented employees and the best customers in our industry. And $25 billion of cash safely in the bank with zero debt. This downturn may also present some extraordinary opportunities for companies that have the cash to take advantage of them, like Apple does.

It would seem that Apple is set for another great quarter over the holiday period, in a very strong position to keep their head above the water through the difficult times ahead.

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