Earnings: Apple Reports Strong Holiday Quarter; Record Revenue Of $7 Billion, Profit Of $1 Billion

The headline has been corrected to reflect the accurate amount of revenue and profit. Updated to include earnings call. Apple turned in strong numbers for the quarter ending Dec. 30: record profit of $1 billion or $1.14 earnings per diluted share, on record quarterly revenue of $7.1 billion, compared to $565 million, or $0.65 per diluted share, in the same quarter last year. I’m still listening to the call but here are some highlights:
— Music products accounted for 57 percent of total revenue compared to 59 percent year over year.
— iTunes and other music revenue was up 29 percent year over year and 40 percent sequentially. The heavy sale of gift cards boosted those numbers.
— Apple shipped 21 million iPods during the quarter, up 50 percent. International sales are a major contributor, with market-share gains in every country where Apple has a retail presence. No answer when an analyst asked if Apple knew how many people were buying iPods for the first time.
— The gross margin of 31.2 percent was up from 27.2 percent last year.
— International sales made up 42 percent of the revenue. The biggest disappointment in that regard is Japan, where overall revenue is down 20 percent year over year in a weak marketplace.
iPhone: While the company and others hype the iPhone in other venues, execs tried to walk a careful line between projecting greatness and managing expectations during the earnings call. Steve Jobs appears at Macworld and in earnings press release but not on earnings calls, where CFO Peter Oppenheimer and COO Tim Cook answer analysts’ questions — or not, as the case may be. The emphasis was on the latter during Wednesday’s call, with suggestions at various times that more information on iPhone might be forthcoming in the April call closer to the product’s launch. One analyst tried to find out if downloads of software would be allowed or available but didn’t get anywhere. Ditto for people trying to figure out the gross margins.
— The subject of iPhones being sold in Apple retail stores came up more than once as in “come June, they’ll sell a lot of iPhones.” (I do not even want to imagine what my compact “neighborhood” store in the St. Louis Galleria will be like then.) I don’t think anyone asked how they would handle the training for phone sales.
Cisco iPhone lawsuit: They’re sticking with the characterization of the suit as “silly” and the U.S. trademark registration as “tenuous at best.” “We are the first company to ever use the iPhone name for a cellphone and if Cisco wants to challenge us, we are comfortable we will prevail.”
Apple TV: When an analyst asked if Apple TV, the best-selling product on the online store now, might be considered a niche product like Airport Express or a broader platform, Cook replied: “If you’re asking from a demand point of view, I think we’ll see as we move forward; it’s really too early to tell. From a how we’re positioning the product, as Steve indicated in his keynote, we see this as the DVD player of the 21st century. It is clearly not a niche.”
— Apple TV will be folded into “other music related products and services” for purposes of financial reporting. (I thought it might wind up in peripherals and other hardware.)
Earnings release | Webcast | Data Summary | Financials

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