Apple Makes Huge Quarterly Profit Despite 4G Fiasco
Propelled by sales of the iPhone and iPad, Apple earned $3.25 billion in profit on $15.7 billion in revenue, its highest quarterly revenue ever.
The company reported its fiscal third-quarter results on Tuesday. Its reported earnings for the quarter represent an 88 percent increase in revenue over the same quarter a year ago, when Apple recorded revenue of $8.34 billion.
The $15.7 billion figure is also on the high side of what Wall Street had been expecting: Analysts were anticipating between $13.82 billion and $15.74 billion in revenue, and earnings between $2.65 and $3.74 per share. Apple had offered a typically conservative forecast of third-quarter 2010 revenues between $13 billion and $13.4 billion, and earnings per share between $2.28 and $2.39.
Apple said it sold 3.27 million iPads during the quarter, the first quarter they were on sale. It also sold 3.47 million Macs, a 33 percent increase over a year ago, and 8.4 million iPhones, or 61 percent more than a year ago. iPod sales were down again--Apple sold 9.41 million during the third quarter, 8 percent fewer than a year ago.
"It was a phenomenal quarter that exceeded our expectations all around, including the most successful product launch in Apple's history, with iPhone 4," CEO Steve Jobs said in a statement.
The record-breaking earnings for Apple came at a fortuitous time, as Apple has been trying to shift the focus from the iPhone 4's antenna-related issues to the successful sales of the device.
Jobs also hinted that there would be more new devices in store between now and December, saying, "We have amazing new products still to come this year."
The iPad is off to a successful start: there are 3.2 million iPads in 10 countries, bringing in $2.17 billion in revenue both from iPads and related accessories, CFO Peter Oppenheimer said during the analyst call Tuesday afternoon. He declined to disclose how many 3G models versus Wi-Fi only models of the iPad the company has sold.
Apple is still experiencing very high demand for the iPad and the iPhone, according to COO Tim Cook.
"Both (the iPad) and the iPhone 4, we had backlogged at end of last quarter...We are selling both of those products as fast as we can make them. We are still quoting longer lead times than we'd like," he said. "In the scheme of things, it's a good problem to have."
iPhone 4 was only on sale for three days before the quarter ended on June 27. Apple announced at the time it had sold 1.7 million during that period. On Friday at a special press conference called to clear the air on iPhone 4's antenna problems, Jobs said Apple has sold 3 million iPhone 4s to date.
On Tuesday, Cook indicated that the company had not seen any drop-off in demand for the iPhone since news spread about potential problems with the device when held in a way that blocks its antenna.
"We're selling every unit we can make," he said.
He added that Apple is still ramping up production on the iPhone 4, and there's nothing preventing the company from eventually catching up to demand.
The 3.47 million Mac sales were Apple's highest ever for a quarter. The company's 33 percent growth indicates that the iPad is not noticeably cannibalizing Mac sales.
Cook said the issue of cannibalization is something Apple discusses internally but that so far, it has not seen it. "We've only been selling (the iPad) for three months, and I think the answer is, 'It's too early to tell.' If you look at this quarter, we reported our best Mac quarter...in same quarter we sold 3.3 million iPads," Cook said. "For us, it's a jaw-dropper."
International sales of all Apple products accounted for 52 percent of the quarterly revenue. The Mac did particularly well in Asia, according to Cook. Sales grew 73 percent in the Asia-Pacific region, 144 percent in China, and almost 100 percent in Hong Kong.
While iPod sales unit volume overall was down, the iPod Touch continued to do well, growing 48 percent and pushing iPod revenue up 4 percent for the quarter, Oppenheimer said. There are now 100 million iOS devices sold cumulatively, something Jobs had predicted at its Worldwide Developers Conference earlier in June.
Apple said it is forecasting $18 billion in revenue and earnings per share of $3.44 for its fourth fiscal quarter. That includes the charge Apple will take for offering free cases to iPhone 4 customers to prevent interference with the device's antenna.
Apple says it expects the offer to cost the company about $175 million during the next quarter.
Apple's stock was up 2.13 percent to $257.25 in after-hours trading on Tuesday.
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