Apple Q2: Few lemons, still plenty of lemonade

Apple Q2: Few lemons, still plenty of lemonade

Summary: Move over, doom and gloom. Apple beat analyst expectations for its second-quarter earnings, despite not announcing or releasing anything during the three-month period. But the third quarter, with announcements on deck, is what will show real stagnation — if any.

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TOPICS: Apple, iOS, iPhone, iPad
39

Apple didn't release or announce a thing for three months, but it still beat expectations in its second-quarter earnings.

tim-cook-thoughtful-620
Apple CEO Tim Cook
(Image: CNET)

Apple's second quarter was not expected to shine. Why? Nothing happened. In spite of this, Apple put its entire range of products on hold while it was readying its next generation of software and hardware products.

That risky bet paid off. The company's second quarter ending March 31 didn't disappoint — and that's accounting for the fact that the second quarter had one week less than its other quarters. And yet, Apple still beat Wall Street estimates. (ZDNet's Rachel King has more on today's numbers).

Though Apple has very few lemons in its hands, it's still churning out batch after batch of lemonade.

While February and March could have been the time when Apple announced at least two major products for the desktop and mobile like it did last year, the company didn't announce a thing. No new iPad, no new iPhone, no new mobile or desktop software, and still nothing on the long-awaited Apple iTV or iWatch.

Its various business divisions, separated handily by product, only saw losses in its iPod and Mac business, which is no surprise, considering the state of the PC market and the continued cannibalization of the Mac as a result of the iPad's popularity.

The only place where Apple fell down was its gross margin figure, estimated to be between 37.5 percent and 38.5 percent. The company reported a 37.5 percent margin compared to 47.4 percent on the same quarter a year ago. While this is likely due to the lower margin for the iPad mini, slowing sales in its Mac division are hardly helping this crucial number.

For Apple, its profit isn't a problem. Its revenue isn't something to be concerned about. Its sales may slow over time, depending on the fiscal quarter and the timeline of its releases. But above all, the company's profit margin needs to keep in check.

While sales figures for the second quarter were far from record breaking — which was expected, seeing as sales are generally slower following the post-December holiday quarter — the company did well in iPhone and iPad sales, the firm's two largest business divisions.

Here's what it looks like:

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ipad-q2
(Images: Adrian Kingsley Hughes/ZDNet)

The company can effectively take a back seat on producing anything public for three months, and only suffer at the hands of subjective and often very varied analysts' expectations. The maker of shiny rectangles has put its various business divisions out to pasture for the last quarter while it focuses on getting the next product ready — and right.

With the technology giant keeping mum on its next-generation range of products, it's no wonder analysts were expecting the company to see its first profit dip in 10 years.

But in that 10 years, it's worth pointing out a few things. Enter ZDNet's Larry Dignan, from this morning:

Apple is doing the rational thing: Milking its existing products as it plots out its product road map. Keep in mind that the iPod launched in 2001, iTunes in 2003, iPhone in 2007, and the iPad in 2010. In other words, Apple is due for a new product line, but not way overdue.

It's expected that June, when Apple typically holds its Worldwide Developers Conference (WWDC), is when we will see a steady stream of products — first off, iOS 7, and then OS X 10.9 to follow. With a new iPhone and iPad on deck for later this year, we can expect something significantly new to roll off the company's production lines in 2014, based on this timeline.

While Apple's second quarter was effectively stagnant and holding the fort, the third quarter is the one that is really going to show if there's any real indication of trouble.

Topics: Apple, iOS, iPhone, iPad

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39 comments
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  • For Apple, it is about the iPad right now.

    The iPad is a HUGE business and is the growth engine of the company right now and not the iPhone. The smartphone market is in late Majority to Laggard stage for the majority of Apple's market so it will start to enter a solid maintenance phase. The iPad, however, is still in the Early Adopters to Early Majority with about 2 years of solid growth left in it. That means it is close to having to need another product something to maintain crazy growth.

    So far, Apple has been able to grow the revenue of the iPad in 3 years to about the same size of all of Google. This business is still growing at 50-60% YoY. Massive growth in the tablet market.
    Bruizer
  • How are sales of PCs and Microsoft laplets doing, toddy?

    You'll notice that iPad sales are trending up. Just thought I'd mention that.
    Userama
    • So are MS Tablets/Ultra Portables...

      The same slump in MS PC sales has impacted Apples PC sales as well (iMac, MacBook, etc.). But the ultra portables/tablets have increased for MS as well.

      Your argument fails deliver.
      spaulagain2
      • Really?

        Just how many Surfaces did Microsoft well for the quarter year over year? Right. None. So to say a product that was just released is trending up is a very shallow statement.

        Look, I hope that Microsoft Surface whatever's do succeed. There needs to be competition out there.

        As to @Userama's dig at @toddbottom3, he is on target. That guy is hopefully getting paid for his drivel. I used to say that Microsoft paid him. However, his posts are so transparent and inflammatory that now I think that ZD pays him to troll just to get clicks.
        JScottA44
  • Can't compare MS Apple, ToddBottom,

    One owns the tablet market, number one selling phone, and biggest digital media store. The sales of Microsofts attempts at phone and tablet sales are a rounding error.

    I laugh every night at Surface commercials, or shows where they show a whole office of people using them. MS wants you to think their products actually exist in the real world! I've never, ever seen a Zune, kin, or surface anywhere!
    ShazAmerica
    • Actually

      The surface is doing really well at companies where people dance in their offices and boardrooms.
      rfoto
      • this explains it

        We just don't have enough place for dancing in the office.
        danbi
      • LOL

        Those commercials are a laugh fest - showing people doing nothing but clicking their keyboards to their displays and dancing. I bet productivity at those offices is through the roof. I also like that they only show twenty-somethings using them. I thought Surface was supposed to be corporate-oriented. As far as I know, few corporations are run completely by twenty-something trained dancers.

        I wonder if they're ever going to show the Surface actually doing something useful. Apple had the right idea with their iPad commercials. Show people what they can do with the device. The myriad apps and add-on hardware are what really sells iPads.
        BillDem
    • I have 2 two Zunes

      I have 2 Zunes a Windows Phone , Xbos 360 and 5 PCs with two running Windows 8. I'll be picking up a Windows 8 tablet soon.
      Nothing but a great experience with all of the prodcuts.
      jatbains
    • We laugh at you. You can't compare Apple to MS, ShazAmerica

      One owns the desktop market, number one selling Server, and biggest digital development tools. The sales of Apple attempts at servers and TV media device sales are a rounding error.

      I've never, ever seen a kin myself, but then again, I've seen the others because I don't walk around with your blinders on.
      William Farrel
      • biggest digital development tools?

        Are you talking about that Expression suite? Or Silverlight? you may be laughing but for this guy who spend 2 years on SL is not funny at all...
        SO I'm all curiosity for those BIGGEST digital development tools...
        theo_durcan
        • Didn't notice the word "digital" in there until after 'submit'

          "development tools"
          William Farrel
    • Actual reason

      Has anyone ever been to visit you in your basement? No? There's the real reason.
      Little Old Man
  • But we are constantly being told in this forum that Apple is doomed

    Huh. And huh again.
    Smalahove
    • yes, they are doomed

      Doomed for success.
      danbi
  • Really have to laugh.

    All the blogs that reported Apple had not met expectations. Bet they feel stupid now!
    NOmoreMicrosoftATall
    • Even if they hadn't

      It wouldn't have meant anything bad, beyond high expectations.
      Michael Alan Goff
  • I have no problems with Apple doing well

    Also any other company, as long as I can get good value for money.
    Again and again, I surprise how how happy Apple fanbois are so happy that their choice of hardware makes so much money out of THEM! High profits means high margins translated means you have paid more money for you product than you needed too. WOW!
    martin_js
    • I want any company whose products I own to do well

      as that ensures the products have a future. For me, I have both Apple and Microsoft gear. There's no reason they can't both make money, and no reason I should want them not to.
      Mac_PC_FenceSitter
      • Yes I know!

        It's important for business to make some money so they can continually improve and innovate (hopefully). But it needs to be a 2 way street, profit for profit's sake is greed and in the long run is NOT good for the end user! Just look at CEO's of most big company's, really who Needs 40, 50 or more millions of dollars in the bank. Society as a whole would be a lot better off if company's put a lot more of their profits back into the companies.

        Where would we be today if more profits were put into bettering tech and society as a whole instead of into only about 5% of the worlds population?
        None of them innovate as much as they could, always they hold stuff back until they make enough profits. Remember they main aim is to make a profit fro there investors, unless your an investor, WHY pay more than you have too?
        martin_js