Apple's Q3 disappoints; iPhone shipments light

Apple's Q3 disappoints; iPhone shipments light

Summary: Apple's third quarter was light relative to estimates and the outlook fell short too. Is Apple facing a slowing global economy or a big pause ahead of an iPhone 5?

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Apple's third quarter was a disappointment relative to expectations as the company issued a dividend.

The company said third quarter earnings were $8.8 billion, or $9.32 a share, on revenue on revenue of $35 billion.

Wall Street was expecting earnings of $10.37 a share on revenue of $37.2 billion.

Apple did declare a quarterly dividend of $2.65 a share, but that did little to satisfy investors. The big concern is that Apple is indicating an overall smartphone slowdown. Equally unclear is whether Apple is being hit by macroeconomic issues or a big wait ahead of the iPhone 5 launch. 

Related: Apple's Q3 earnings: The numbers to know

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The big issue for Apple is that consumers may be holding off on purchases even for the iPhone. To wit:

  • Apple said that the company sold 26 million iPhones in the third quarter. Piper Jaffray analyst Gene Munster said in a research note that he's more confident that Apple can ship 28 million to 29 million iPhone units in the quarter.
  • The company sold 17 million iPads during the quarter, up 84 percent from the year-ago quarter. Wedbush analyst Scott Sutherland estimated that Apple will ship 12.68 million iPads in the fiscal third quarter.
  • Apple sold 4 million Macs in the quarter and 6.8 million iPods.

Apple CFO Peter Oppenheimer made the following points about the global economy on the earnings conference call:

Sales of each of our products did exceed what we had had factored into the guidance. That was especially true of the iPad which set a new record at 17 million units. And the $35 billion of revenue that we reported grew by $6.5 billion year-over-year. We do think some things did impact us in the quarter, so let me comment on that. The economy in Europe is not doing well. We think this impacted our results. We also saw some economic impact in the natural resource based economies including Australia, Brazil and Canada. As Tim discussed, regarding the iPhone, we're reading the same rumors and speculation that you are about a new iPhone and we think this has caused some pause in customers purchasing. The timing of availability of Intel's ivy bridge and resulting rumors about the new portables impacted our sales in April and May. Tim talked about how after WDC we saw a large increase in sales, both in terms of weekly sales, before WDC, and on a year-over-year basis and customers are loving the new MacBook Pro. And we did not get the benefit of launching the new iPad in China or the new portables as we're pursuing routine regulatory approval. And finally, the dollar strengthened against most currencies around the world which reduced our revenue growth sequentially by over $200 million net of our hedges.

Oppenheimer added:

We sold 26 million iPhones compared to 20.3 million in the previous June quarter. That represents 28% year-over-year growth and was ahead of the amount we factored into our guidance following very strong sales in channel inventory build we achieved in the March quarter. We added several small regional carriers during the quarter and now have iPhone distribution to over 250 carriers in over 100 countries. We ended the quarter with about 8.3 million iPhones in channel inventory, a sequential decline of about 300,000 iPhones and we remain within our target range of 4 to 6 weeks of iPhone channel inventory.

  • Apple said it had its best quarter for education sales and expanded deployments in PepsiCo and other large enterprises.
  • China remains a strong market for Apple despite economic worries.

As for the outlook, Apple took its usual conservative tone. Apple projected fourth quarter earnings of $7.34 a share on revenue of $34 billion. Wall Street was looking for fourth quarter earnings of $10.23 a share on revenue of $38.02 billion. The wild card for the fourth quarter is the timing of an iPhone 5 launch.

In addition, it's worth noting that Apple topped its outlook for the third quarter. Wall Street historically pooh-poohed Apple's outlook as being overly conservative and upped its estimates. This time may be different.

What's going on with Apple?

The company saw slower sequential growth in key markets. Year-over-year sales were strong. Mac units, however, took their lumps globally. 

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Topics: Apple, Hardware, iPhone, iPad, Smartphones, Tech Industry

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126 comments
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  • Maybe

    it's because they have pushed everyone over the "hate line" towards them.
    timspublic1@...
    • There MAY be a grain of truth to what you say

      but more than likely it's because of the impending release of iPhone 5.
      athynz
      • Maybe samsung

        With it's S3 ?
        tzihlmann@...
        • Not maybe, but definitely it has something to do with the economy

          Americas +25%, Europe -10%, et cetera.

          But SG, including SGS3, of course has to do with this, too. As I was already writing here, Samsung basically says "Here! Here! Here is ours iPhone, but only cheaper". This concerns to cheaper SG smartphones in aspects of design, package and UI of OS, and package and UI of OS for higher end devices such as SGS3 (Samsung smartly drifted away from Apple's design in those devices; only cheaper mass market SG smartphones still "copy" Apple's design).
          DDERSSS
          • SGS3 > 4S

            Don't know about you, but where I live the SGS3 costs more than an iphone 4S.
            warboat
          • here its the same price

            Most vendors have it for teh same price, a few are cheaper and a fwe are more expensive, but I forsee them selling alot of those phones. Iphones really cant compare anymore...
            Jimster480
          • Top end Android phones

            aren't cheaper.
            Michael Alan Goff
          • SGS3 is just small part of Samsung smartphone sales

            @warboat: the likes of Galaxy Y or Galaxy Wave sell much more.
            DDERSSS
          • Galaxy S3

            The galaxy s3 is the first phone from samsung or any phone manufacturer that is being promoted at levels even close to that done by Apple with its iphone.
            In fact, S3 promo levels in Australia exceeds iphone promos. You go to any phone store here and the S3 promotion is dominating. iphone 4S is just another phone now, the S3 is THE phone to get. Any they are buying! Most of the premium phone users I know either have the S3 or intend on getting one when their contract is up. The others that don't consider the S3, don't even consider an iphone anyway so the argument regarding low end android affecting iphone sales is not relevant.
            The S3 will be Samsung's best selling phone....ever.....easily.....
            warboat
      • iPhone 5 and some saturation

        would be my guess.

        They have a pretty heady market share lead on the high end of the phone market already and may be running into saturation issues in the present economy. ie everyone that was jumping on the iphone bandwagon may be there already. That kind of growth isn't sustainable forever.

        They will still sell loads of phones, but it might start being more cyclical. They sell a truckload after a refresh and it trickles down quickly after the first few months.
        SlithyTove
      • Nine Months Prior to iPhone 5 Release? ha.....

        You people just don't get it. In the 1st Quarter, before we had the firm results from Samsung, everyone was touting Apple's Biggest 1st Quarter ever. The only problem was that Samsung's was a whole lot bigger!

        Take the 45 Million Smartphones (they thrashed Apple's iPhone sales) they sold in the Quarter and combine it with what they are about to announce for the 2nd Quarter. Which is projected to be well over 50 Million and that's not counting much GSIII sales.

        Next Quarter has always been Apple's worst season when no product is announced until October. So what do you think Samsung's Smartphone sales will be going by this knowledge and the fact that the GSIII is just getting started? Well reasonable estimates have it selling a iPhone 4s Whopping over 60 Million Smartphones reported for the 3rd Quarter. Do you actually think everyone doesn't see the writing on the Wall?

        If Samsung's sales are anything like they've been, no wonder Apple has resorted to iSue Thermonuclear Inert Weapons to try to slow them down! .....what else do they have?

        Two Products that make over 80% of both their profits and revenue are under attack in the marketplace. An Open Market now controlled by an Open Business Model and OS in Android! Bottom line= 155 Million Smartphones this year by the time iPhone 5 is released. So they simply don't have a chance in hell to even come close to Samsung this year!!!
        KronJohn
        • Put down

          what ever it is that you are smoking, it's rotting your brain.
          non-biased
          • Wow, "non-biased"...

            ..you really got him with your coherent and well thought-out argument. Congrats!
            daftkey
          • Thanks, and you sure got me

            When the title of the post is as misinformed as that one there wasn't any point in either reading further or giving a coherent and well thought-out argument.
            non-biased
      • Post-iPhone era

        It's the beginning of the post-iphone era where people realise they don't really need an iphone.
        warboat
        • I can't wait until we get to the post-troll era!

          We CERTAINLY don't need trolls, and that includes you.
          non-sycophant
        • Your right, nobody needs an iPhone

          But they don't need any of the Android based phones either or any smartphone for that matter so what is your point?
          non-biased
    • athynz is probably more correct

      most people just don't care about patent laws or anything else, since they have direct personal involvement or repercussions from others who play around with creating or manipulating those laws.

      Most people prefer watching Snookie or Jerry. Sorry to be blunt, but some don't care how their data is collected and used on Facebook.

      People just don't care.
      HypnoToad72
    • Nailed it

      We cannot overlook the degree to which Apple non-customers are continuing to not-buy Apple products because of [insert pet issue here]. The effect of non-customers, most of whom have hated Apple for years, continuing to not be customers and to hate Apple loudly on tech blog forums is the most likely cause for the shortfall.
      paferg
      • You mean the status isn't so quo?

        So the same people that didn't buy the iPhone 3G and iPhone 4 somehow NOW have an effect on the non-sales of the iPhone 4s? What happens if you couple the old non-customers with Apple's new non-customers?
        daftkey