Apple delivers strong earnings; Countdown to 1 million iPhones on hold; Outlook conservative

Summary:Apple's third quarter earnings handily topped Wall Street expectations on Wednesday, but the total number of iPhones sold to date remain a mystery. Apple reported fiscal third quarter earnings of $818 million, or 92 cents a share, on sales of $5.

Apple's third quarter earnings handily topped Wall Street expectations on Wednesday, but the total number of iPhones sold to date remain a mystery.

Apple reported fiscal third quarter earnings of $818 million, or 92 cents a share, on sales of $5.41 billion. Those results handily beat Wall Street estimates projecting earnings of 72 cents a share on revenue of $5.28 billion.

But for folks worried about iPhone sales Apple's results may not have totally soothed investors.

In a statement CEO Steve Jobs said:

"iPhone is off to a great start -- we hope to sell our one- millionth iPhone by the end of its first full quarter of sales -- and our new product pipeline is very strong."

That statement would indicate that the most optimistic projections were off a bit. Nevertheless, one million units in a quarter isn't chopped liver.

But the real story of the quarter was Mac sales, which came in strong.

  • Apple shipped 1,764,000 Macs in the quarter, up 33 percent from a year ago. Most analysts were projecting shipments of about 1.6 million or so.
  • The company sold 9.8 million iPods, up 21 percent from a year ago.
  • The outlook for the third quarter looks a little light relative to Wall Street expectations. Apple CFO Peter Oppenheimer projected fourth quarter earnings of 65 cents a share on revenue of $5.7 billion. According to Thomson Financial, analysts were expecting earnings of 83 cents a share on revenue of $6 billion.

And live updates from the conference call include:

  • Average revenue per store was $5.1 million. Fifty percent of people buying the Mac were new to the platform.
  • Apple shipped 270,000 iPhones in the third quarter (that's two days).
  • This quarter didn't have any payments from AT&T included. Oppenheimer said revenue will be recognized in the September quarter.
  • Analysts asked why they should believe Apple's outlook. The perception: Apple is low balling. Oppenheimer said guidance was cut on higher commodity costs and product transitions that he couldn't discuss. My take: Apple is bluffing here. AT&T will start paying Apple in the current quarter and there's no upside?
  • Apple chief operating officer Timothy Cook said demand for iPhone is strong. Officials wouldn't discuss year to date sales. "Our primary focus is not on initial sales," said Cook. "We're looking to build our third great business. It will not be done overnight. Our success will be measured in years not months."
  • Cook also tried to put the iPhone in context. He noted it took two years to sell one million iPods.
  • iPhone coming to Europe in the next quarter.
  • Best Buy partnership is expanding.
  • Component prices "particularly DRAM" led to prices being favorable to Apple. Commodities tightened in preparation for the second half, said Oppenheimer. NAND, DRAM and LCDs prices are tightening ahead of strong demand.
  • Cook said Apple will monitor iPhone/iPod cannibalization, but so far there's little evidence.
  • Cook said the iPhone is a breakthrough for everyone, including corporate users. "We have a number of corporate customers piloting the iPhone and they are pleased so far," he said.
  • Apple TV sales weren't broken out.

Topics: Apple, iPhone, Mobility

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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