Apple's Mac shipments surge; Lowballs on outlook; Jobs health worries

Updated: Apple on Monday reported fiscal third quarter earnings of $1.07 billion, or $1.19 a share, on revenue of $7.46 billion, well ahead of Wall Street estimates as Mac sales continued to surge. However, Apple lowered its outlook and failed to allay concerns about CEO Steve Jobs' health.

Apple was expected to report earnings of $1.08 a share, according to Thomson Financial. In the year ago quarter, Apple had earnings of $818 million, or 92 cents a share, on revenue of $5.41 billion. Gross margins fell to 34.8 percent, down from 36.9 percent a year ago.

The company's conference call also addressed the health of Jobs. As Jason Perlow noted last month there have been ongoing concerns following Jobs' keynote where he looked gaunt. The company line was that Jobs' health is "a private matter" and that he has no plans to leave (more on the health issue in the update below). That didn't ease shareholder concerns afterhours.

As expected, Macs fueled Apple's quarter (statement). Apple shipped 2,496,000 Macs in the quarter, up 41 percent in units from a year ago. Those results were also ahead of expectations. Apple's Mac tally wasn't totally unexpected given that the company has been picking up market share at a rapid clip. Indeed, Apple is the third largest PC vendor in the U.S., according to Gartner.

The company also sold a little more than 11 million iPods in the quarter, up 12 percent from a year ago. Apple moved 717,000 iPhones in the third quarter, up from 270,000 a year ago. Here's how the figures stacked up against estimates from Piper Jaffray analyst Gene Munster. As you can see Apple topped most of its targets.

The catch: Apple issued a conservative outlook. In a statement, Apple CFO Peter Oppenheimer said the company will report earnings of about $1 a share on revenue of $7.8 billion for its fiscal fourth quarter. For the September quarter, Wall Street was expecting earnings of $1.24 a share.

However, I'd argue that Apple is low-balling estimates again. Munster provides Apple's track record. The formula is to lower the bar and then hurdle it easily.

By the numbers:

• Apple's research and development expenses for the September quarter were $292 million, up from $208 million a year ago.
• The company had $20.7 billion in cash, cash equivalents and short-term investments.
• iPhone and Apple TV deferred revenue in the third quarter was $4.06 billion, up from $2.24 billion in the September quarter a year ago.
• Revenue in the Americas was $3.43 billion in the third quarter, up from $2.68 billion a year ago. Europe revenue was $1.65 billion, up from $1.16 billion a year ago. Apple also got traction in Japan with revenue of $365 million, up from $258 million.
• Retail store revenue was $1.44 billion, up from $915 million a year ago.
• Portable revenue was $2.23 billion in the third quarter, up from $1.57 billion a year ago. Desktop revenue was $1.37 billion, up from $956 million a year ago.
• Other music related products and services (iTunes) had revenue of $819 million, up from $608 million a year ago, but off 7 percent sequentially.

Here's the breakdown:

Update:

• In a call with analysts today, the company was asked about a New York Post report that questioned whether Jobs was suffering complications from, or a reappearance of, the pancreatic cancer cured by surgery nearly four years ago. The response was simply: "Steve loves Apple. He serves as CEO at the pleasure of Apple's board and has no plans to leave Apple. Steve's health is a private matter."
• AppleTV is still considered to be a "hobby" product and, while the company remains committed to it, it's not considered to be as large as the mac or iPod businesses and does not have potential of the iPhone business.
• There were 11 new stores opened in the quarter, including Boston and a first in Australia, bringing the total to 216. The company said it is on track to bring that number to 242 by the end of the year. Apple store sales of Macs were up 44 percent over the previous year quarter and more than half of those sales were to first-time Mac owners.
• Apple sold its 1 millionth iPhone 3G within three days of its launch in 22 countries. By comparison, the company noted that it took 74 days to sell 1 million iPhones during the first launch and two years to see 1 million iPods. The company plans to launch in an additional 22 countries in August. The company said it's confident in production and feels good about its supply. The demand for the new iPhone was "stunning" and demand is a very difficult thing to predict, the company said in response to questions about the launch problems earlier this month. It also re-confirmed its confidence in reaching its goal of 10 million iPhones in calendar year 2008.
Senior Editor Sam Diaz contributed to this entry.