Apple beats for Q2; Best non-holiday quarter; Netbook hardware 'junky'

Apple beats for Q2; Best non-holiday quarter; Netbook hardware 'junky'

Summary: Apple, known for conservative financial forecasts, easily surpassed Wall Street's estimates for the second quarter, reporting net income of $1.21 billion, or $1.

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Apple, known for conservative financial forecasts, easily surpassed Wall Street's estimates for the second quarter, reporting net income of $1.21 billion, or $1.33 per share, on sales of $8.16 billion. (Statement) Wall Street had been expecting earnings of $1.08 per share on $7.9 billion in sales, according to Thomson Reuters.

The quarter fared better overall than the year ago quarter, which saw revenue of $7.51 billion and net profit of $1.05 billion, or $1.16 per share, and also had the advantage of the launch of the Macbook Air to help boost sales. Gross margin for the second quarter was 36.4 percent, up from 32.9 percent in the year-ago quarter.

Among the quarter's highlights:

  • Apple sold 2.22 million Mac computers, a three percent drop from the year-ago quarter
  • It sold 11.01 million iPods, a three percent increase from a year ago.
  • It sold 3.79 million iPhones, a jump of 123 percent.
  • Revenue from Apple retail stores were down from $1.47 billion to $1.45 billion a year ago, a decline that the company blames on continue weak consumer spending and expansion of other retail outlets carrying Apple products.
  • The company continued to see traction with its online App store, with the company on track to see its 1 billionth download in the coming days.

The company notes that its financial reporting of iPhones, over a period of eight quarters, had an impact this time around. In its press release, the company said:

Unit sales of iPhone 3G continued to be significant in the quarter ended March 28, 2009, with 3.79 million iPhones sold. As a result, the amount of revenue and product cost related to those iPhone sales that the Company deferred for recognition in future periods under subscription accounting was substantial. While the GAAP results provide significant insight into the Company's operations and financial position, management continues to supplement its analysis of the business using financial measures that look at the total sales, related product costs and resulting income for iPhones and Apple TVs sold to customers during the period.

During a call with analysts, the company addressed the issue of netbooks, the popular, low-cost ultra portable PCs that are seen as propping up the industry. Chief Operating Officer Tim Cook said, without mixing words, that Apple is not interested in the netbook arena "as it exists today." The software, he said, is poor. The hardware is "junky" and netbooks at this time are "not something that we would put the Mac brand on quite frankly."

Asked to dive deeper on the success of the iTunes App store, company executives would not separate the number of paid apps versus free apps downloaded. Cook did note, however, that the combined 37 million iPhone and iPod Touch devices in circulation provides "an enormous platform for developers to develop on." Sales of iPod Touch devices doubled year-over-year.

Finally, asked about the exclusive contract with AT&T as a service provider for the iPhone and the lost sales by customers who are either unhappy with AT&T's service or tied to another provider, Cook said he believes AT&T is "the best wireless provider in the U.S." and that the company does not plan to change partners. He further noted that the iPhone, from the beginning, was designed to be a phone for the whole world and that GSM technology - as opposed to CDMA technology used by Verizon - was, and continues to be, the best route to go.

Looking ahead to the end of the current quarter, the company projected revenue in the range of about $7.7 billion to $7.9 billion and eps of about $.95 to $1.00. Wall Street consensus for the third quarter is revenue of $8.26 billion and EPS of $1.11. Again, it's important to remember that Apple always tends to forecast conservatively.

The current quarter is also expected to see the launch of iPhone upgrades, which will include new and long-anticipated features such as copy-and-paste and MMS support. In June, the company will host its worldwide developer's conference.

Apple CEO Steve Jobs announced just before the January Macworld event that he would take a medical leave of absence through the end of June, though there have been reports noting that Jobs is still working on special projects from home. It is unclear if he will be returning in time for WWDC.

Also see: Analyst: Declines in Mac, iPod sales isn't so bad

Shares of Apple were down slightly in regular trading, closing at $121.51, but were up as much as 4 percent in after-hours trading.

Topics: Apple, Banking, Enterprise Software

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68 comments
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  • Mac sales plummet!

    Apple is spiraling down! Losing business! Watch the stock price sink as well! Oh, wait a minute...
    rynning
    • Readers of ZDNet would be surprised

      ZDNet's been pumping all quarter an Apple revenue collapse whilst
      fawning over MS ads and windows 7 vapourware stories.

      At least in the last few days we were given the option of reading how bad
      the Oracle/Sun deal is;-)
      Richard Flude
      • Apple is UP 42% this year! Better than MS' 19% (NT)

        NT
        No More Microsoft Software Ever!
    • New Headline: iPhone saves Apple's butt!

      Macs down 3%. iPhone sales more than double! Take the iPhone out of their numbers and things would look pretty grim, indeed. That phone is saving them from the pain of the recession. Their big cash reserves would be dwindling fast if it wasn't for the iPhone. All hail the iPhone!!! And version 3 will only add to this. Whoever designed that phone should get a fat raise.
      BillDem
      • Down 3% that's not squat

        You're delusional, they sold 2.22 million Macs in a quarter that is normally slow, not to mention the Recession!

        Buy yourself a clue!
        GoPower
    • If only they could sell more net... macbookairs

      This is a joke right?

      The same arguments can be used to describe their precious macbook air.. but weight, netbooks are only 200-400 bucks. Their macbook air, with half the battery life, is 1800 bucks!

      Apple = Hypocrits!
      JABBER_WOLF
  • RE: Apple beats for Q2; calls it best non-holiday quarter

    Ah but there is a new Zune coming out - i bet they are
    terrified!!! ;-)
    thelivo
    • No_Ax and Loverock Are Camped Outside Best Buy

      http://www.iconocast.com/A0000000015/O7/News8_1.jpg

      Go and cheer them up!
      itanalyst2@...
      • They must have seen this already....

        http://www.youtube.com/watch?v=nRKIDdIaFyE
        nix_hed
  • Memo to BloatFarm:

    1. Class beat mass.
    2. Note increased profitability and no layoffs were announced
    3. Implications:
    a. No Bloat in Cupertino;
    b. Genuine innovation always beats "Wow Is Now" M$H!T.
    Jeremy W
    • rofl

      Yes thats why Apple have the Majority of installed desktop and smalll buisness computers right? because everyone that buys windows is stupid!
      Realy I knew appple fanboys were arrogant but realy!
      jdbukis@...
      • Not what he said.

        He said "class beats mass." That means he doesn't care that mac is in the minority; their product is still superior.
        urbandk
        • To what?

          {NT}
          Sleeper Service
          • To what, you ask?

            Why, the Commodore 64, of course!
            John Zern
          • Don't forget the Atari 400/800, XL, and XE computers...<nt>

            [b]
            nix_hed
          • C-64 "the best selling single personal computer model of all time."

            See http://en.wikipedia.org/wiki/C64

            "During the Commodore 64's lifetime, sales totaled 30 million units, making it the best-selling single personal computer model of all time."

            "According to the Guinness Book of World Records, the Commodore 64 is the best-selling computer of all time. About 30 million were sold between its launch in 1982 and its "commercial decline" in 1993, when it was discontinued. "

            http://www.wired.com/culture/lifestyle/news/2003/09/60349
            YaBaby
          • Depends of the stats.....

            If one talks about profit then well everything out there I would say at
            least in the PC arena.

            What about UI?

            What about form/style?

            What about durability?

            Since the Mac can run OSX, LInux and Windows what about flexibility?

            Pagan jim
            James Quinn
        • No

          Its not. It is the weakest OS out right
          now...Superior LOL

          davidhite
      • it's profitability/sound business...

        has nothing to do necessarily with market share or installed base or any
        of that... GM up to this year was the largest car manufacture (just surpassed by Toyota)... but how sound is GM's business? Just because
        you are selling lots of product doesn't necessarily mean you are turning a
        huge profit doing it or that your business is sound, efficient etc... it just
        means you're selling a lot of units.. that's it.

        Apple's business is very sound and they are turning a great profit... MS
        that had to do layoffs, apple didn't. that tells you something about the
        soundness of their businesses... get it now?
        doctorSpoc
        • MS Layoffs

          What department did the lay-offs come in or what part of Microsoft? I cannot remember but I'm sure it wasn't the core MS business/OS/Software but the gaming side of it was it not? Which is always going to get hit in a recession when people will be more likely to download games and with console gaming taking off PC gamers are becoming fewer - again due to the recession and people not wanting to spend a load of money on a gaming rig.

          Seems like apple have a sound business policy to be fair and are doing well due to the iPod/iPhone side of things.

          Good on them.

          Still doesn't mean they are going to take over the OS world really.

          By christ Apple 'fans/zealots' are annoying to say the least in the way the jump on everything that Apple do as a massive success for themselves.

          They are a company. They just want your money and don't really give a damn how you feel. Get over it. It's not a religion and there's far better and more worthwhile things you could support instead of another greedy business you idiots.

          *shakes head*

          A lot of the Apple fans here are just a victim are marketing. Very good marketing.
          Average-IT-Guy