Apple clears Mac, iPhone shipment hurdles; Earnings shine; Outlook strong

Apple clears Mac, iPhone shipment hurdles; Earnings shine; Outlook strong

Summary: Apple capped a strong fiscal fourth quarter and 2007 amid strong Mac shipments. The company reported Monday fourth quarter earnings of $904 million, or $1.

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Apple clears Mac, iPhone, earnings estimatesApple capped a strong fiscal fourth quarter and 2007 amid strong Mac shipments. The company reported Monday fourth quarter earnings of $904 million, or $1.01 a share, on revenue of $6.22 billion. That sum easily topped estimates.

Wall Street was expecting earnings of 86 cents a share for the fourth quarter and revenue of $6.07 billion, according to Thomson Financial. However, expectations were much higher with some so-called "whisper numbers" as high as 95 cents a share according to various reports. Apple cleared those aforementioned hurdles handily.

Here's a look at the big points in Apple's statement:

  • Apple (all resources) shipped 2,164,000 Macs. Consensus: 2 million, but some analysts were in the 2.15 million range.
  • Apple sold 1,119,000 iPhones in the quarter. Consensus: 900,000.
  • Apple moved 10.2 million iPods. Consensus: 10.9 million. Executives noted that iPod sales accelerated "dramatically" once Apple unveiled its new lineup.

In the year ago quarter, Apple reported earnings of $542 million, or 62 cents a share, on revenue of $4.84 billion. Apple's closely watched gross margin was 33.6 percent, up from 29.2 percent. That tally also topped estimates. For instance, BMO Capital Markets analyst Keith Bachman was projecting 31.7 percent gross margins.

As for the outlook, Apple projected first quarter earnings of $1.42 a share on revenue of about $9.2 billion. That projection is also above estimates. Wall Street was expecting first quarter earnings of $1.39 a share on revenue of $8.58 billion. Earnings estimates are likely to be viewed as conservative. If not, Apple might be seeing component prices increasing.

CFO Peter Oppenheimer was asked about why Apple was so optimistic with its outlook. Apple is usually conservative. Oppenheimer said that Apple is shipping its best product lineup ever. As for concerns about the economy, Oppenheimer said he'll leave the forecasts to the economists.

Apple ended its September quarter with $15.4 billion and no debt. Don't be surprised if folks start asking what Apple will do with all that dough.

For the fiscal year, Apple reported net income of $3.5 billion on revenue of $24 billion. That's up from earnings of $1.99 billion on revenue of $19.3 billion in fiscal 2006.

Other odds and ends worth noting:

Apple's deferred revenue line is getting interesting. Deferred revenue wasn't an item a year ago, but the launch of the iPhone and subscription revenue has changed the equation.

  • Apple's "iPhone and Apple TV" deferred revenue for the September quarter was $346 million, up from $92 million in the June quarter. It's safe to assume that line is all iPhone and very little Apple TV.
  • AppleCare deferred revenue was $430 million, up from $333 million in the same quarter a year ago.
  • Apple is still a U.S brand, but is gaining international exposure. Overall 40 percent of Apple's revenue comes from abroad. For instance, Apple's Mac revenue--the engine of the company for now--was $2.9 billion in the Americas, up from $2.35 billion a year ago, with Europe accounting for $1.34 billion, up from $998 million a year ago. Japan Mac revenue was $255 million in the quarter, down from $286 million a year ago. Apple called Japan its "most challenging market," but the iMac has been well received.
  • Notebooks accounted for $1.91 billion in Apple's Mac revenue with desktops reeling in $1.2 billion in revenue.
  • iPod revenue was $1.62 billion with music-related products and services sales (think iTunes) accounting for $601 million. What's notable is that music-related revenue is down from $608 million in Apple's June quarter, but still up a healthy margin from a year ago.
  • iPhone-related product and services had $118 million in revenue in the fourth quarter.
  • Fourth quarter software revenue was $430 million, up from $316 million a year ago.

Oppenheimer was optimistic about Apple's prospects. A few notes from the earnings conference call:

  • Apple CFO Peter Oppenheimer said the company was "extremely pleased" with its record Mac shipments. The iMac led to a 31 percent year over year jump in desktop units shipped. Apple ended the quarter with "slightly less" than three weeks of inventory.
  • On iPod sales, Oppenheimer said inventory was in the four to six week range that the company was targeting. On iTunes, Oppenheimer said the early results from the Wi-Fi iTunes store and partnership with Starbucks were promising.
  • Regarding the iPhone credit, Oppenheimer said most credits will be redeemed by the end of the December quarter.
  • Apple ended with 197 retail stores. Fifty-six percent of customers buying the Mac in Apple's retail stores were new to the platform. Oppenheimer said 40 stores are scheduled to open in the upcoming year.
  • Gross margins benefited from better average selling prices, a weak dollar and better-than-expected commodity costs. Tax rates were lower than expected at 27 percent instead of the 32 percent expected.
  • Oppenheimer said gross margins will fall in the upcoming quarter due to higher component costs, higher mix of indirect sales and overall product mix.
  • Fourth quarter Direct sales were 57 percent of revenue, up from 53 percent. Last year 44 percent of total company revenue.
  • Apple was asked about the SMB market. Oppenheimer said the company is doing well and growing based on its store sales. However, he acknowledged that tracking SMB sales are difficult.
  • Chief Operating Officer Tim Cook declined to give an iPhone shipment target for the next quarter. However, Cook did note that Apple is comfortable with its goal to ship 10 million iPhones in calendar 2008.

Topics: iPhone, Apple, Hardware, Mobility

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15 comments
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  • Small fry stuff...

    Just wait until Microsoft releases with the latest Zune and Vista numbers. That will really get Wall Street seeing what a true technology company is capable of. I just put another buy order in for MSFT shares, my rep told me he will sell me some of his.
    Mike Cox
    • LMAO, 9.5!

      Your rep selling his made this one great.
      Stuka
    • The Scary Part

      Want to know the scary part, we may joke here that Mike is the quintessential Windows fanboy/CIO, but the reality is that there are actually a lot of people like Mike Cox out there - running companies IT into the ground off the back of Microsofts promises (and failure to deliver).
      Kaiwai
      • He's not a Windows fanboy

        he's instead making fun of Microsoft and their shortsighted customers.
        Mikael_z
        • Read The Bloody Post (RTBP)

          I never said he was being serious - how about reading what people write. I said that it maybe a joke, a piss-take, but there are actually people out there, as Mike portrays, who do act like that.
          Kaiwai
    • Zune & Vista -small fry indeed

      The numbers of dyed in the wool window users confronted with Vista as their only choice are digging deeper and buy Mac computer products. That is what I am seeing in my neck of the woods. The Vista blunder is giving Apple a once in a life time opportunity and Joe/Jane public are stepping right up to the plate in increasing numbers as more and more of their friends are bying a new computing paradigm one of ease in use with the freedom that they can still install their Window apps. Vista product used to be everywhere in all the stores here, now you have to look hard to find it.
      ajv123
    • You..

      need treatment! LMAO! Priceless!
      cashaww
    • You poor, poor boy

      Looking back on two years of MSFT stock, I see growth of ... wait
      for it... $10 per share over that entire two year period.
      Correction... over the last 18 months. However, the net growth
      over the 24 months is only... three dollars? This is growth?

      APPL on the other hand has grown $130 or more in the same
      time period! Maybe if you buy lots and lots of MSFT you might
      see some profit, but meanwhile my stock has split twice in the
      last 10 years and grown... what?... 6000%.

      Pardon me while I keep my APPL.
      Vulpinemac
  • Very strong results

    Each quarter we watch to see if Apple will beat expectations and, if they do,
    by how much. Yet again Apple delivered more than expected.

    From what I understand Apple is putting some of their free cash to use in
    pre-paying for their most important component, like memory and
    processors. It gets them the best price and some prime delivery slots are
    going to be fully shipped.

    Margins have been helped by the shrinking dollar as well as new software
    that has hit the market, like iLife 08. While component costs may increase
    in the next quarter there will also be Leopard that will be a nice help in
    raising overall margins.

    Overall I'm impressed. Who would have thought 5 years ago that Apple
    would be flying like they are?
    Ken_z
    • Strong results bassed on value

      "Who would have thought 5 years ago that Apple would be flying like they are?" A short answer is VISION and Microsoft Blunder 2007 (Vista) have a lot to do with that. Dispite the none recognition of Microsofts blunder, many of my friends and professionals in my neighborhood have come to recognize that to have Vista run well a new Mac product is actually cheeper to purchase and you have the choice to run Windows and Linuc beside the Mac OS. How can you beat that.
      ajv123
  • The consumer has spoken. Apple too high priced!

    My closest friend just switched from Windows to Mac and will be installing Leopard
    next weekend. She is in AWE at how much simpler things are, at the high quality
    video of Skype and iChat and how EASY iWork is compared to Office.

    The simplicity is best, complexity is for geeks movement is here to stay. Buy your
    shares now, they are predicting a $205 price target and it hit $185 a share overnight.
    mlindl
    • RE: The consumer has spoken. Apple too high priced!

      People are happy to pay a premium for things that work as expected. I maybe IT orientated, but I want an OS that works, and doesn't require me to constantly be in System Administrator mode of thinking - having to constantly debug stupid errors.

      As a long time Mac person who had a brief foray into the PC world - I've now got a Macbook - the money I might have saved in the PC world certainly didn't off set the time wasted debugging a half baked operating system.
      Kaiwai
      • I believe AAPL was intended

        The previous message was specifically about AAPL, not Apple. The difference being
        "the company stock" rather than "the company product".
        Yes, people with a clue are happy to spend more for a better product - fewer
        problems, longer expected useful life, etc. That, however, assumes they are aware
        of the issues. My iMac-using wife regularly alerts me to Windows problems, and I
        regularly tell her "you're safe". The company stock, though, is over-priced and
        could see a "correction" all too soon. Not that there isn't "good value" in the
        company, just ... not THAT much.
        DLMeyer - the Voice of [url=http://tinyurl.com/y4amro] [b]G.L.Horton's Stage
        Page[/b][/url] Pod Cast
        dlmeyer9
  • Hard to argue with success

    For years we heard about how Apple's vertical
    integration (build the entire widget) model was doomed
    to failure or was to be relegated to a niche corner of the
    market. Well now it seems word is getting out on how
    much better their model is for the end user.

    http://smallurl.co.uk/?1745
    Len Rooney
  • RE: Apple clears Mac, iPhone shipment hurdles; Earnings shine; Outlook strong

    Sir
    Steve win win. He has been showing this knighthood velour since 70 with his Apple PCs. I like the guts he has and the PC that come out beautifully designed. My problem is they are very expensive

    I thank you
    Firozali A.Mulla MBA PhD
    P.O.Box 6044
    Dar-Es-Salaam
    Tanzania
    East Africa
    famlitig