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

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.

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TOPICS: Apple, iPhone, Mobility
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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

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8 comments
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  • Jobs continues to drive the Apple train

    While the results came in at the higher end of expectations, they do reinforce Apple's reliance upon the Jobs machine.
    For more consideration click:
    http://sneakybusiness.typepad.com/sneaky/2007/07/apple-earning-1.html
    DayNovo
    • Jobs isn't the only winner at Apple

      There are a lot of very bright people at Apple - Jonathan Ive is a
      good example of the talent at the "lower level". What makes Jobs
      so important to the company is that he is a driving force for
      everyone to "make it better". Another critical key is that he is
      willing to take risks when he believes there is a good product to
      develop and release to the market. Throw in Jobs ability to
      understand the market and ensure that a product is packaged to
      work will in that market and you have the ideal CEO. It's just as
      important to understand, however, that there are a lot of rather
      bright/talented people working at Apple that can make jobs'
      dreams come to fruition.
      Ken_z
    • Ah, what to say first about this...

      stupid article you linked to.

      First, of course, is that analysts were forecasting $.72/share earnings. I'd say that
      $.92/share is a lot more than being "at the higher end of expectations." It blew
      those expectations away.

      Now, why does this "reinforce Apple's reliance upon the Jobs machine?"

      What this reinforces is that Apple has assembled a good team. As is mentioned
      elsewhere, Jonathan Ive is possibly as important as Steve Jobs.

      The concept of two CEOs is ridiculous. There's a reason that the C in CEO stands
      for "chief." Many, if not most, of the hugely successful companies have a stong
      CEO with vision. Watson at IBM, MacNamara at Ford, Buffet at Berkshire Hathaway,
      Gates at Microsoft, Welch at GE, Johnson at Lockheed's Skunk Works, just to name
      a few. It's not easy for two people to be the chief.
      msalzberg
  • waiting for 2nd or 3rd Gen

    then i'll buy it...

    it will be faster, hold more music, better network speeds, and probably way more apps.

    in two years i'll buy one.
    pcguy777
    • Not waiting for any gen

      I simply won't be buying one, I'll be buying the OpenMoko Neo. I can write my own software for it, or I can get someone who knows how to write software for it. I don't have to wait at the pleasure of Steve Jobs before I get extra software, and I don't have to rely on browser based technology to do it, the software will run native.
      tracy anne
      • OpenMoko Neo

        That's a real fine piece of equipment for someone who can program. But for the vast
        majority of us, it is a total waste of time.

        Add to that: small screen, needs a stylus, ugly as all get out, doesn't support iTunes.

        Do you think that they will sell more than 10,000 per year? I think not.
        DavidB_z
        • Personally I don't give a rats

          If they sell only 1, and I buy it. It's Free and Open Source, and I won't be beholding to Steve Jobs for my use of the software on it.

          In addition It matter not one iota if I can program or not, the fact that it's Free and Open Source means there are lots of people who can and will write excellent Free and Open Source software for it. None of which will be discontinued at the whim of Steve Jobs - so he can make more money by changing the interface or the proprietary file format that the software uses.
          tracy anne
          • Guess you hate Motorola, Nokia and LG too. Your loss. (NT)

            :-(
            nomorems