Apple, which has dominated headlines over news that CEO Steve Jobs would be taking another medical leave of absence, today released first quarter earnings that far exceeded expectations, driven in part by better-than-expected sales of the iPad during the holiday season.
For the quarter ending December 25, 2010, the company reported a profit of $6 billion, or $6.43 per share, well above the EPS of $3.67 during the same quarter a year ago. Revenue for the quarter was $26.74 billion, a new record. Wall Street had been expecting earnings of $5.40 per share on revenue of $24.43 billion. (Preview, Statement. Techmeme)
In a statement, CEO Steve Jobs called it a "phenomenal holiday quarter" and said that "we are firing on all cylinders and we’ve got some exciting things in the pipeline for this year including iPhone 4 on Verizon."
Among the biggest headlines about the quarter was sales of the iPad tablet computer, which came in a 7.3 million, well above the 6.2 million that analysts had been expecting. Sales of iPhones, which came in at 16.2 million units, saw 86 percent growth over the previous year. And Mac sales were also stronger than a year ago, up 23 percent from a year ago. Sales of the iPod were down 7 percent.
On a call with analysts today, CFO Peter Oppenheimer talked iPhone and noted that the company continues to "have a sizable backlog and could have sold even more iPhones if we had been able to supply them." more if we could have supplied them." COO Tim Cook, who was also on the call, followed up by saying that he felt good about what the company has done to meet the demand "however it's not enough. We still have a significant backlog. We're working around the clock to build more."
Cook said it feels great that demand is so high but, at this point, he said he wasn't go to predict when "supply and demand will meet. We believe the reaction and results from the Verizon customers will be huge, and so I don't want to give a prediction right now on when supply and demand will cross."
Part of the demand came from interest among businesses. Oppenheimer said:
Enterprise customers continue to embrace iPhone, with 88 of the Fortune 100 companies and also 60% of the Financial Times Europe 100 companies now testing or deploying iPhone. Strong employee demand and custom app development are fueling deployments within the corporate sector. Enterprise CIOs continue to add iPhone to their approved device list worldwide.
He also noted that more than 80 percent of the Fortune 100 are now deploying or piloting iPad, as well, up from 65 percent in the previous quarter. He said:
We continue to see great enthusiasm for iPad from consumer, business and education customers. Employee demand for iPad in the corporate environment remains strong and the response to the product continues to be significant. Enterprise CIOs are adding iPad to their approved device list at an amazing rate.
On the call, Cook was asked about the coming of tablets on other platforms, specifically those that were highlighted at CES in Las Vegas earlier this month. In his response, he highlighted what he perceived to be the shortcomings of the current competitors, which is mostly Android. As for the others, he called them "vapor" because they're not shipping yet. He said:
We'll assess them as they come out. However, we're not sitting still. We have a huge first-mover advantage and we have an incredible user experience... We're very very confident.
Among the other highlights:
- The company generated $9.8 billion cash flow from operations during the quarter.
- Gross margin was 38.5 percent, compared to 40.9 percent in the year-ago quarter.
- International sales accounted for 62 percent of the quarter’s revenue.
Looking ahead, the company - which tends to be conservative with its forecasts - said that it expects revenue of about $22 billion and EPS of about $4.90.
The earnings announcement comes on the heels of an announcement by company CEO Steve Jobs that he was taking a medical leave but would remain CEO, leaving Chief Operating Office Tim Cook to manage the day-to-day operations of the company.
Analysts, in the meantime, don't seem to be as concerned about this leave as they did when Jobs, a Pancreative cancer survivor, took a six-month leave in 2009. Not only does there seem to be a succession plan in place, with Cook once again running the show, but the product lineup is in pretty solid shape, the latest development being the news of an iPhone for the Verizon network.
Shares of Apple were down - largely off the Steve Jobs news - by more than two percent in regular trading, closing at $341.14.