Apple earnings: Mac sales rise but iPod sales slip for holiday quarter

Apple earnings: Mac sales rise but iPod sales slip for holiday quarter

Summary: Apple reports strong Mac sales but slipping iPod sales for the holiday quarter.

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Apple, which is capturing headlines for a big Wednesday event that's expected to launch a new tablet device, put the speculation on hold long enough to report its first quarter earnings, which would include holiday sales. (Statement, Techmeme) On the surface, the company appeared to far exceed analysts expectations. The company reported a net profit of $3.38 billion, or $3.67 per share, on sales of $15.68 billion. Wall Street analysts has been expecting earnings of $2.07 per share on sales of $12.06 billion. But it's also important to note that Apple changed its accounting processes during the quarter, changing the way it counts sales of items such as Apple TV and iPhones, which are subscription-centric products. (more on that below) For a better understanding of how the company fared during the quarter, consider how the company did on key product sales. It sold 3.36 million Mac computers, a 33 percent jump over the year-ago quarter. It reported sales of 8.7 million iPhones, or 100 percent unit growth over a year ago. But iPods sales, which came in at 21 million during the quarter, actually represented an eight percent decline from a year ago. Mac sales exceeded estimates but iPhone sales missed targets, despite the company highlighting it as a strong performer. On the call with analysts, the company was asked if AT&T's service problems might be having an impact, as well. Chief Operating Officer Tim Cook responded by saying that AT&T has been a good partner and that, aside from a few key cities where AT&T has already acknowledged some service issues, Apple's own research finds that in the "vast majority of locations, iPhone customers are having a great experience." Going back to that accounting matter, CFO Peter Oppenheimer explained that, because of a change in accounting reporting rules, Apple now recognizes iPhone product revenue immediately, instead of over 24 months the way it did under the previous accounting method. The previous method was used because these particular products might come with future software upgrades or additional tools. A rule change allows the company to now report the sales of such products in two ways: 1) the hardware and software itself, which is recognized at the time of sale, and 2) the right to an upgrade, which has a value placed on it ($10 for Apple TV and $25 for the iPhone) that's spread over the 24 month period. In essence, that means nearly the full amount of the sale is recognized immediately. In addition, the company has gone back to fiscal year 2007 to revise all of its financial statements to reflect the new accounting method. For the March quarter, the company said it expects earnings in the range of $2.06 to $2.18 per share, compared to $1.79 for the year-ago quarter (revised to meet the new accounting method.) Sales are expected to be between $11 billion and $11.4 billion, compared to $9.4 billion (adjusted) in the year-ago quarter, Finally, the company was asked - but didn't offer any hints - about Wednesday's event. Specifically, analysts wanted to know if the guidance included sales of any, ahem, yet-to-be announced products. Execs didn't cave. But in a statement in the company's press release, CEO Steve Jobs seemed to give a bit of a wink with his prepared quote: "The new products we are planning to release this year are very strong, starting this week with a major new product that we're really excited about." Shares of Apple were up slightly in regular trading, closing at $203.07. Also see: Apple's December quarter: Big earnings an appetizer ahead of tablet

Topics: Enterprise Software, Apple, Hardware

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37 comments
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  • Macs up 33%. Still not convinced?

    I can't wait to read the pooh-poohs on these results. It'll be hilarious.
    mlindl
    • Let's see...

      Mac sales up hugely over the last two quarters but OS X market share remains fairly static. On the other hand Windows 7 share is up dramatically.

      I wonder if this is people buying the excellent Apple hardware and putting the equally excellent Microsoft OS on it?
      Sleeper Service
      • idiotique

        you know that - as always - your blubber doesn't make any sense.
        eighter hardware units are counted or online behavior. there is no
        statistic that shows what people install on their machines after the
        purchase. you are probably referring to units sold for your marketshare
        numbers. and these are collected by gathering information about
        hardware units sold by pc vendors not what kind of software people
        install afterwards.
        bannedfromzdnetagain
        • So...

          ...if Macs are selling at double the rate of Windows based OEMs then, by reasonable deduction, one would expect OS X's market share to be increasing at a similar rate.

          But it's not.

          So people like me buy Macbooks and put the superior Windows 7 on them rather than use the inferior Snow Leopard. What's so hard to understand here?
          Sleeper Service
          • Dual booting

            I've got that setup

            Play games on windows 7

            surf the web with Firefox on OSX leopard (not snow)

            Best of breeds
            Yax_to_the_Max
          • Wouldn't that count as 1 for both Windows AND OSX?

            Again, how come OSX market share has remained static...?
            tikigawd
          • OSX market share has NOT remained static

            If you are going to argue a point, at least do so with both valid data
            and a firm foundation in market statistics.
            First, over the year for 2009, OSX market share increased about 9%.
            Over the last quarter, OSX also saw a slight increase. It is only over the
            last few months that OSX has leveled out, but ANY class in statistics
            will teach you that this has no statistical significance.
            Besides which, even if it does turn out to be true, there are many
            possible explanations. The main one, in a word. Netbooks. Since
            Apple did not yet play in that market segment, nonetheless those
            sales count as Windows sales (assuming it is a Windows-based
            machine.) However, those machines are often second or third
            machines, use a deeply discounted version of Window, often XP, and
            do very little to advance the bottom line of either the hardware OR the
            software vendors that sell them or their installed software.
            Nonetheless, Apple's numbers for iPhone OS continue to increase.
            Many of these sales CAN be seen as competing against netbooks, so
            the numbers are not as clear cut as you might want to suggest.
            Now that the iPad is out, which is a more direct competitor, the
            picture will clear up somewhat, at least over the next few quarters.

            Maybe you should wait for actually significant data before making
            queries?
            SpiritusInMachina
          • Or they just

            might be replacing older Macs.
            Erroneous
          • Innumeracy, inaccountancy, inadequacy, take your pick

            As usual, your inability to see anything beyond your superficial bias,
            and your lack of intellectual rigor shine forth in your misinformed
            posts.
            Nowhere, ANYWHERE in that article is it mentioned that mac sold at
            double the rate of Windows machines (not sure what you mean by
            "double the rate of Windows based OEMs" but apparently neither are
            you.)
            It said macs sold 33% more than a year ago last quarter. This number
            exists completely independently of ANY Windows machine sales. OEMs
            could have sold 3 billion units, the number would still be 33% for
            Apple. The could have collectively sold only a single PC, and the
            number would STILL be 33%.

            As for market share, market share IS increasing at a rate
            commensurate with the stated numbers.

            "So people like me buy Macbooks and put the superior Windows 7 on
            them rather than use the inferior Snow Leopard. What's so hard to
            understand here?"

            Dream On, Steven Tyler, Dream On!
            SpiritusInMachina
          • Not difficult to understand - you are a troll

            [i] So people like me buy Macbooks and put ... Windows 7 on them
            rather than use ... Snow Leopard. What's so hard to understand here?
            [/i]

            At first glance, why would you bother to buy a MacBook in the first
            place? Are you trying to emulate Non_Zealot? Not recommended.

            Having discovered OS/X after 20 years of using Windows, it came as a
            breath of fresh air; only Windows bigots think otherwise.

            Why do so many NBM trolls, all of whom complain about anyone who
            isn't an MS fanboy posting on Windows blogs, continue to infest blogs
            about Apple?

            "Cue the double standards"...
            rahbm
      • ....

        [i]Mac sales up hugely over the last two quarters but OS X market share remains fairly static.[/i]

        Could be that a large portion of the sales were to folks upgrading old Mac hardware?
        Badgered
    • Analyst did predict a drop in iPod sales

      due largely to the fact that iPhone would impact them directlly as people passed up on the iPod and got the iPhone instead.
      AllKnowingAllSeeing
      • Except iPod Touch grew by 55%.

        Up 55% from what, we don't know. But that means more high priced
        units so over-all revenue is probably up on iPods even with a drop in
        units sold.
        Bruizer
  • Windows 7 already has won...

    I would normally laugh at these earnings, but now I am straight out guffawing because Windows 7 market share has already eclipsed all versions of OS X. Once again, Microsoft has proven the future is Windows everywhere. Only 100% growth for the iPhone? Just wait until Windows Mobile 7 ships. My rep and I ran the numbers and we predicted 15000% increases in the first week alone. The tablet will fail too, mainly because Microsoft owns the tablet space.
    Mike Cox
    • Mike!

      You're back! :D
      The one and only, Cylon Centurion
    • of course more people use Windows!

      As Will Rogers said, "God must love stupid people or why would he make
      so many?". So, of course, Windows users will always outnumber Mac
      users, and be proud of it!
      john_gillespie@...
      • O_O

        ROFL!!!!
        NeoGraven
    • WM 7

      might MIGHT get something close to 100% growth IF they rebuild the thing from the ground up instead of patching code on the crapware WM 5/6/6.5... 15000% is pushing things quite a bit.
      athynz
    • Brilliant!

      The 15000% growth had me chuckling, but then I spurted my drink all
      over the screen when I read [i]"The tablet will fail too, mainly because
      Microsoft owns the tablet space."[/i]

      Serves me right for taking a sip while reading a Mike Cox post!

      Thanks heaps for the laughs! It was a pleasant change from having to
      wade through the typical NBM troll posts.
      rahbm
  • RE: Apple earnings: Mac sales rise but iPod sales slip for holiday quarter

    Looks like there'll be some serious correction on the stock price soon especially if the tablet fails to completely wow the consumers.
    nothingness