Apple's fourth quarter dinged by iPhone 4S waiting game

Apple's fourth quarter dinged by iPhone 4S waiting game

Summary: Apple delivers a rare earnings miss as consumers waited for the iPhone 4S launch.

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Apple's disappointed Wall Street with fourth quarter earnings as consumers held out on buying iPhones ahead of the iPhone 4S device. The company also said it held back on rolling out new countries and carriers for the iPhone ahead of a new product cycle.

The company reported fiscal fourth quarter earnings of $6.62 billion, or $7.05 a share, on revenue of $28.27 billion.

Wall Street was expecting fiscal fourth quarter earnings of $7.39 a share on revenue of $29.68 billion. The company sold 17.07 million iPhones in the fourth quarter, up 21 percent from a year ago. Wall Street was looking for a range of 18 million to 20 million.

However, there are a few explanations for the iPhone unit miss. First, consumers could have held out for the iPhone 4S launch. In addition, Apple could have drained its iPhone 4 supply in favor of building iPhone 4S. Apple sold 4 million iPhone 4S devices in a weekend. That channel had to be built somehow.

On a conference call with analysts, Apple CFO Peter Oppenheimer explained the iPhone sales shortfall.

We were pleased with the iPhone sales growth as we prepared for the transition to the iPhone 4S. We expected iPhone sell-through to decline sequentially from the June quarter as a result of new product rumors following the announcement at our developers conference in June that iOS 5 and iCloud would become available in the Fall. As we predicted, iPhone sell-through did decline across the quarter, especially in the second half as new product speculation intensified. We ended the quarter with about 5.75 million iPhones in channel inventory, a sequential decline of about 180,000 which placed us within our target range of four to six weeks of iPhone channel inventory.

Given the October launch of the iPhone 4S, we opted to defer new carrier and country additions from the September quarter until after the launch.

In a statement, CEO Tim Cook touted Apple's $108 billion in annual revenue and $26 billion in earnings. In addition, Cook said Apple has "strong momentum going into the holiday season, and we remain really enthusiastic about our product pipeline."

Cook elaborated on the conference call about his confidence into the December quarter and iPhone 4S sales.

We're confident that we will have a large supply but I don't want to predict when supply and demand might balance because the demand is obviously extremely high right now, but I'm confident that we will set an all-time record for iPhone this quarter.

The afterhours reaction to Apple's results indicated that investors were willing to cut Cook & Co. a break. Apple missed estimates, but is likely to make up for it with a strong December quarter.

To that end, Oppenheimer projected fiscal first quarter revenue of $37 billion and earnings of $9.30 a share. Wall Street was looking for $9.96 a share on revenue of $42.24 billion.

Apple historically has low-balled its Wall Street guidance. But Apple's first earnings miss in four years may give investors pause. Don't be surprised if there are multiple questions about the next phase of Apple and whether growth is played out. Toss in Cook's first quarter and the death of Steve Jobs and questions are likely to multiply.

Other key figures in the fiscal fourth quarter:

  • Apple moved 11.13 million iPads in the quarter.
  • 4.89 million Macs were sold in the quarter, up 26 percent from a year ago.
  • Apple sold 6.62 million iPods in the quarter, down 27 percent.
  • The latest Mac OS had 6 million downloads in the September quarter.
  • Mac inventory was between three and four weeks.
  • iPod touch is more than half of all iPods sold.
  • iTunes revenue was nearly $1.5 billion in the quarter.
  • Apple retail store revenue was $3.6 billion, a tally that was flat with a year ago. Apple has 357 stores.
  • Apple had $81.6 billion in cash, equivalents and marketable securities.

Related:

Topics: Banking, Apple, Enterprise Software, Hardware, iPhone, Mobility, Smartphones

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14 comments
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  • RE: Apple's fourth quarter dinged by iPhone 4S waiting game

    Oh, don't worry, they were busy suing others.
    tatiGmail
    • Apple topped their own estimations for this calendar Q3 and set another ...

      @tatiGmail: ... record, and showed 40% Y-Y growth which in unseen by company of this size.<br><br>Wallstreet estimations were unreasonably overheated considering that iPhone 4S came four months late. Apple lost about $3 billion in sales and almost $1 billion in net profits because of that.<br><br>Considering that Apple always tops their own estimates for the quarter (including the one about this report is just done), $37 billion sales for Q4 might turn into topping $40 billion if manufacturing and economics will be right.<br><br>Why Apple set $37 billion for Q4? It is holiday quarter, so iPad sales might easily top 15 million, iPhone sales will top 25 million, Mac sales will top 5 million, and even iPod sales are expected to top 10 million -- significant increase in all areas comparing to Q3's $28.3 billion.
      DDERSSS
  • RE: Apple's fourth quarter dinged by iPhone 4S waiting game

    What if Apple misses one more quarter? What will be blamed then?
    paul2011
    • Apple has been having blow out quarters for years.

      @paul2011: At some point they had to miss one. I've always maintained they couldn't keep it up forever. I am surprised at how long it took for them to miss one.<br><br>These are impressive numbers. Unfortunately the stock price has been inflated based on beating the numbers. Hopefully the stock won't take too big a hit as I've been very pleased with the performance of my AAPL shares.
      ye
      • But they did not miss the target, they topped it

        @ye: you can not miss target that you never aimed at.
        DDERSSS
      • They missed Wall Streets target.

        @DeRSSS : From the article:

        "Wall Street was expecting fiscal fourth quarter earnings of $7.39 a share on revenue of $29.68 billion. The company sold 17.07 million iPhones in the fourth quarter, up 21 percent from a year ago. Wall Street was looking for a range of 18 million to 20 million."

        Wall Street bid up the price based on their numbers, not Apple's.
        ye
      • Only with Apple is a 40% year over year growth

        seen as evidence their stock is over-valued. Unreal.
        baggins_z
      • Not at all.

        @baggins_z: [i]Only with Apple is a 40% year over year growth seen as evidence their stock is over-valued. Unreal.[/i]

        If the stock was priced with the expectation of 50% YoY growth then 40% would be over valued.
        ye
  • RE: Apple's fourth quarter dinged by iPhone 4S waiting game

    Meh. iPhone's #'s being short don't really surprise me... considering every 'journalist' was spouting 6 ways from Sunday about the 'iPhone 5'...

    What made me look again was the iPod #'s... 27 percent off? I'm sure that'll rebound during the holiday season... but, what, are iPhone/iPad sales beginning to cannibalize iPod sales? ...or, are the markets just becoming saturated?
    UrNotPayingAttention
    • A little of both, I would surmise

      @chmod 777
      [i]are iPhone/iPad sales beginning to cannibalize iPod sales? ...or, are the markets just becoming saturated[/i]
      Tim Cook
      • RE: Apple's fourth quarter dinged by iPhone 4S waiting game

        @Mister Spock
        I agree.

        Regarding "cannibalization:" "You mean they want to buy this, which makes us more money, than that. Ohhh. Okay."
        DannyO_0x98
      • iPod functionality is now commodity of mass smartphones, even cheaper ones,

        @Mister Spock: ... so iPod market not even matures, it is gradually declines to some new, lower level, which will by more about iPon nano-like devices only.
        DDERSSS
  • So, it begins...

    There will be many who, when Apple begins to flounder and miss expectations, the cause will be "the absence or death of Jobs".

    However, there will come a time, when Apple can't continue depending on their 4 main products to survive. Those products are becoming stale and, though they can continue to make them "seem" updated or renewed, people will begin to catch on to the fact that, most of what they're buying or "re-buying via 'upgrades'" is the "same old, same old".

    The time will come when Apple has to diversify from iPods and iPhones and iPads and Macs. And, when they start to miss the earnings expectations, nobody should be blaming it on Jobs' death. The lack of diversification and the staleness of the product-line is something that probably would have occurred anyway, with or without Jobs.
    adornoe
  • RE: Apple's fourth quarter dinged by iPhone 4S waiting game

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    BernardBrent