Apple's Q2 results: Are Qualcomm, iPhone 5 worries overblown?

Apple's Q2 results: Are Qualcomm, iPhone 5 worries overblown?

Summary: Apple may deliver more iPhones than expected in the March quarter and iPad units should be solid. Mac units could be light.


Apple is expected to deliver strong second quarter earnings, but analysts will be looking for any comments about the company's ability to manage through a potential shortage of Qualcomm chips for the iPhone 5.

Wall Street is expecting Apple to report second quarter earnings of $10.02 a share on revenue of $36.7 billion.

As for Apple's outlook, which is typically lowballed, the company is expected to report third quarter earnings of $9.91 a share on revenue of $37.34 billion.

Among the key Apple barometers to watch: iPhone units. Piper Jaffray analyst Gene Munster is projecting Apple to deliver 30 million to 33 million iPhone units in the March quarter. That estimates is based on Verizon's tally of 3.2 million iPhone activations. Munster is betting on 33 million iPhone units due to growth in China and other countries.

iPhone units in the future. Qualcomm last week indicated that it was seeing a supply squeeze on 28nm chips. Many observers took Qualcomm's comments as a warning that the likely chip behind the iPhone 5 would be supply constrained. However, there's a possibility that these worries about the iPhone 5 are overblown. Jefferies analyst Peter Misek said Apple's supply chain clout may come into play. Misek said in a research note:

We continue to believe the iPhone 5 will be launched in early September. But due to the 28nm capacity issues Qualcomm expressed, there could be fewer handsets than desired at launch time or the launch could be delayed until October. We believe Apple and Qualcomm are in strong discussions over supplies of the 8960 baseband (for iPhone 5). We also believe Apple will pressure TSMC to prioritize capacity for Qualcomm.

The iPhone 5 launch date. Given Qualcomm's comments, analysts are betting on an October lift-off for the iPhone 5. Keep in mind that Apple CEO Tim Cook (right) isn't going to say anything on launch dates.

iPad units. Sterne Agee analyst Shaw Wu is projecting iPad units to be about 12.3 million. iPad unit estimates have been creeping higher in recent weeks.

Mac sales light? Analysts have been worried about Mac sales and cutting their unit projections accordingly. For instance, Wu is projecting 4.3 million Mac units, down from 4.7 million. The worries about the Mac picked up after NPD reported that Mac units fell 16 percent in March. Barclays analyst Ben Reitzes noted that the iPad likely cannibalized Mac sales. There's also a product refresh on deck.

iPod units. Analysts barely mention the iPod these days because they are financially immaterial to Apple. Misek expects 7.1 million iPods to ship in the quarter.

Topics: Mobility, Apple, Hardware, iPhone, Smartphones

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  • Larry, one small correction

    Apple [b]never[/b] added to the name of any of its devices a [i]single[/i] number that would not match to device's actual generation. If a new device is considered to be an upgrade to previous one, then they add suffix to it, and keep the number (like in case of "iPhone 4S" comparing to "iPhone 4"). But not when the number is standalone, without suffix.

    So the new iPhone might be called "iPhone 4G", "iPhone 6" or even simply "iPhone", but not "iPhone 5".
    • Apple has their supply chain completely guaranteed...

      this is what Tim Cooke brought to the table.. Larry has the Bass Akward.. Qualcom is projecting a shortage BECAUSE Apple has put in a huge order and has bought guaranteed access to those chips meaning there will be little supply for anyone else... notice that apple sold 12million iPads in Q2 with retina displays and sharp( or LG can't remember) and samsung that are producing those display have no supply of those screens for their own products? Apple buys guaranteed supply.. Apple will not be short of chips.. this is Qualcomm saying Apple is buying almost all of our supply in the near future so don't expect to get big shipments of chips from us in the next little while...
  • If a component supply gets tight

    Apple will simply write a check as big as it takes. I wouldn't be surprised if Apple buys Qualcomm's entire expected production and pays in advance. It ensures their supply, inconveniences (at a minimum) other handset makers, and it's the [b]exact[/b] reason Apple keeps that $100 billion pile of cash around.
    • Qualcomm won't sell them their entire stock

      as customers can be fickle - imagine Qualcomm forcing their other customers to buy elseware, and then Apple decides it will manufacture their own chips going forward at the foundry they recently purchased.

      Qualcomm has no customers at that point.
      William Farrel
      • Thus the pay in advance. Qualcomm can negotiate

        a contract where they get their money even if Apple decides to go somewhere else partway through.
      • Agree - No 100% Customers

        I doubt Qualcomm management needs to take that kind of risk. Having a 100% customer for a major product line can lower their stock price immediately.

        Study the High Standard example with Sears from decades ago.
      • Learn something about semiconductors

        Semiconductor chips are worth so much, at the time they are "fresh". When that time passes, they are worth virtually nothing, because new, better chips exist, that cost the same to manufacture.

        It would be suicidal for Qualcomm to refuse an offer by Apple to buy all they could manufacture. Besides, it's not really Qualcomm who manufactures the chips, they merely design them.

        But, I understand you -- perhaps Microsoft might come along and bribe Qualcomm to not sell "all" their chips to Apple. Then, Apple will look elsewhere and guess who is screwed? ;)
  • Apple's Q2 results: Are Qualcomm, iPhone 5 worries overblown?

    No, they are very valid concerns.
    Loverock Davidson-
    • You're too stupid to know how an iPhone works

      So what do you know
      • Pot.... Kettle...

        You know the rest.
        Hallowed are the Ori
      • Kettle.... Black...

        You must be the black.
  • Ah, the financial analysts...

    "Analysts barely mention the iPod these days because they are financially immaterial to Apple. Misek expects 7.1 million iPods to ship in the quarter."

    Sure - with annual iPod sales of 2 or 3 billion dollars, who could be bothered with such penny-ante stuff? :)
    • The iPod is still strategic...

      They don't sell a huge number of iPods, by Apple standards. But it's still a strategically important product. The reason is simple: teenagers get them. Most parents are not footing the $20-$50/month extra for a smartphone for their kids. But the iPod has become the go-to upgrade to "kiddie" gaming devices like the Nintendo DS. It's helped make iOS the top mobile gaming platform... and it's a very effective gateway drug into the iPhone.

      This is why companies like Samsung have delivered "pocket tablets" or whatever you want to call them... 3G-less smartphones, PDAs, media players with apps, etc. Expose kids to your devices before they buy their first smartphone (and most kids WILL buy smartphones at some point; the dumb phone is slowly dying off), they're more likely to want your phone upgrade.

      And Apple's had this innovation largely to themselves for some years. They might think about re-christening the iPod Touch as the "iPad Nano" or "iPad Mini" or some-such, to boost it's marketing cachet. But it's not going anywhere. And the sales alone don't come close to reflecting its real value.
  • no Apple products

    No Cares about any of it
    • Yet you do

      You care at least enough to post a incomprehensible post about them.
  • Bigger concerns....

    My worry is that Apple's stock price is just reacting to short term concerns related to Apple's sales cycle. If longer term risks such as - 1) iPhone's carrier subsidy dependence and 2) Margin compression due to potential launch of Mini-iPad, haven't adequately been priced in, we could see further corrections at some point.
  • Just curious...

    What exactly is an "iPad-mini"? Didn't we already have one of those? It was called an iPod Touch! Is it really going to be profitable to offer these mobile devices in every conceivable screen size? This is nothing more than a "Goldilocks syndrome"...."this screen is too small...this screen is too big...ah, this screen is just right"! Give me a break...NONE of these devices has a screen big enough to replace my laptop as my primary production device. Sure, I may have the convenience of carrying a small device with me at all times....aka, an i-Phone...however the rest of this stuff is all gimmickry to keep the public always thinking they've got to have the latest gadget!
    number cruncher
    • Sizist....

      So, an 11" MacBook Air screen is so much better than an iPad? Not really.... You're just used to the laptop format. Things will change, are changing, and I suspect iPad format devices will be the vast majority of computing devices in use worldwide within 24 months if not sooner. I know octogenarians who are finding the intuitive to use, and few people need the accuracy or potential extra power of a larger device. With the Cloud, no one needs large hard drives any more either - except cloud providers!
  • mac sales are light

    I think this reflects the veiw that apple are being seen less and less as a computer company and more as a manufacturer of devices. I wouldnt be surprised if apple exit the PC business altogether in the future, maybe as soon as the next 10 years. And no the iPad is not a personal computer.
    Scarface Claw