Apple's second quarter blowout: iPhones, Macs carry the day; iPad, iPod units light

Apple's second quarter blowout: iPhones, Macs carry the day; iPad, iPod units light

Summary: Apple's fiscal second quarter results were well ahead of expectations as the company sold more iPhones and Macs than expected. Apple's iPad units looked light relative to expectations.

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Apple's fiscal second quarter results were well ahead of expectations as the company sold more iPhones and Macs than expected. Apple's iPad units looked light relative to expectations.

The company reported earnings of $5.99 billion, or $6.40 a share, on revenue of $24.67 billion. Wall Street was looking for Apple to report earnings of $5.37 a share on revenue of $23.38 billion.

For context, Apple's revenue a year ago was only $13.5 billion.

By the units:

  • iPhones: Apple sold 18.65 million iPhones in the March quarter, up 113 percent a year ago. Piper Jaffray analyst Gene Munster was expecting 16.2 million and the consensus view called for 16.6 million units. That pop in iPhone units indicates that additional distribution at Verizon was a big help. Meanwhile, AT&T kept selling a lot of iPhones.
  • iPads: Apple sold 4.69 million iPads in the March quarter. The timing of the iPad 2 launch and supply constraints made this figure a total wild card. Wall Street was looking for 6.2 million iPads in the quarter. Munster had 5.5 million. Given the uncertainty around supplies, the real iPad sales focus will be for the June quarter.
  • Macs: Apple sold 3.76 million Macs in the March quarter. Analysts were expecting 3.6 million.
  • iPods: Apple sold 9.02 iPods in the quarter. Analysts were looking for about 10 million.

Apple's outlook fell in line with historical norms. Simply put, Apple lowballs its outlook. The company projected earnings of $5.03 a share on revenue of $23 billion. Wall Street was expecting third quarter earnings of $5.25 a share on revenue of $23.82 billion.

In a statement, CEO Steve Jobs said the company was "firing on all cylinders." Jobs said the company will "innovate on all fronts throughout the remainder of the year.

On a conference call with analyst, CFO Peter Oppenheimer made the following points:

Key points from Oppenheimer:

  • Mac sales have outperformed PC growth for 20 consecutive quarters. MacBook Air and MacBook Pro led the sales charge. Mac channel inventory was between 3 and 5 weeks. Oppenheimer said:

The growth in Mac sales was fueled primarily by the continued great popularity of the MacBook Air, which was updated in the December quarter, as well as very strong sales of MacBook Pro.

  • Americas and Asia iPhone sales doubled year over year. Oppenheimer said that Apple was able to boost capacity. Apple has 186 carriers in 90 countries. iPhone channel inventory was 4 to 6 weeks.
  • 88 percent of large enterprises deploying or testing iPhone.
  • On iPad, Oppenheimer said there was distribution in 59 countries. "We sold every iPad 2 we could make in the quarter," he said. He said CIOs continue to embrace the iPad.
  • Apple will open 40 new retail stores in 2011. Three quarters of those stores will be outside the U.S.

Tim Cook, operating chief of Apple, said there wasn't any supply or fiscal impact due to Japan's earthquake in the March quarter. Cook doesn't see any impact in the fiscal third quarter. Apple sources from multiple vendors in Japan and has been able to create alternate plans. Cook said it will stick with suppliers in Japan. However, "the situation remains uncertain," he said.

Other points from Cook:

  • On the iPad 2, Cook said he was pleased with the manufacturing ramp and confident that the company could meet "staggering demand." Cook added he's confident company "can produce a very large number of iPads in the quarter," but stopped short of saying supply and demand would be balanced.
  • Cook added that Jobs remains on medical leave, but executives see him regularly and that he is involved in all key decisions.
  • Regarding the Samsung lawsuit, Cook said Apple is the company's biggest customer. He expects a strong relationship to continue. However, Apple couldn't work out its patent problems behind the scenes so went to court.

Shares gained in afterhours trading, but remain off the 52-week high above the $364 mark.

Key data points:

  • Research and development spending in the quarter was $581 million, up from $426 million a year ago. For the six months ending March 26, Apple spent $1.15 billion on R&D.
  • Apple had $15.97 billion in cash and another $13.35 billion in short-term marketable securities.
  • Revenue in Japan was down 4 percent sequentially.
  • iTunes-related revenue was $1.63 billion in the quarter.
  • Apple's Mac mix continues to move toward notebooks over desktops.

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

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60 comments
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  • RE: Apple's second quarter blowout: iPhones, Macs carry the day; iPad, iPod units light

    Kudos to Apple, nice job.
    daikon
    • Hopefully investors won't dwell too much

      @daikon
      on tablet sales and look at it as a whole. If investors believe tablets are the future and see sales light, who the heck knows what they'll do, stock wise.
      John Zern
      • RE: Apple's second quarter blowout: iPhones, Macs carry the day; iPad, iPod units light

        @John Zern

        Who knows with Wall Street, but those numbers are monstrous. Especially year-over-year.
        Rich Miles
      • RE: Apple's second quarter blowout: iPhones, Macs carry the day; iPad, iPod units light

        @John Zern
        Oh who cares. The market relies on people looking at the same information and going one way while some go another.

        Lighter than expected iPad sales: a phenomenon, to be repeated annually, of being the post-Christmas quarter? An unofficial Osborne effect? (That'd be why I wanted and did not get one early this year.) The fad is over, run, run, the sky is falling? Those millions of missing iPad buyers are Xooming merrily as we speak? (And "Wall Street" and Munster will now take up the Android tea leaf reading gig? Oh please, please, please, make this so.)
        DannyO_0x98
      • RE: Apple's second quarter blowout: iPhones, Macs carry the day; iPad, iPod units light

        @John Zern If you would have read farther down in the article, you would have seen this quote: "We sold every iPad 2 we could make in the quarter".

        It's not that they couldn't sell ipads, but that they weren't able to produce enough to meet demand and sales projections.
        K B
      • It's a miracle!

        @John Zern
        You actually managed to resist bashing Apple and Linux, or praising Microsoft in a post. Amazing. Did it hurt, dear?
        rahbm
    • RE: Apple's second quarter blowout: iPhones, Macs carry the day; iPad, iPod units light

      @daikon
      18 million iphones in 3 months??? what about the antenna issue!!
      Hasam1991
      • RE: Apple's second quarter blowout: iPhones, Macs carry the day; iPad, iPod units light

        @Hasam1991 Exactly. There is no antenna issue. You can make any smartphone lose some reception in poor areas if you grasp it just so. However, in the real world, this isn't an issue
        oriorda
      • RE: Apple's second quarter blowout: iPhones, Macs carry the day; iPad, iPod units light

        @steftheref,
        "You can make any smartphone lose some reception in poor areas if you grasp it just so. However, in the real world, this isn't an issue "
        Two of my familiy recently bought iPhones and have the problem with the antenna. So the problem still there, even though it's "solved" by using a case. And you can have the same issue with other phones, but with the iPhone the problem is worst because of the antenna location.
        dvm
    • And for 1/4 the R&D spend of another competitor

      Can't say investors haven't been warned, despite many of the ZDNet talkbacker's denial;-)

      A company that releases solid products will continue to grow revenues. A surprise to some.
      Richard Flude
      • As GM and IBM did in their heyday.

        @Richard Flude
        but with you repeating the same thing time after time like it's relevant, the one thing here IS clear:

        You really don't understand what's your talking about but that's OK, we'll let you keep pretending.

        We need the laugh you supply! :)
        Will Farrell
      • what's with your R&D stick anymore?

        @Richard Flude <br>How much R&D does it take to upgrade a camera in a phone as opposed to creating an entire online office suite? how much R&D does it take to shop for smaller or cheaper components vs creating a full body motion sensor?<br><br>It's clear that what happens in this industry is WAY over your head, that much undeniable!<br><br>You should just change your name to Donnieboy2, you know and make about as much sense!<br>
        Will Farrell
      • Funny you saying that

        [i]As GM and IBM did in their heyday.[/i]

        Considering that Micro$oft is in the same position as they were in their heyday. Huge monopolies that became dinosaurs towards the end.

        If you really think the situation with M$ will go on forever, I have a bridge to sell you. All empires eventually crumble. That's a historical fact. It comes down to a matter of when.
        LTV10
  • ? Everyone on Earth owns 2.7 iPhones?

    [i]iPhones: Apple sold 18.65 billion iPhones in the March quarter,[/i]
    UrNotPayingAttention
    • RE: Apple's second quarter blowout: iPhones, Macs carry the day; iPad, iPod units light

      @chmod 777 I own 12,000 myself, I'm probably skewing the numbers.
      paferg
      • RE: Apple's second quarter blowout: iPhones, Macs carry the day; iPad, iPod units light

        @paferg
        Certainly an interesting statistic......
        hoaxoner
    • billions-schmillions

      @chmod 777 Yep - every person on the planet bought at least 3! ;-p Billion = million.
      technoracle
    • RE: Apple's second quarter blowout: iPhones, Macs carry the day; iPad, iPod units light

      @chmod 777 Obviously the guy who wrote the article has been working on our Federal debt. they don't use "millions" anymore.....
      larrycivic@...
    • RE: Apple's second quarter blowout: iPhones, Macs carry the day; iPad, iPod units light

      @chmod 777 Nice, talk about padding the numbers! :-D
      slickjim
    • Purchasing Fractional iPods

      @chmod 777 What I'd like to know is who bought 0.02 iPods. What's that amount to, just the power button?
      cnet@...