Apple's third quarter: All eyes on the iPhone

Apple's third quarter: All eyes on the iPhone

Summary: Apple reports its fiscal third quarter results on Wednesday and all eyes will be on the iPhone and its sales to date. Apple is expected to deliver third quarter earnings of 72 cents a share on revenue of $5.

TOPICS: iPhone, Apple, Mobility

Apple reports its fiscal third quarter results on Wednesday and all eyes will be on the iPhone and its sales to date.

Apple is expected to deliver third quarter earnings of 72 cents a share on revenue of $5.3 billion, but most analysts expect the company to exceed that figure. The third quarter sales target is $6 billion with earnings of 83 cents a share.

But the big milestone will be the number of iPhones sold to date. Only two days of iPhone sales (diary, blog focus, galleries) will be included in the quarter so the financial impact will be minimal.

Instead, folks will be waiting to see how many iPhone units have moved. Mike Abramsky, an analyst at RBC Capital, says that Apple has probably sold 450,000 to 500,000 iPhones in the third quarter. Overall, Apple has likely sold anywhere from 1.1 million to 1.5 million iPhones by July 25, according to Abramsky. JMP Securities analyst Ingrid Ebeling projects iPhone sales of 1 million or so. Inventory levels will also be a hot topic for Apple.

Apple may discuss its revenue split with AT&T, but it's doubtful. Most likely we're left with Piper Jaffray analyst Gene Munster's analysis. However, is reporting another interesting tidbit. According to Scott Moritz's sources AT&T is paying Apple a bounty of $150 to $200 per new customer. That sum is on top of revenue sharing.

While it's tempting to talk about how AT&T is insane for giving Apple that much, there are other businesses at Apple worth watching.

Here's a look at the key data points:

Component pricing: Apple's second quarter was strong largely due to component pricing. The big question: Will that hold in the third and fourth quarters? Abramsky notes that NAND pricing has gained recently and could hurt the fourth quarter outlook.

Mac sales: With the iPhone and iPod folks tend to forget that Apple actually makes computers. Mac sales are still an important revenue driver. Abramsky is projecting $2.4 billion in Mac revenue with 1.6 million units overall. Portables will dominate that mix. That 1.6 million unit figure appears to be the consensus among Apple watchers, but J.P. Morgan analyst Bill Shope predicts 1.68 million Mac units.

Music sales: Apple is expected to ship roughly 9.4 million to 10 million iPods in the third quarter and have revenue of $1.5 billion. Note that revenue may be down slightly from a year ago due to a decline in average selling prices, says Abramsky. Here's another thought though: Monitor iTunes sales. Apple recently went DRM free and it'll be interesting to see if that move had any impact on sales. What's telling: Many analysts have listed iPod sales as almost an afterthought.

Topics: iPhone, Apple, Mobility

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  • I'll admit it I'm a happy camper things seem to be

    going well for Apple my only one true concern is GROWTH. Sometimes a company
    has so much growth and in different area's like computers, iPods, iPhones and
    various software projects like iTunes and Quicktime now Safari for the PC that I do
    worry about stretching resources to thin. But that's a nice change a different thing to
    worry about than in the past...heh heh heh

    Pagan jim
  • Third Quarter equals two days of iphone sales

    It will be interesting to see what bloggers and reporters mention that Third
    Quarter iPhone sales are only for Friday June 29th after 6:00 PM and Saturday June
    30th. I would be many of the Apple Haters will report the number of units sold
    and make it sound like that is up to this point, with out pointing out it is only for
    less than 2 days of sales. Granted an incredible two days - but two days non-the-

    I hope the reporters of ZDNet put in the appropriate info.


    Rob W
    host - Today in iPhone Podcast
    • 146000 activations reported

      way less than expected by analysts
      • With activation problems

        at ATT - unable to handle the overload on their system in some
        places - the "completed" activations might be a fair bit lower than
        the actual sales. Other factors slowing down completed
        activations during the first 30 hours will be the time required to
        move from your previous carrier and I've seen numbers
        suggesting that 25% of iPhone buyers were switching to ATT from
        other carriers.

        I doubt that this is the first time that the market has been so
        focused on 30 hours of sales of any product. Gonna be
        • Where's the beef

          AT&T (T, news, msgs) reported that only 146,000 iPhones were activated in the second quarter.

          Shares of Apple were down $3.75, or 2.6%, to $139.95 at midday on the news, which one analyst called a "reality check" for Apple. Shares had been down as much as $7.15 earlier this morning.

          Apple watchers should get more clarity on iPhone action once the company reports its fiscal third-quarter results tomorrow after the market close. But for now, the AT&T report is giving some investors a case of the jitters.