Edible Apple

Apple Earnings Highlights

• Apple reached its goal of selling 10 million iPhones in 2008
• Apple sold more iPhones this quarter than RIM did Blackberry’s
• Apple sold more Macs this quarter (2.6 million) than they did in any other previous quarter
• Apple set a record for most iPods sold in a non-holiday quarter
• Apple will sell its 200 millionth app from the iPhone app store tomorrow

Apple today reported its Q4 earnings and posted revenue of $7.9 billion and earnings of $1.26 a share. Analysts were expecting revenue above $8 billion, but Apple was able to post an impressive profit of $1.14 billion on slightly lower than expected revenue, representing a 26% increase from Q4 of last year. Apple also reported that it sold over 2.6 million Mac’s, which represents a 17% increase over the same quarter a year ago. Apple Mac sales came in just below what analysts were expecting, with some predicting Apple would have a blowout quarter with Mac sales over 2.8 million. iPod sales were more or less in line with what analysts were expecting, coming in at just over 11 million iPods sold.

With respect to the all-important guidance that analysts look for, Apple noted that with today’s tough economic market, it’s difficult for them to predict what to expect in the future. As such, Apple didn’t provide specific guidance, but rather provided a range of guidance for the next quarter, informing investors to expect earnings anywhere between $1.06 to $1.35 per diluted share on revenue somewhere between 9 and 10 billion dollars.

In an Apple press release, Steve Jobs noted:

“Apple just reported one of the best quarters in its history, with a spectacular performance by the iPhone—we sold more phones than RIM. We don’t yet know how this economic downturn will affect Apple. But we’re armed with the strongest product line in our history, the most talented employees and the best customers in our industry. And $25 billion of cash safely in the bank with zero debt.”

Though Mac sales came in slightly lower than what some bullish analysts were expecting, 2.6 million Macs represents the most number of Macs Apple has ever sold in any quarter in its history. Moreover, Apple sold more iPhone’s in the past quarter than it had in all previous quarters combined. It was noted during the conference call that if Apple didn’t defer its iPhone revenue over a period of 24 months, then the iPhone would account for 39% of Apple’s revenue this quarter.

Points of interest from the conference call, with Steve Jobs making a surprise appearance:

• Apple has already succeeded in selling more than 10 million iPhones during the 2008 calendar year, and there are still 2 months more to go.
• 11 million iPods is a record for a non-holiday quarter
• The iPod continues to gain mp3 player market share
• Over half of all Macs sold in retail stores were to customers new to Apple
• Tax rate was lower than expected due to better than anticipated international sales
• Over 65 million iTunes accounts
• Steve Jobs notes that Apple will soon sell its 200 millionth app from the iPhone app store tomorrow
• Apple has 25 billion dollars in the bank and no debt
• Shipped iPhones to 51 countries this quarter
• Apple doesn’t want to create a price umbrella under the iPhone
• Margins this quarter were much better than expected
• Sales to K-12 schools were down 7% year over year, and California school sales in particular were down 28% due to local economic conditions.
• Shipments of Macs were lower, Apple believes, due to consumers waiting for product refresh. Saw considerable rebound in sales after new MacBook models were released last week.

Steve Jobs also noted that Apple outsold RIM this quarter (6.9 million iPhones vs. 6.1 million BlackBerrys), and he was pretty excited about it. “They’re a great company and they make great products.” Wow, you don’t hear Jobs giving props to other companies too often. He also noted that on revenue, Apple is the third largest handset manufacturer, “not bad for being in the market for only 15 months”.

• There’s a question regarding Apple stock re-purchase, and what Apple is going to do with all its cash in the bank. Jobs mentions that now is a good time to be a company with money in the bank, doesn’t mention stock re-purchase, and is comfortable with Apple’s cash situation.
• Steve Jobs is asked if he’ll be returning for future conference calls? “Not likely.” He says Tim and Peter do a great job.
• Question regarding what percentage of iPhone sales were to new users vs. customers who were upgrading from first gen iPhones. Apparently that’s confidential information between Apple and AT&T
• Apple will continue to expand iPhone expansion in other countries, with plans to be in over 70 by years end.
• Another question about Apple’s cash and if it might acquire other companies – Jobs: “There will be significant opportunities”
• In response to a question about cheaper Macs, Jobs noted “We don’t know how to make a $500 dollar computer that’s not a piece of junk” and that Apple focuses on delivering increased value in its products, not less.
• Jobs: “We don’t try to be every thing to everybody”
• Jobs: Apple TV is still a hobby, experimenting with it has slowed down. Believes it will continue to be a ‘hobby’ in 2009.
• Steve Jobs, in response to a question about iPhone innovation and the potential for different models: “As software becomes the differentiating technology of this product category, people will find that 100 variations presented to a software developer isn’t very enticing.. We’re extremely comfortable with our product strategy, and we approach it as a software platform”
• With respect to Netbooks, Jobs noted that it’s a nascent category, but Apple has some interesting ideas should it evolve
  
• With respect to tablets and touchscreens, the response was, you guessed it, “We can’t talk about future products.”

And with that, the conference call is over!

After hours, Apple’s stock is up 12 points and is trading at 103.