Edible Apple

Apple today reported its earnings from its third fiscal quarter and reported earnings of $1.35 a share on revenue $8.34 billion.  Last year during the same quarter, Apple reported earnings of $1.19 a share on revenue of $7.46 billion.

Apple’s solid earnings report utterly destroyed analyst estimates, which anticipated earnings of $1.17 a share on revenue of $8.16 billion.

In terms of specific products, Apple sold 2.6 million Macs for the quarter, 10.2 million iPods, and 5.2 million iPhones.  While quarter to quarter growth for the iPod was down 7%, iPhone growth increased an astounding 626% over the same quarter a year-ago.  Of course, last year at this time the iPhone 3G had only been around for 2 weeks, which helps explain the relatively low number of iPhones sold.

In regards to the Mac, 2.6 million in sales represents the highest number of Macs ever sold for the June quarter and almost eclipsed Apple’s all time record for Macs sold in a quarter which was set last September.  Quarter to quarter growth came in at 4%, which is a remarkable figure considering that IDC and Gartner peg industry sales of PC’s declining 3 and 5 percent respectively.  As noted later in the conference call, this means that Apple is running ahead of the market by 7-9%

Apple’s impressive earnings report also represents the company’s highest reported earnings and revenue for a non-holiday quarter in its history.  Even more impressive was the fact that Apple’s gross margins for the quarter came in at 36.3%, up from 34.8% in the same quarter a year-ago.

In a press release issued by Apple earlier today, Steve Jobs noted,

We’re making our most innovative products ever and our customers are responding.  We’re thrilled to have sold over 5.2 million iPhones during the quarter and users have downloaded more than 1.5 billion applications from our App Store in its first year

Looking forward to the next quarter, Apple COO Peter Oppenheimer projects Apple revenue to come in somewhere between $8.7 and $8.9 billion, with EPS to come in somewhere between $1.18 and $1.23 a share.

Apple is providing a live stream of its earnings conference call here, and we’ll keep you updated on any developing stories.

Okay, the conference call has begun… Peter Oppenheimer and Apple COO Tim Cook are in the house.  Contrary to previously reported rumors, Steve Jobs isn’t in attendance.

– Net revenue was $1.23 billion.

– iPod decline due to reduction channel inventory

– Expects traditional iPod sales to decline over time as Apple cannibalizes the product with the iPod Touch and the iPhone

– Over 8 Billion songs downloaded from iTunes to date

– Apple Retail Stores raked in $1.25 billion in revenue over the quarter, down from $1.45 billion last quarter

– 492,000 Macs were sold at Apple Stores over the quarter. Impressively, half of them were sold to customers who never owned a Mac before

– 22% more visitors to Apple Retail Stores

– Opening first store in France during the holiday quarter

– Margins increased because component costs didn’t increase as much as expected, and relatively weak dollar

– Made a $500 million pre-payment to Toshiba for NAND Flash

Now it’s time for a little Q&A.

Question about AT&T:  “We think it’s an excellent relationship and we’re very happy with it.”

Question about K-12 sales: Consumer spending is doing a lot better than educational spending.

Question about how $99 iPhone is doing: “Significant acceleration in total unit sales” but as expected, no breakdown for sales for specific models.

Question about the Enterprise: “Just the tip of the iceberg for what the iPhone can do for business customers”

Question about Snow Leopard and its low $29 price point: “Snow Leopard is an even a better Leopard.. includes powerful core technologies.. we priced it very aggressively so that all of our users can upgrade to it, and we hope that they do that.”

Question about if the $99 iPhone helped drive sales for the iPhone 3GS? “We’re happy with all iPhone sales.. I think it will take some amount of time… it’s only been a few weeks, I don’t want to make any statements about what’s going to happen in the longer term.”

Question about competing app stores: Tim Cook notes that the iTunes App Store now reaches an installed base of over 45 million users in 70 countries. “We feel extremely good about our competitive position, and continually believe that we’re years ahead of other people.” Cook also notes that Apple still looking to expand distribution in countries its already in, and expand into brand new countries is well.

Question about Netbooks: “Our goal isn’t to build the most computers, it’s to build the best.” Cook notes that they don’t see a way to build a computer you can categorize as the “best” for only $399 and $499.  Also said that many customers who purchase these low priced computers often end up feeling disenchanted with the product and their purchase.

And now a follw-up about netbooks:  Cook says that most people who buy a portable device want a full featured notebook.  Netbooks, Cook says, have weak horsepower, small screens, cramped keyboards and don’t provide a “robust computing experience.”

Question about iPhone activations and International growth: “We don’t release definitive iPhone sales by geography” because it’s competitive information.

Question about when supply and demand will balance for the iPhone: Cook doesn’t want to make any predictions, but doesn’t envision it happening in the short term.

Question about the iPhone in China: “It continues to be a priority project, and we expect to be there within a year.”

Question about “race to the bottom” for iPhone apps: Apple has some ideas to help users differentiate quality apps from the crap. “It’s up to the developer what to charge…”

And that’s it folks. Q&A is ova!

In after hours trading, Apple Stock is up nearly 7 points and is trading at $158.29