Last Tuesday, Apple’s stock
recovered the previous week’s losses after ‘blowout’ second quarter earnings
during late-day trading. The stock
gapped up 7%, driven by EPS of $12.30 (almost doubling year-over-year) versus
the average estimate of $10.02. Revenue
came in at $39.19 billion (year-over-year growth of 59%) compared to Zack’s
Consensus of $36.58 billion. Gross
margin increased 600 basis points to 47.4%.
iPhone sales increased 88% year-over-year to 35.1 million units, fueled
by international demand for the iPhone 4S, notably in China. International sales made up 64% of total
revenue in the most recent quarter. iPod
sales fell 15%, as these sales were partially replaced by the hot-selling
iPhone & iPad. Although, CFO Peter
Oppenheimer said that the iPod still holds about 70% of the market share of MP3
players.
iPad sales were up 151% to 11.8
million units. Although some of these
sales cannibalized Mac sales, management insists that this is not a ‘zero-sum
game’. Education & enterprise are
two promising markets for future growth.
For example, 94% of Fortune 500 companies have used/tested the iPad in
their operations. Sales to domestic
K-12 grades outnumbered Macs by two to one this quarter, after iBooks 2 was
introduced in January. CEO Tim Cook said
that the main reason for cutting the iPad 2 price to $399 was to ‘unlock some
(price-sensitive) educational demand’.
The iPad occupies about 60% of the tablet market, followed by tablets
supporting the Android operating system (32%).
China was a clear catalyst for
international growth during this quarter.
The iPhone 4S debuted in China in mid-January, as the #3 wireless
carrier (China Telecom) was brought into the mix. This should continue to grow, when China
Mobile (#1 carrier) eventually comes into play.
Analysts anticipate Apple to launch a new iPhone (5) this fall, followed
by a TV (iPanel) in the winter. The new
iPhone is expected to support 4G service.
Management reiterated (pending board approval) a dividend of $2.65 to be
paid out at the end of the next quarter.
Revenue guidance was lowered for the
next fiscal quarter (ending in June).
Production was more efficient than anticipated, so revenue that was anticipated
for the next quarter (ending in June) may have been realized in the most recent
quarter. Also, management expects that a
strengthening dollar will hurt revenue levels in the next fiscal quarter.
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