By now the news media has digested the rock-solid quarter from the Steve Jobs-led-innovative bunch in Cupertino, so now its time for the experts to weigh in. First, here's a simple recap of Apple's (AAPL) quarter.
$1.67Billion in profits ($1.82/share) on $9.87Billion in revenue, which compares to $7.9Billion in revenue and $1.14Billion in profits ($1.26/share) a year ago. Considering the street was anticipating $1.42/share, with a whisper number in the $1.60s/share, this is quite the professional thrashing. Even the highest estimate on the street was left in the cold in the $1.70s.
The real kicker here however is when Apple accounts for iPhone sales right away and not under the subscription method. In that instance the company earned $2.85Billion on sales of $12.25Billion. Clearly this company can not be priced based on P/E valuations.
Now for the sales figures.
3.05Million Macs (A new quarterly record)
10.2Million iPods
7.4Million iPhones
All impressive in their own right, considering iPods are by all accounts supposed to be dying off, and iPhone 3GS supply was limited most of the quarter. I'd speculate Apple wants to stock up for the Christmas season now as it steps into its newest market, China. The 3Million Mac number is most impressive, as the company beat its previous quarterly record by 400,000 units, and its not even the Christmas season yet.
Apple has just also announced 2 new iMac desktops, starting at $1200 a newly redesigned entry-level MacBook at $1000, and 3 models of the Mac Mini, setting one of the up to be a home media server type device. This refresh of the desktop line is sure to spur holiday sales into a segment that has been stagnant for sometime as laptops dominate computer sales. In what's still considered a recessionary environment, Apple stands out as a testament to quality, design, innovation and marketing power. The quarterly performance definitely can't be argued with.
The pros had their say before the quarter and the market had its say boosting shares to all time highs over the $202 mark. What do the pros say now? Higher price targets and upgrades galore!
A who's who list of tech analysts that includes firms such as Piper Jaffray, Oppenheimer, RBC, Carris & Co., UBS, Needham & Co. have reiterated, upgraded or raised targets on Apple with UBS being the highest at $280. The love-fest with the electronics maker didn't stop there as targets came in at $277, $275, $260, $235 and so on. Although the numbers the pros give vary, one thing was common-place. Apple is a must-own tech bell-weather.
Just think when they change their accounting! Over the last 4 quarters, non-adjusted profits total $9.77/share vs $6.11/share under GAAP. Roughly a P/E of 20 (now that this calculation makes sense)!
Oh, and the company now keeps 19% of its market cap, about $34Billion in cash in its bank vaults.
Disclosure: Author owns AAPL
20 October, 2009
Apple's Earnings Aftermath
11 September, 2009
Can Motorola follow the Palm path?
In a bit of Deja Vu, the conscious feeling not the forgettable Denzel suspense film, Motorola (MOT) is attempting to pick its phone company off of the balance sheet floor with an attractive new handset. Investors have just seen this same story with PDA legend Palm (PALM), as it used hype from its Pre handset unveiled in January of this year to move the stock from $4 to $14 and save a business that was clearly heading in the wrong direction.
The battle in the smart phone marketplace is very heated, with entrenched competitors Apple (AAPL) and Research In Motion (RIMM) slowly gaining market share but gathering much of the mind share, and more importantly most of the profit margins. Recent stats show those two juggernauts grabbing just 3% of the overall cellphone market but an astounding 35% of all industry profits. And for good reason, the companies sell very expensive but heavily subsidized attractive smart phones.
Motorola, which has been in dire financial shape quarter after quarter for what can only be described as forever, hasn't had a hit in the cell phone space since its popular RAZR handset, and is desperately trying to compete in the profitable smart phone segment. By gutting through a lot of the company, and doing away with historically bad Motorola interfaces the company turned to Google's (GOOG) upstart Android platform for its resurgence.
Android, by all accounts is gaining significant traction since the first HTC handset launched nearly a near ago. The platform has been featured in 3 additional phones headed in the US thus far and rumors peg the number of Android handsets at 20 into 2010. This contrasts with the handful of RIM models available and the 2 current selling versions of Apple's iPhone. Motorola is betting with a lot of the industry that the free Android platform can eventually be as compelling and competitive in an industry feeling the need for consolidation in what is becoming an age of mobile applications. If your phone doesn't have applications available its simply not as good, and the beauty of Android, as far at Moto is concerned, is that it doesn't need to worry about pumping resources to create an application hub. The reach of Google is already doing just that, granted it is nowhere near the size of Apple's AppStore, but Android does boast the 2nd biggest mobile application catalogue. Nothing to scoff at.
Enter the Motorola Cliq, the world's first social phone, as the company claims. The phone is built on Android, but Moto's designers have layered an interface that directly ties in a user's Facebook, MySpace and Twitter contacts and status information. The social aspects of the phone are sure to resonate with a younger smart phone buying public and Motorola has shown it can indeed build something of higher quality. Will the phone be able to compete in the space? Sure, but will it gain any significant market share? At least one analyst seems to think so, as a note was published putting 4th quarter Cliq sales at about 750,000 or an estimated 5% of Moto cell sales. 5% may not seem that significant, but with a hefty subsidy, Motorola could start to see some real revenue from its new headlining handset. And after all, Moto essentially bet the company on Android less than a year ago, so we're guaranteed to see several handsets leveraging the new interface.
While specs are impressive, price will be a key differentiator for consumers. In the age of the $99 iPhone 3G and the higher capacity $199 iPhone 3GS, it is sheer lunacy for other players to think they can charge more and gain any sort of traction with consumers. Thus far though, Investors are jumping in and believing in the robot that will eventually have come to save Motorola from the brink. Shares are up 7% today and gained more than 10% since the device was officially announced. Here we go again?
Disclosure: Author owns AAPL, GOOG
21 July, 2009
Apple earnings on tap after Tuesday's close. [Update]
Update: Apple's reported earnings included.
What can Apple Investors and traders expect after the bell today as one of tech's giants reports its June quarter? Well if one thing is certain with Apple, each line of business will be speculated on ad nauseum starting at about 4:30PM Eastern Time.
Likely much of the focus will be on the Mac and iPhone businesses. New price cuts for Mac Computers were implemented recently and according to shipment data and analyst reports, this could be a driver for higher unit sales and perhaps, less than hopelessly conservative guidance for September. The launch of the iPhone 3GS was a great success in the middle of June, which will likely prop unit sales significantly above previous expectations, however comparisons against the iPhone 3G launch are far more difficult as its launch window fell at the beginning of the July-September quarter of last year.
Of course, analysts will ask the company about Steve Jobs, who returned to work towards the tail end of June, after a 6 month medical leave. The company has come under intense scrutiny for not commenting on the health of its CEO, however, it goes without saying everyone in the extended Apple community hopes for good news for a long time to come on that front.
So, to the quarter. The average analyst estimates paint a picture of Profits at about $1.17/share on Revenue of $8.2Billion. Slowly as the quarter has come along, analyst numbers for Apple's unit sales have crept up and with that too went the Revenue target.
Year over year comparisons vs estimates for the quarter are as follows:
- 2008 Macs: 2.496Million Units vs 2009 Macs: 2.5Million Units
- 2008 iPods: 11.011Million Units vs 2009 iPods: 9.5Million Units
- 2008 iPhones: 717,000 Units vs 2009 iPhones: 5Million Units
- Macs: 2.6Million Units
- iPods: 10.2Million Units
- iPhones: 5.2Million Units
While those 3 major product lines represent the bulk of Apple's cash creation business, not to be overlooked are the percentage of revenue that is derived by iTunes, the AppStore, Software and other accessories. Last year the Music, Software and Other categories of Apple's business represented $1.76Billion in Revenue.
Revenue Breakdown for June quarter 2008
- Macs: $3.60Billion
- iPods: $1.68Billion
- iPhones: $419Million
- Music, Software and Other: $1.76Billion
While it will be hard to maintain gross margins of 34.8% given price cuts on the Mac line and the back to school iPod Touch promotion, it is possible for Apple to maintain these levels given the increased presence of the iPhone in terms of Revenue and Profits.
Total iPhone units sold to date represent 21.17Million Units and with another 5Million units estimated in this quarter it'll bring the total to about 26Million units sold to date and given Apple's deferred Revenue accounting this running total is very important as all iPhones are still contributing 1/8th of their sale price to this quarterly report.
WC Power Tech Fund Investment Blog Revenue estimates for Apple's Quarter:
- Macs: $3.3Billion in Revenue vs. Actual Mac Revenue of $3.329Billion
- iPhone: $2.1Billion in Revenue vs. Actual iPhone Revenue of $1.689Billion
- iPods: $1.25Billion in Revenue vs. Actual iPod Revenue of $1.492Billion
- Music, Software and Other: $2.1Billion in Revenue vs. Actual Other Revenue of $1.827Billion
Apple's results:
- $8.34Billion in Revenue
- $1.38 Basic EPS (890Million Shares) & $1.35 Diluted EPS (909Million Shares)
08 June, 2009
Apple cuts Mac prices, unveils Software and new iPhone at WWDC
The yearly developer showcase that is Apple's (AAPL) Worldwide Developer Conference (WWDC) kicked off with a keynote, once again sans-Jobs, but was packed with several software and hardware announcements.
Consider Palm's (PALM) highly touted Pre smart phone sold well in its first weekend the landscape for telecom mind share had shifted away from Apple for at least a short while. Analysts early estimates point to sales of about 50,000 Pre devices in the first weekend for Palm, which compares to about 270,000 devices when the original iPhone went on sale and 1,000,000 units for the iPhone 3G. While it may be unfair to compare launches since Sprint is a much smaller carrier compared to AT&T, and the iPhone 3G launched in a multitude of countries, its the media that counts. Palm made a good sized dent during the Pre's announcement, sales will have to continue to deliver if it hopes to turn that dent into a crack.
But when Apple takes the stage for any event, competitors in each line of business must be anxcious, hoping to be able to breathe a sigh of relief as the rumors come and go with little to no surprises. At today's event, it seems every business Apple is in, it made headaches for its competitors.
The Computer Hardware business: Apple reduced pricing on virtually all of its machines, turning the well designed aluminum laptops into a family of MacBook Pro machines starting at $1199 for the 13 inch computer formally known as simply a MacBook. The slim MacBook Air also got a price cut and Apple kept the $999 price point on the previous generation white plastic MacBook. The only model in the line to keep only the MacBook name.
The Computer Software business: Mac OS X Snow Leopard, branded and versioned like a full OS upgrade, was priced like a going out of business sale. $29 for the next version of Apple's Operating System due in September, has got to make the folks at Microsoft (MSFT), who are rolling out Windows 7 a month later, a little bit edgy.
The Phone business: Apple, having repeatedly said, didn't want to leave a price umbrella for competitors has finally publicly brandished an iPhone on the world for $99. While unveiling a 'newer, better, faster, stronger' iPhone 3GS, sounds like a Porsche doesn't it, the company kept its $199/$299 pricing for the new models, setting the existing iPhone at the magic 99 figure. This puts tremendous pressure on the makers of Blackberries, and Androids, and especially the Pre, which is $199 after a $100 rebate.
Many hoped, Steve Jobs would make at least a minor show-stopping appearance, the rumor mill still has Apple's iconic CEO returning to work at the end of the month, which will put several analysts and many potential investors at ease. Apple's year-to-date run up of 69% has showed that Investors feel the company can survive without Steve or they are already sure he will return. However, the company still stands $60/share away from those gaudy 2007 highs, with a business models that combined are selling more devices than ever.
Disclosure: Author is long AAPL
