July 25, 2012

Apple Q3 Call: Earnings Below Expectations

Michael Harper for - Your Universe Online

Yesterday´s Q3 earnings call wasn´t just a fancy, dressed up platform with which to launch Mountain Lion, Apple also, you know, discussed their performance over the last quarter. Bloggers and journalists alike were able to trot out their doom and gloom headlines they´ve been preparing since Jobs came back in ´97 as Apple missed Wall Street´s expectations. The Wall Street Journal, for example, began their piece with “The sky is falling.

Very ominous words for a company who earned $35 billion in total revenue and $8.8 billion in quarterly net profit. Apple fell short of the expectations of those who are on the outside looking in, but it´s hard to believe anyone at Apple is too worried.

Analysts had begun to predict that Apple would see a slight decline in iPhone sales in the days leading up to their earnings call. Talk of the next Apple smartphone is only getting louder as the days march on, and as such, it´s likely many have decided they can wait a few more months to take the plunge.

Before the earnings call, Pacific Crest Securities analyst Andy Hargreaves predicted Apple had sold 25.4 million iPhones in Q3, down from last quarter´s 35.1 million. Apple was able to outsell Hargreaves´ prediction, pushing 26 million phones out the door, representing a 28% growth over the same quarter last year. It´s also worth  mentioning that the same sort of slow down occurred last year as people began to anticipate a brand new iPhone. Though Hargreaves predicted a slowdown in iPhone sales, he also said the next iPhone will be a huge success when it finally launches.

“It´s going to be bad now, but great later,” said the analyst.

Capital Advisors Growth Fund co-manager Channing Smith agrees, telling Reuters, "We expected a lot of consumers will probably delay their upgrade and their purchases until the iPhone 5 comes out," Channing Smith, co-manager of Capital Advisors Growth Fund, said. "We saw a similar trend occur last year with the iPhone 4S."

Apple´s iPad was the biggest point of pride in the Q3 results as 17 million devices were sold since April.

We´re thrilled with record sales of 17 million iPads in the June quarter,” said Tim Cook, Apple´s CEO. “We´ve also just updated the entire MacBook line, will release Mountain Lion tomorrow and will be launching iOS 6 this Fall. We are also really looking forward to the amazing new products we´ve got in the pipeline,” said Cook during the call.

Where Apple did miss, however, is in their total growth. For the first time since 2009, Apple showed signs of slowing in terms of their growth, as revenue only grew 23%, their smallest since June 2009, where their revenue grew 12%.

Apple also blamed their lower-than-expected numbers on slow growth in Western European countries, as CFO Peter Oppenheimer said, "The economy in Europe is not doing well. We think this impacted our results.” Growth in their new Asian and Chinese gold mine was also slowed, as revenue shrank by 22% from the previous quarter, much more than the 3 to 6 percent loss in America and Europe.

All told, Apple makes most of their money from the iPhone, and for years the iPhone was a driving factor in Apple´s growth. Now, with anticipation reaching a fevered peak for the next mobile device, it seems the world is waiting to see just what Apple has up their sleeve. If analyst comments following yesterday´s earnings call can be freely interpreted, Apple will have a stellar Q4 and Q12013.