Apple Reports Much Stronger Quarterly Profit Than Expected
Strong sales of Macs and iPhones and unexpectedly high gross margins boosted Apple’s quarterly profit past Wall Street forecasts, Reuters reported.
Apple’s strong 13 percent jump in fiscal third-quarter net profit continues to defy the global recession, as the company sold more than seven times as many iPhones (5.2 million units) than it did last year.
Andy Hargreaves, an analyst at Pacific Crest Securities, said Apple’s numbers were great.
“Their gross profits continue to surprise people and there is a return to product momentum … a return to growth in the Mac business. And then the iPhone is doing tremendously well and that is a potent combination," he said.
Up from $1.07 billion, or $1.19 a share, in the year-ago period, Apple reported a net profit of $1.23 billion, or $1.35 a share, for its fiscal third quarter ended June 27.
According to Reuters Estimates, Apple’s earnings per share beat by far the average street forecast of $1.18.
With new product refreshes and lower prices, both Mac and iPhone sales beat analysts’ expectations, while iPod shipments were toward the low end of forecasts.
Apple reported it sold 2.6 million Macs, up 4 percent from a year ago, and 5.2 million iPhones in the June quarter, during which the company launched its third-generation iPhone 3GS and cut the price on the second-generation model to $99.
Although the iPhone is traditionally a consumer device, nearly 20 percent of Fortune 100 companies have bought at least 10,000 units.
Apple said it is unable to make enough iPhone 3GSes to meet demand — a shortfall the company said it is working to address.
Tim Cook, Apple’s Chief Operating Officer, said the company is "years ahead of other people" in its competitive position in the growing smartphone segment.
Apple said the install base for the iPhone and the iPod Touch is now 45 million.
Frost & Sullivan analyst Ronald Gruia said the iPhone is the biggest driver right now because the profitability is really high and it has been an absolute success.
But given the product price cuts and the trend of higher component costs, there had been some concern about margin pressure heading into the results.
Mac units rose even though revenue in the segment fell 8 percent from a year ago, as average selling prices came down.
But Apple posted a gross margin of 36.3 percent, above the 34 percent some analysts predicted. That compared with 36.4 percent in the last quarter and 34.8 percent a year ago. The company saw margins at 34 percent in the September quarter.
While component costs rose, Apple said it wasn’t as much as it expected and the company spent less than it planned in several areas.
Kaufman Bros analyst Shaw Wu said the overall takeaway is that Apple continues to execute in this tough environment.
"They do the hardware, software and service, and that really allows them to have a leg up against competitors," he added.
The consumer appeal of Apple’s products has endured despite a troubled economy that has dented sales at competitors selling less expensive products.
However, Apple reported weakness in education, one of its key markets, but relative strength in consumer demand.
Meanwhile, sales of iPods were down 7 percent on the year.
Apple shipped 10.2 million iPods in the quarter. Analysts reported alternative catalysts as the possible cause, with the expected launch of an iPhone in China and a rumored tablet PC or Internet device in the works.
The company hopes to have an iPhone in China within a year, according to Cook.
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