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Apple CEO Steve P. Jobs holding the elusive white iPhone 4  (Source: The Star)
Company continues to put analyst estimates to shame

Another quarter has rolled around, so did a bullish Apple embarrass the Wall Street analysts yet again?  Such an event has seemingly been a quarterly tradition by now.  But this quarter's earnings reports, while sticking true to tradition in revenue and several other areas, actually fell short of analyst's typically overly conservative expectations in two areas. 

This quarter's earnings will likely be over-scrutinized in the face of much bigger questions facing the trendy gadget maker.  While there'd been a bit of optimism surround the upcoming iPad 2 and availability of a CDMA (3G) iPhone on Verizon, most Apple-related financial chatter over the past two days had centered around the company's CEO, co-founder, and creative guiding hand, Steven P. Jobs taking a medical leave of absence (the CEO has battled cancer over the last decade and is recovering currently from a liver transplant).

A strong earnings report wouldn't completely silence concerns about a possible future Apple leadership crisis, but it might offer a decent distraction.

Apple's official accounting of calendar Q4 2010 earnings trickled in at around 4:30 p.m. on January 18.

Revenue was $26.74B USD, a new record, grossly surpassing the consensus expectation of $24.4B USD and the "high" expectation of $25.5B USD.  Earnings per share (EPS) similarly whipped expectations to the tune of $6.43 USD, versus a consensus estimate of $5.38, and a "high" estimate of $6.02.

IPhone and iPad shipments beat expectations, recording 16.24 million and 7.33 million, respectively, units shipped, versus respective expectations of 15.5 million and 6.2 million.  

If there was one trouble spot in the earnings report, it was the shipments of Mac computers and iPods, which fell short of expectations.  Apple only shipped 4.1 million Macs vs. a consensus of 4.3 million, and only shipped 19.45 million iPods vs. a consensus expectation of 20.3 million.  

The iPod shortfall is perhaps expected -- sales of the portable music player have slumped as tablets and smartphones have boomed, filling many of the niches once filled by the portable music player.  The lower than expected Mac shipments are a bit more troublesome and a sign perhaps that Apple is slowing in its quest to gain ground on industry leaders Dell and HP.  The Mac shipments, while lower than expected, represented a 23 percent increase from shipments a year ago.  The iPod shipments, on the other hand, represented a 7 percent drop.

Despite the couple of weak metrics, the record revenue, strong iPad/iPhone sales, and higher than expected revenue/EPS guidance for Q1 2011 all culminated to a generally positive reception of the report.  While it is early to fully characterize the net impact, Apple stock in resumed after hours trading has swung upwards $7.23 USD/share, a 2.12 percent gain that almost erases a 2.25 percent Tuesday drop, which was driven by the aforementioned leadership concerns.

Apple CEO Steve Jobs, put in a good word, enthusing, "We had a phenomenal holiday quarter with record Mac, iPhone and iPad sales. We are firing on all cylinders and we’ve got some exciting things in the pipeline for this year including iPhone 4 on Verizon which customers can’t wait to get their hands on."

Note: We originally overstated the revenue as $27B USD.  It is actually slightly lower ($26.74B USD).  Some have questioned the analyst consensus surrounding Macs.  We have consulted several different publications, and the figure 4.3 million is consistent across them and appears correct.  Apple also fell short of its own Mac sales predictions.

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RE: Nice
By Tony Swash on 1/18/2011 7:06:44 PM , Rating: -1
Macs are still a tiny tiny tiny portion of a personal computer market

What would rather do, dominate yesterday's business model or tomorrows?

Sell into shrinking markets or growing markets?

And although Macs make up a fast growing minority of personal computers (about 10% if you don't include the iPad) they still manage grab most of the profits. I don't know who is more incompetent the Windows OEMs or Microsoft. Neither seem to have a clue.

Cling onto the past. Its all you have :)

RE: Nice
By semiconshawn on 1/18/2011 9:25:58 PM , Rating: 3
Apple dies with Steve Jobs. I know you know it and so does the Market. They will lose content partners there will be power struggles infighting and slower product cycles. That man runs apple. You just dont replace that with next guy in line. Worship your false god Tony he is about to fall and bring the church down with him.

RE: Nice
By nuarbnellaffej on 1/18/2011 9:35:17 PM , Rating: 1
Dude you're pretty fucked up..

RE: Nice
By dark matter on 1/19/11, Rating: 0
RE: Nice
By semiconshawn on 1/19/2011 4:45:02 PM , Rating: 3
Please point out the non Capitalist enconomies that are inovating new products and moving tech forward.

RE: Nice
By Aloonatic on 1/19/2011 7:51:44 AM , Rating: 2
I think that you might be exagerating slightly. His departure, however it happens, would not be good for the company, of course, however...

.. regardless of what goes on with Macs, in their iProduct line up, they have a pretty good business going that doesn't really need Steve at the helm. I know that people here like to think that everyone who bought an iPod/iPhone/iPad were all brainwashed when they heard Steve's keynote speech and rushed out and bought one of his devices purely because they love his black turtle-neck and blue jeans style, and that he designed and manufactured the prototypes in his garage all by himself, but that's not how it happened.

He's influential and would be missed, but not pre iProduct influential.

RE: Nice
By Shadowself on 1/19/2011 7:51:24 AM , Rating: 1
First, Jobs has never invented *anything*. He has never been the "innovator" at Apple or anywhere else he's been. Every idea for something new and interesting at Apple has been brought to him by others. Jobs' stregth -- and it *is* better than almost anyone else in the field -- is to be able to pick from a bunch of new ideas the few that people will want to buy.

Second, Jobs has been gone twice since his return in the 90s. Apple didn't fall apart either time.

Will Apple be the same without Jobs? No.

However, it might actually be better! Jobs believes down in his very DNA in high margins. The margins are higher than are necessary to keep fueling the research and development to keep the pipeline full of new, and in many cases innovative, products. Who's to say that the next guy (no pun intended) will not lower the margins just a bit to expand the market share AND still fuel the R&D budget too?

RE: Nice
By PrezWeezy on 1/19/2011 5:22:11 PM , Rating: 3
High profit margins give the impression of high quality, rightly or not. But that is what gives Mac's the idea that they are better, the idea that their quality is much higher. You can argue if that is true all you want, but that's why they are thought of the way they are. Also, it is a status thing. Just like owning a Benz. Whether it is true or not doesn't matter, what matters is that if they drop the price, they lose the image, and Apple is built on image.

RE: Nice
By Aenslead on 1/19/2011 11:31:28 AM , Rating: 2
That's why Jobs is getting cloned, so Apple becomes eternal, too.

RE: Nice
By Tony Swash on 1/19/2011 11:43:32 AM , Rating: 1
Apple dies with Steve Jobs. I know you know it and so does the Market.

It seems you are wrong.

Apple shares rose today.

I think we may have just passed an inflection point.

A post Steve Jobs Apple is now a prospect that does not inspire fear or anxiety. During his previous leaves of absence Apple continued to fire on all cylinders. The company has been re-made so well that it no longer need Steve Jobs. I think he will be glad about that.

I very much hope Jobs overcomes his health problems, just like I would hope anybody else would. I also hope that he returns to Apple because I think he has lots left to do and achieve. But whether he does or doesn't return is no longer a make or break deal. Apple is too big, too strong, too powerful and too well run for one man to matter anymore. As I said an inflection point.

RE: Nice
By semiconshawn on 1/19/2011 4:17:51 PM , Rating: 1
Im wrong? Steve Jobs died. Im sorry. Oh wait no im not wrong. Your an idiot.

RE: Nice
By Alexstarfire on 1/19/2011 12:43:32 AM , Rating: 2
IDK if you can really say that just about PCs. Apple certainly makes the most profit when comparing to HP, Dell, Gateway, etc. but Apple is selling both the hardware and the OS at the same time. If you took Microsoft's profit from selling Windows I think we'd have a much better view. IDK how it'd look though. Apple might still come out ahead for all I know.

RE: Nice
By KoolAidMan1 on 1/19/2011 1:58:00 AM , Rating: 2
It is simple. Microsoft is in the software business. Their net profit margins are higher than Apple's because selling Windows, Office, and backend business software carries profit margins higher than any piece of hardware can hope to achieve. Software that is sold in such massive quantities generates enough excess cash to fund Microsoft's numerous loss leaders and experiments in the consumer space.

This is why Apple, despite having higher gross revenue than Microsoft, makes lower net revenue. A phone or laptop or tablet can't possibly make as much percentage per unit sold as a piece of software. It seems inevitable that this will change as there doesn't seem to be any end in the near term to Apple's growth. They double gross revenue on an annual basis while maintaining good (for hardware) profit margins. If Foxconn's iPad sales estimates are accurate (100 million sold by 2013) they should quickly have the highest net revenue in the tech sector as well as the highest gross.

RE: Nice
By Alexstarfire on 1/19/2011 3:14:28 AM , Rating: 2
I'm not exactly sure what your counter-argument is, if there even is one. Surely you can see that since Apple designs the hardware and makes the software that comparing them to HP, Dell, Gateway, etc. just doesn't make sense since they are only hardware companies. The only logical conclusion would be to include Windows OS sales in there as well. It's not like this information would change anything, it would just provide a clearer picture of Windows/PC vs Mac OS/Apple.

RE: Nice
By Azethoth on 1/19/2011 8:25:17 AM , Rating: 2
You do not understand. This has nothing to do with Microsoft or OS sales. Apple sells at premium prices compared to the other hardware manufacturers. They have cherry picked the high end and left the zero-profit low end to the others to bleed over. I do not recall the exact figures but last year some analyst estimated that despite their low overall share of the total shipments pie (10%?), their share of the revenue pie was crazy high, as in 50% or 70% or something.

RE: Nice
By Alexstarfire on 1/19/2011 5:06:31 PM , Rating: 2
I think it's you who doesn't understand because that's not the way I see it. I suppose it probably does make more sense to look at it this way though, since Apple doesn't sell the OS by itself. It really doesn't matter either way. I just thought it'd be interesting information to look at. HP obviously cares about its profit more than the combined PC v Apple/UNIX/etc.

RE: Nice
By KoolAidMan1 on 1/19/2011 8:09:47 PM , Rating: 2
Apple doesn't sell operating systems, they sell hardware bundled with operating systems. Their profit margins are dictated by the fact that they sell hardware, which by nature carry far lower profit margins than software, which happens to comprise almost all of Microsoft's profits.

The only companies you can compare Apple to are other hardware companies Dell, HP, Gateway, Sony, etc etc.

RE: Nice
By Pirks on 1/19/2011 10:23:00 AM , Rating: 2
What would rather do, dominate yesterday's business model or tomorrows? Sell into shrinking markets or growing markets?
My thin and light 14" Asus notebook that works up to 14 hours on a single charge is fueling tomorrow's mobile business model, and the market for such mobile PCs as my Asus grows pretty fast, judging by how many similar thin/light/battery sipping PCs Asus has flooded the market with recently. So yeah Tony, I'm staying with my Asus PC from the future, thank you for your kind words about my PC :P
Cling onto the past. It's all you have.
I also have cheaper and better than Mac 12"-14" ultraportables from Asus and others, which you Macheads will never get, just stop envying us will ya? :)))

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