Apple Blows Way Past Analyst Projections for Q4
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Apple has long exceeded expectations, and has a habit of underestimating its quarterly figures so it can surpass them handsomely. But its fourth quarter figures were a huge blow-out even by its own standards.
For the quarter ended December 26, 2009, Apple (NASDAQ: AAPL) reported earnings of $3.37 billion, or $3.74 per share, a 50 percent surge over the $2.50 EPS reported in the same quarter in 2008. Revenue was $15.6 billion a 32 percent climb over the $11.8 billion in the December 2008 quarter.
It handily blew past analyst projections. A consensus estimate from analysts surveyed by Thomson Reuters projected EPS of $2.07 on sales of $12.0 billion.
Apple adopted a new method of accounting for sales of the iPhone and AppleTV. Instead of recognizing the revenue over a two-year lifespan of the device, Apple recognized the full dollar amount at the time of sale. And given this was the Christmas season, where many of those devices were given as gifts, Apple's timing was perfect.
In a conference call with analysts, CFO Peter Oppenheimer said that Apple's historical earnings would be retroactively adjusted going forward to reflect this new accounting method, so the year-over-year comparisons would be accurate.
"We're extremely pleased with the results of our quarter, particularly with our thirty-two percent revenue growth and fifty percent income growth and we are excited with our product pipeline," Oppenheimer said.
Apple sold 3.36 million Macintosh computers during the quarter, representing a 33 percent unit increase over the year-ago quarter. Remarkably, it was desktop sales that drove things. MacBooks account for about two-thirds of Mac sales, but with new Intel Core i5 iMacs on the market, iMac sales rose 62 percent year-over-year while MacBook sales rose just nine percent.
COO Tim Cook noted that the Mac growth rate of 33 percent is twice the current growth rate of the market, and he "doesn't want to predict" how long that will last. "In some of the markets that we're in, the Mac growth was spectacular. Italy, France, Switzerland and Spain grew forty percent or higher. Australia was up seventy percent, China up a hundred percent. Some markets where we're doing extremely well we'll have to see where it takes us," he told analysts on the call.
In the quarter, Apple had 283 stores, opening 10 new ones and remodeling 32. The stores brought in a total of $1.97 billion, up 13 percent over the $1.75 billion in Q4 '08.
Apple sold 8.7 million iPhones in the quarter, representing 100 percent unit growth YoY and 90 percent dollar growth. The company sold 21 million iPods during the quarter, representing an eight percent unit decline from the year-ago quarter.
However, dollar-wise, iPod sales were up one percent due to the fact that the iPod Touch is now the hot-seller and it's the priciest. iPod Touch sales were up 55 percent YoY.
Apple's strongest market was Asia-Pacific (excluding Japan), which was up 142 percent. The weakest was the Americas, up 15 percent. Japan was up 57 percent thanks in part to the iPhone taking off there in a big way, with sales up 400 percent YoY, according to Oppenheimer. Apple has added 17 more international carriers for a total of 86.
Talk of the iPhone's carrier in the U.S. was short and sweet. When an analyst brought the subject up, Cook defended AT&T. "AT&T is a great partner. We've been working with them since well before we announced the first iPhone. It's important to remember they have more mobile broadband usage than any other carrier in the world. In the vast majority of locations, we think iPhone users are having a great experience," he said.
For the upcoming quarter, Apple projects revenue in the range of $11 to $11.4 billion, down due to seasonality, vs. $9.1 billion (under the new accounting rules) for the March quarter. Oppenheimer said Apple will no longer issue non-GAAP earnings now that it has done away with the old accounting rules.
Margin for the quarter will be 39 percent, with $40 million related to stock-based compensation expenses. Operating expenses will be $1.64 billion.
Oppenheimer said margins for next quarter will be lower for three reasons: a higher component cost environment and other parts costs relative to December; the typical seasonal decline in revenue; and the U.S. dollar has strengthened vs. Q4 '09.
Update adds executive comments from today's earnings call.