Earnings Cheat Sheet: Apple Still Raking in the Dough, But iPad Sales Disappoint

Apple designs, manufactures, and markets such popular products as Mac computers, iPod music devices, iPhones, iPad Tablets as well as various accessories for these products. The company sells these products through retail partners (i.e. Best Buy, AT&T, MacMall), its own website, and a network of more than 300 Apple stores.

Given the success of the above products, there are very few people who haven’t heard of Apple. A company once left for dead (the stock was <$2 in the mid-$80’s), Apple is now the most valuable technology company in the technology company in the world (see chart 1). Earnings expectations were clearly high, as the stock hit its all-time high today, and is up over 26% since the end of the last quarter.

Apple reported Q4 revenues and earnings of $20.3bn and $4.64, respectively. Both numbers are well above guidance, which were $18bn and $3.44. Apple is notorious for providing conservative guidance, and has beaten its guidance by over 10% on average for many quarters.

This quarter set records on a number of fronts – – most macs sold; most iPhones sold; most iPads.

Apple sold 3.89mm macs, up 28% over last year’s Q4
Apple sold 14.1mm iPhones, up 91%
Apple sold 9.05mm iPods, down 11%
Apple sold 4.19mm iPads (didn’t exist last year).

Most of these numbers were within expectations; the one possible disappointment was in iPads, which were product constrained in the quarter. Most reports say that product availability is significantly better, and demand is still very strong for the product.

Guidance for the next quarter was for revenues of $23bn and EPS of approximately $4.80. Consensus expectations are for earnings of just over $5.00. However, as stated above, you need to take Apple’s guidance with a grain of salt.

A few comments from their conference call:

Macs – – set quarterly record with 3.9mm Macs, up 27% y/y growth. This was more than double the 11% growth for the industry according to IDC.

iPods – – sold 9.1mm vs 10.2mm last year. Market share is still over 70% of all MP3 players sold in the US. A new lineup of iPods was launched in September for the holiday season.

iPhone – -sold 14.1mm, up 91% vs the 61% that smartphones grew, according to IDC. Now being sold through 166 carriers in 89 countries. Asia, Europe and Japan showed more than 100% growth. The Company also stated that enterprises continue to add the iPhone to their approved device list. “We could have sold more iPhones if we could supply them.”

iPads – – sold nearly 4.2mm devices. Over 65% of Fortune 100 are deploying or testing the iPad. Supply in much better shape going into the holiday season. Perhaps most interesting was Steve Jobs commentary on the tablet market. First, Mr. Jobs does not typically participate on earnings calls. Second, he went out of his way to say that most of the new tablets coming to market are too small (a 7 inch screen has 45% less real estate than the iPad) and will be “DOA.”

Disclosure: Position in AAPL.

Wall St. Cheat Sheet welcomes Marc Baylin to the team!