Q1

Century Financial Brokers

25/04/2012

Apple’s Earnings Report

Apple Inc. said Tuesday that its earnings surged 93% in the March quarter, largely powered by stronger-

than-expected sales of the iPhone.

IPhone shipments of 35.1 million units easily surpassed Wall Street’s estimated range of 31 million to 33

million for the period. Shipments of the iPad came in at 11.8 million — on the low side of analysts’

targets, as the company’s newest version of the tablet did not launch until late in the quarter.

Apple shares AAPL -2.00% jumped 7% in after-hours trading following the report. The stock had been in

tailspin, shedding 13% since topping out at an all-time high of $644 on April 10. The shares closed down

2% at $560.28 on Tuesday before the report.

Multiple concerns have weighed on the stock in recent days, including worries about the subsidies that

wireless carriers pay to sell the iPhone, as well as a shortage of 28-nanometer chipsets used in

smartphone devices from Qualcomm, an Apple supplier. Profit taking was also a likely factor, as the

stock had run up by 59% for the year when it hit its high.

With these strong results, it sets up the company very well for the months ahead, with the iPhone 5

coming. Per usual practice, Apple offered highly conservative guidance for the current quarter that was

below analysts’ forecasts. If they have half the beat they had this quarter, they’ll still beat their forecast

easily.

For the period ended March 31, Apple reported net income of $11.6 billion, or $12.30 per share,

compared with earnings of $6 billion, or $6.40 per share, for the same period last year. Revenue jumped

59% to $39.2 billion.

Analysts were expecting earnings of $10.07 per share on revenue of $36.96 billion, according to

consensus forecasts from FactSet Research.

Mac shipments came in at 4 million for the quarter — in line with analysts’ expectations — while iPod

shipments totaled 7.7 million. Mac sales fell by 23% from the December quarter, leading to some

analysts wondering if the product is being cannibalized by the iPad.

On a call with analysts, Apple CEO Tim Cook said the PC market is slow overall, and there was likely

some cannibalization from the iPad, but that the Mac still outperformed the rest of the market.

“Finally, and this is most important, is that the iPhone is the best smartphone on the planet to entice a

customer who is currently using a traditional mobile phone to upgrade to a smartphone,” he said,

adding that “this is by far the largest opportunity for Apple” and for carriers.