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Apple Beats Estimates

Posted on Thursday, Jan 22nd 2009

Yesterday, Apple reported strong first quarter results that were driven by strong Mac sales and better-than-expected iPod sales. After IBM’s results this week, it is now Apple’s turn to beat analyst estimates and its guidance of last quarter. As usual, its outlook was short of analysts’ estimates.

Apple posted record revenue of $10.17 billion, a 5.8% growth, and net income grew 2% to $1.61 billion or $1.78 per share. Analysts were expecting earnings of $1.39 on sales of $9.76 billion. Apple had forecast revenue between $9 and 10 billion and EPS between $1.06 and $1.35 last quarter. Gross margin was 34.7%, same as last quarter. Cash flow from operations was over $3.9 billion, and Apple ended the quarter with $28.1 billion in cash reserves.

Mac sales grew 9% to 2.5 million, driven by the success of the new MacBook and MacBook Pro introduced in October. Analysts expected sales of 2.4 million Macs. Portable sales grew 34% while desktop sales declined 25%, compared with last year’s desktop sales growth of 53%. Mac growth in the US was just 2% while international growth was 16%.

The iPod continued to be a hit, achieving sales of 22.7 million, up 3%. Analysts were expecting sales of just 18.6 million iPods in the quarter. In December, the iPod’s share in the US MP3 market was over 70%.

Apple sold 4.4 million iPhones, up about 88% y-o-y but down 36% q-o-q. Analysts were expecting sales of 5 million iPhones in the quarter. The company sold a total of 13.7 million iPhones in calendar year 2008, surpassing its target of 10 million. It has also met its goal of selling the iPhone in over 70 countries. Recognized revenue from iPhone handset sales, accessory sales and carrier payments was $1.25 billion compared with $241 million last year. The sales value of iPhones sold was over $2.6 billion. Read more about the impact of the iPhone on the handset market in the Handset Sector Overview.

In the absence of Steve Jobs, who is on medical leave, Chief Operating Officer Timothy Cook will be handling day-to-day operations. Asked to comment on competition from Google’s Android and the much appreciated Palm Pre, Cook said, “We like competition. As long as they don’t rip off our IP – and if they do we’re going to go after anybody that does.”

For Q2, Apple expects revenue to be between about $7.6 and $8 billion, EPS in the range of about $0.90 to $1, and gross margin to be about 32.5%. Analysts expect revenue to be $8.19 billion and EPS of $1.12. For the past nine quarters, Apple’s guidance has missed analyst estimates and then gone on to beat estimates in the next quarter. So, we can perhaps expect the same next quarter, too.

The stock is trading around $83, and in after-hours trading it has jumped to about $90. Market cap is around $73 billion. It hit a 52-week low of $80 on November 20.

Chart for Apple Inc. (AAPL)

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