Majestic Research

Investor's Business Daily

Apple Smashes Q2 On Runaway Sales Of iPhones, Macs

By Patrick Seitz
Published: April 20, 2010

An Apple customer displays the new iPad next to his iPhone in Palo Alto, Calif., on Tuesday. Blockbuster iPhone sales helped Apple blow past Wall… View Enlarged Image

Apple (AAPL) is having a tough time holding on to its iPhones. And that’s not just a reference to the company engineer who reportedly lost a next-generation iPhone that ended up in the hands of the press.

Apple on Tuesday reported selling 8.75 million iPhones in its fiscal second quarter, up 131% from a year ago and better than many Wall Street forecasts.

Last quarter marked Apple’s highest iPhone sales quarter yet, topping the recent holiday sales period.

Apple also said it earned $3.33 a share for the quarter that ended March 27. That’s up 86% from a year ago and 36% higher than analysts had expected. Sales surged 49% to $13.5 billion, 12% above Wall Street’s target.

Analysts polled by Thomson Reuters expected Apple to earn $2.45 a share on sales of $12.04 billion.

‘Strong Momentum’

Apple’s sales guidance for the current quarter topped Wall Street’s views, but its earnings forecast — notoriously conservative — undershot expectations.

Apple expects earnings per share of $2.28 to $2.39 on sales of $13 billion to $13.4 billion. Analysts are looking for Apple to earn $2.70 a share, up 100% from a year ago, on sales of $12.97 billion, up 33%, according to Thomson Reuters.

“The strong momentum we experienced in the holiday quarter continued in the March quarter,” Apple Chief Financial Officer Peter Oppenheimer said in a conference call with analysts.

Apple shares rose 6% after hours on the earnings news. During the regular session Tuesday, Apple closed down 1% to 244.59.

Apple sold 2.94 million Macintosh computers during the second quarter, a 33% increase over a year ago. It also sold 10.89 million iPods during the quarter, a 1% unit decline.

On a revenue basis, iPhone sales were up 124% year over year in the second quarter. Apple’s revenue for Macintosh computers rose 27% and iPod dollar sales jumped 12%.

Apple said international sales accounted for 58% of the quarter’s revenue, the second straight quarter where Apple got the majority of its sales from outside the U.S. The company got 58% of its sales from overseas in the first quarter, too.

Apple’s gross profit margin was 41.7%, up from 39.9% in the year-ago quarter.

"It’s all positive,” said Tony Berkman, an analyst with Majestic Research, about the quarterly report. “It’s tough to find anything to point to that’s not positive.”

IPhone Boost

Apple’s iPhone sales were particularly strong in Asia and the U.K. last quarter, Berkman said. In the U.S., iPhone sales got a boost from the product being sold in AT&T authorized retailers not owned by the wireless carrier, he says. That started on March 1.

"Things will become more interesting when they release their next-generation phone, presumably at the end of the quarter,” Berkman said.

Apple is widely expected to announce a fourth-generation iPhone in June.

So gadget blogs and tech news Web sites were abuzz this week when Gizmodo got its hands on the yet-to-be-revealed device.

Gizmodo says the phone had been lost at a bar by an Apple engineer. The person who found the phone sold it to Gizmodo owner Gawker Media for $5,000, according to news reports.

The new phone reportedly features a slightly different design and a front-facing camera, likely for video chats. It also has camera flash for a rear camera and a higher-resolution screen.

In a statement, Apple CEO Steve Jobs said he was “thrilled” with the quarterly results and hinted at future products.

“We’ve launched our revolutionary new iPad and users are loving it, and we have several more extraordinary products in the pipeline for this year,” he said.

Apple lately has gotten a lot of attention for its iPad multimedia tablet, which went on sale April 3. With the iPad, users can browse the Web, read and send e-mail, watch videos, play games and read electronic books and publications.

The Cupertino, Calif.-based company said Tuesday it plans to start selling high-end model iPads with 3G wireless connectivity starting April 30.

At the end of May, Apple will make the iPad available in Australia, Canada, France, Germany, Italy, Japan, Spain, Switzerland and the U.K.

It will announce international pricing and start taking pre-orders on May 10.

The Wi-Fi-only model iPads now on sale start at $499 for a version with 16 gigabytes of memory. Step-up models cost $599 for 32 GB and $699 for 64 GB.

Models with Wi-Fi and 3G will cost $629 for 16 GB, $729 for 32 GB and $829 for 64 GB.