

Apple Reports Third Quarter Results - yoda_sl
http://www.marketwatch.com/story/apple-reports-third-quarter-results-2012-07-24

======
jpxxx
TL;DR: Exceeded guidance, no blowout.

Mac sales are static, overall iPhone sales softening as the lineup ages, iPads
surging, iPod continues to dwindle, miscellaneous sales remain miscellaneous.

\+ stock buyback next year \+ dividends being issued as expected \+ China
sales exploding

So: a quiet quarter. New Mac OS released tomorrow. Yay!

~~~
hristov
You forgot another one -- estimates missed.

~~~
InclinedPlane
If you can make $8 billion profit in a single quarter and for some reasons the
estimates where higher, that's a problem with the estimators, not with your
business. In 2012 on the planet Earth averaging nearly $4 million in profit
every single hour of every single day is tremendous business.

~~~
tazzy531
Sure, but the stock multiple prices in the estimates. If it can't meet the
estimates, the stock is overvalued.

~~~
myspy
They beat their own estimates, but analysts are proven to be wrong all the
time and the make up some numbers which don't reflect what really happens.

~~~
diminish
Here is a better TL;DR. Apple, missed average estimates for most of the
reported values for iPhone, Mac, EPS, revenues and profit margin, but beaten
its own guidance, which is usually quite low. The stock price was down over 5%
after markets.

Most articles blame the next iPhone for the lower than expected sales. So In 1
year there are 4 quarters, and in the last 2 quarters misses on estimates are
explained by rumours for the next iphone, this year and last year. Finally,
will the current quarter also be worse for iPhone due next release
approaching?

Analysts; please be clever enough to take care of new releases in your
estimates.

------
goatforce5
Oh... also buried in the release - Mountain Lion is released tomorrow:

"We've also just updated the entire MacBook line, will release Mountain Lion
tomorrow and will be launching iOS 6 this Fall. We are also really looking
forward to the amazing new products we've got in the pipeline."

------
goatforce5
The amount of the first dividend in a while has been set.

"Apple's Board of Directors has declared a cash dividend of $2.65 per share of
the Company's common stock. The dividend is payable on August 16, 2012, to
stockholders of record as of the close of business on August 13, 2012."

------
smackfu
Down 5% in after hours trading, although not sure if that is before or after
results.

~~~
_delirium
Looks like after, due to being lower than the average analyst expectations...
had been predicting $37b revenue, vs. actual report of $35b.

~~~
smackfu
They also missed the EPS by a dollar ($9.32 vs $10.35)

~~~
rkrishnakumar
They missed the analysts predicted revenue and EPS, but not their own
guidance: revenue of $34 billion and earnings per diluted share of $8.68. Wall
Street investors go bullish when iPhone sales slow, and bearish when sales are
exploding.

~~~
adavies42
this is traditional: they almost always undershoot the over-expectations

------
asdfdsa1234
Gross revenue and margin rose. Slow iPhone sales were the only weak spot in
the report, which is unsurprising given the age of the current model.

~~~
swalsh
The current model is less then a year old, I think the problem is people are
waiting for 4g.

~~~
ceejayoz
With iPhones, "less than a year old" means "the new one's about to come out".
My two year plan expired a few months back and I'm holding out for iPhone 5,
and I suspect a lot of iPhone 4 purchasers are in the same boat.

~~~
heretohelp
>I'm holding out for iPhone 5, and I suspect a lot of iPhone 4 purchasers are
in the same boat.

Yep. Hi. *waves from a 3g-only Verizon iPhone 4 :(

~~~
zcvosdfdgj
aww... I'm holding an ATT iPhone 4s that says "4g". Maybe Verizon should make
the appropriate payment to Apple for an "upgrade"?
<http://www.pcmag.com/article2/0,2817,2401422,00.asp>

------
vijayr
Almost 43% gross margin, for a (mostly) hardware company !!

~~~
endlessvoid94
I don't really understand how people keep calling Apple a hardware company.
Yes, they make their own hardware (in some cases) but on the record,
repeatedly, everyone at Apple says, all the time, that they treat themselves
as a software company.

~~~
mikeash
To call Apple a hardware _or_ a software company is to miss the point
entirely. Is Ford a wheel company or an engine company?

~~~
betterth
That's not fair, both wheels and engines are hardware ;)

In all seriousness Apple isn't either. They make better software than any
hardware company I know of, and better hardware than any software company I
know.

~~~
mikeash
My point is that both wheels and engines are simply components of what Ford
actually makes, which is cars. Likewise hardware and software are just
components of what Apple actually makes.

Totally agree that Apple isn't either, which was exactly my point.

~~~
user-id
So they're a computer company. Right.

------
thechut
What a bunch of fanboys...

They missed their estimates and stocks tumbled 6% in after hours trading.
That's $33, more than 10 times the dividends they will be paying on that $8B
profit.

~~~
polycom
How did they miss their estimates?

~~~
thechut
"Apple said its earnings per share were $9.32 on revenue of $35 billion.
Analysts polled by Thomson One Analytics predicted earnings per share of
$10.36 on revenue of $37.19 billion."

Via [http://www.mercurynews.com/breaking-
news/ci_21147940/apples-...](http://www.mercurynews.com/breaking-
news/ci_21147940/apples-third-quarter-earnings-misses-wall-streets-
expectations)

It doesn't matter how much money you actually make when you are as big as
Apple, it matters what you make compared to what people (analysts) think and
expect you to make.

Edit: Put wrong quarter numbers, fixed.

~~~
polycom
You said "their estimates" which I took to mean Apples own estimates. Isn't it
tradition for Apple to beat their own estimates, fail to meet analysts
estimates, and having their shares drop for a period of time afterwards? I'm
not a trader though so correct me if I'm wrong.

~~~
astrodust
They're usually pretty good about their own estimates, but they don't manage
"expectations" very well. By way of contrast, Microsoft seems to do this much
better, leading to fewer surprises.

These analysts have their heads up their asses, though, as that's the only
place you could get numbers like this.

------
mladenkovacevic
I guess this week would be a good time to buy some AAPL and wait for the
iPhone 5 frenzy.

------
Steko
From Jacqui Cheng's liveblog of the call on ars:

Q: Can you talk about what your conversations are like with carriers in terms
of pricing, subsidies, etc.?

Tim Cook: (laughing out loud)

I don't want to talk about specifics with carriers, but generally I'd say our
role is to make the very best smartphone in the world that has an incredible
user experience that's far superior than anything else, that customers want to
use every day at the end of the day, carriers want to provide what customers
want to buy the most important thing for Apple is to continue making the best
products in the world. we are maniacally focused on it

------
yoda_sl
From the Press Release: the Company sold 26.0 million iPhones in the quarter,
representing 28 percent unit growth over the year-ago quarter. Apple sold 17.0
million iPads during the quarter, an 84 percent unit increase over the year-
ago quarter. The Company sold 4.0 million Macs during the quarter, a two
percent unit increase over the year-ago quarter. Apple sold 6.8 million iPods,
a 10 percent unit decline from the year-ago quarter

~~~
jusben1369
This caught my eye. 26 million iPhones. Galaxy S III just did 10 million in 6
weeks since launch? That's 20 million in a quarter. Assume the iPhone number
is a blended number too between older and latest model. So did we just see the
first real example of one phone model legitimately challenge the iPhone? The
argument was always that Android success was across so many phones. Now is the
breaking down? Please don't flame me as hater or fan boy and just help me with
the question of whether this is meaningful or flawed.

~~~
fallous
And how much money did the Galaxy S III earn on those 10 million sales vs
iPhone?

I'm no Apple fanboy, but it always amuses me that the Android boosters talk
unit numbers while Apple continues their "BMW" revenues on product. Congrats,
you sold 100 Beetles... our sales of 1 BMW generated more profit.

~~~
btilly
A rule that I learned a long time ago in tech is, "The commodity always wins."

And it seems to work out that way most of the time. If there are two
technologies, and one manages to become a commodity that is installed all
over, that's the technology that you see innovation coming from and the future
coming out of. It is often the worse technology. But it wins.

I don't have a horse in the phone race. But when I see Apple folks talking
about profit margins and Android folks talking about units sold, I'd lay my
money on Android winning in the long run. It may be a worse market to be in
now, it may make a lot less money. But where the users are is where the future
tends to be.

This happens for a lot of reasons. Let me give just one. When teenage kids
(who don't have a lot of money of their own) get a smart phone, they are going
to be given Android devices because it is cheaper. When they play around with
those phones and master them, they will be learning Android. Many will stick
with Android. Others will learn Android, and their first programming
experiences will be with it because that is what they have. And once they grow
up they will be worth a lot more than $0, both as customers or developers. But
they won't be imprinted on iOS.

~~~
rimantas
Please, everyone, when talking about "wins"—do specify, what is won. In this
case—the race to the bottom?

~~~
btilly
What I mean by win is that they will wind up becoming the dominant technology
with the lion's share of the market, revenue, and other companies building on
top of. The also ran technology may survive, but it becomes relatively
insignificant.

For example compare the Mac vs Microsoft Windows. The Mac was better, had
better product margins, etc. Microsoft was the commodity and completely owned
the market.

For other historical examples compare VMS vs Unix, Lisp vs C, OSI protocols vs
TCP/IP, Smalltalk vs Java, traditional client-server vs web apps, CORBA vs
SOAP (vs JSON rpcs), Perl vs PHP, and so on. In many cases the losing
technology was technically much nicer to work with. But the winning technology
won.

For a famous essay reflecting on why, see <http://www.jwz.org/doc/worse-is-
better.html> from the Lisp vs C war.

~~~
rimantas
So how your theory explains Apple's success in recent years? Comparing Mac to
windows makes no sense, but still: just look at the sales trend of Mac's vs.
other computers. Then see how much companies are making with Android: many
adopted the OS but only a couple actually get profits from it.

~~~
btilly
Apple's recent success has come from recognizing and creating new markets.
Even in traditional computers, a large part of their current success is that
they pioneered the market for people who want physically attractive computers.
This is unlikely to continue to succeed for them without Steve Jobs a the
helm.

As for Mac vs Windows, I'm referring to the old macs, OS 7, etc. That story
ended with Apple almost dying before Steve Jobs came back and did what he did
best - focused the company on creating new markets.

Moving back to your focus on profits, I think you could benefit from reading
_The Innovator's Dilemma_ and its followup _The Innovator's Solution_. What
you'll learn is how across many types of technologies (examples include ship
design, steel production techniques, earth moving machines, disk drives, etc),
across many decades, whenever two technologies compete head to head, the odds
very, very strongly favor the one that is cheap and crappy. Throughout the
competition, all of the revenue to be made is in the established, strong
technology - until they suddenly have no market left.

Given that history, there is no question what to expect in phones. The iPhone
is clearly the superior option that makes more money. Android is clearly the
cheap crappy option that ships more units. But both are going to improve
faster than people's needs increase, and Android is going to win.

------
jsz0
I'm surprised the Mac grew at all given how late in the quarter they updated
the notebooks plus no desktop updates at all. I guess it just proves how
little people really care about spec sheets anymore -- or maybe they made it
all up at the end of the quarter with the new notebooks?

------
jusben1369
I think this is a great concise view on the numbers. 23% revenue growth vs
Google 21%.... <http://www.splatf.com/2012/07/apple-jun12earnings-charts/>

------
suprgeek
Inspite of being the most valuable company on Earth and making an amazing
profit by any metric - you still lose value (stock price) if you come in under
"analyst" estimates.

The relentless march of capital may be increasingly going off the rails.

~~~
AlisdairO
It makes perfect sense. If you're widely expected to make a lot of money,
people will price that into your stock. If you make a lot minus n, you're
doing less well than the analysts expected, and so your stock is overvalued.

The failing here is not that the stock price dropped on results that were
worse than the market expected, it's that the market expected too much in the
first place, causing the stock to become overvalued.

~~~
ubernostrum
If it happened once, sure.

The thing is, analysts have shown, historically, that either:

1) They are really, really bad at their jobs to have such a consistent track
record of producing poor estimates for Apple, or

2) They are really, really good at their jobs, but the jobs they're doing
aren't the jobs we think they're doing.

~~~
AlisdairO
> The failing here is not that the stock price dropped on results that were
> worse than the market expected, it's that the market expected too much in
> the first place, causing the stock to become overvalued.

I don't really see how what I said disagrees with what you said - what I was
pointing out was that a stock price falling when the company fails to meet
expectations is good and rational behaviour. The problem is the bad analytics
that caused the inflated expectations in the first place. Feel free to
speculate as to the cause of that as you wish :-).

