Apple’s Earnings Announcement for FYQ4 2011

Wednesday, October 19th, 2011 at 7:16 AM

Last night after market’s close, Apple’s CEO Tim Cook hosted the first ever quarterly report after Steve Jobs demise on the 5th October, 2011. In remembrance of the visionary Steve Jobs and his former boss, Cook started with a remark that, “The world has lost a visionary, a creative genius and an amazing human being. Steve was a great leader and mentor and inspired everyone at Apple to do extraordinary things. His spirit will forever be the foundation of Apple and we are dedicated to turn using the amazing work that he loved so much.” Cook then expressed gratitude for the long list of condolences that poured into the company on Jobs’s passing away.

Apple’s Chief Financial Officer Peter Oppenheimer informed shareholders and investors that Apple has achieved a record sales of 4.89 million Mac units. This represent the highest shipment of Macs and is an increase of 750,000 units compared to last year’s figure. Apple’s Asia-Pacific region saw an increase of 61% in the sales of Macs. Even in a market that is barely growing at all, Japan’s Mac sales has jumped 48% compared to last year’s figure.

Apple’s iTunes recorded a revenue of almost $1.5 billion in the quarter, Oppenheimer said.

Apple’s iPhone sales has increased 21% to 17.1 million units was better than what Apple has expected and ia a new record for the September quarter in Apple’s history. This figure is however, short of what the analysts have expected which is in the range of between 18 million to 20 million units. Apple’s CFO Oppenheimer remarked that the Apple iPhone’s sales in the Asia-Pacific region was “particularly strong”. Apple originally thought that the sales of the iPhone would drop in this quarter due to some not so favourable comments from fans about the iPhone 4S launch. Many of the die-hard Apple fans were actually waiting for the launch of the iPhone 5 but were disappointed. All in all, the iPhone’s revenue has increased by 24% to $11billion in this quarter.

“We’ve gotten off to a great start with the 4S,” said Tim Cook.

“We’ve sold over 4 million in just three days after launch and so we’re thrilled with the start that we have. We’re confident that we will have a large supply but I don’t want to predict when supply and demand might balance because the demand is obviously extremely high right now, but I’m confident that we will set an all-time record for iPhone this quarter.”

Cook said the goal with the iPhone is to “eat into” the 1.5 billion handsets sold each year, not just the 400 million smartphone units sold each year.

Apple has also toyed with the idea of reducing the iPhone 3GS by giving it out for free with a 2-year’s contract commitment plan with some carriers to test out the take up rate in the market. It has certainly not being practiced here in Malaysia though.

Apple’s CFO noted that Apple continues to be “thrilled” with the take up rate of its iPad. Apple has sold 11.1 million units of iPad this year compared to 4.2 million units sold last year. This figure is about 3 times the iPads sold last year.

Apple’s retail stores recorded a revenue of $3.6 billion, which is an increase of 1% compared to last year. The number of Macs sold through the retail stores increased by 25% to 1.1 million units. Apple has also increased their total store count to 357 as of the end of this quarter. It has added 30 new stores, of which 21 stores are outside of the US. Apple is planning to open another 40 new stores in 2012. Out of which 30 will be located outside of the US.

Oppenheimer said the company sees gross margin being about the same this quarter as last quarter’s 40.3%. Even though component costs are coming down, which is good, that will be offset to some extent by “the impact of higher cost structures and reduced price points for the recently introduced iPhones and iPods, as well as the stronger U.S. dollar.”

During the earnings call, the big question that analysts and investors have for Tim Cook was what he intends to do with the huge amount of cash that the company has generated through the sales of its products. Apple is currently sitting on about $82billion in cash and investments. Tim Cook has replied that “The cash is always a topic and will always include to do what we think is in Apple’s best interest and I think we’ve done that so far and if you look at where we’ve spent it, I think you would agree.”

All in all i would think the results were not “bad”. However, this results were lower than what the Analysts have expected and the AAPL stock has been beaten down by more than 6.4% in its after hours trading to $395.12 at the point of this writing which is down by $27.12 compared to the market closing of $422.24 before the earnings call.