IPhone helps Apple dial 4Q net income up 70 pct (Update 2)

Oct 18, 2010 By JESSICA MINTZ , AP Technology Writer
In this April 8, 2010 file photo, Apple Inc. Chairman and CEO Steve Jobs is silhouetted as he leaves the stage following an event at Apple Inc. in Cupertino, Calif. Apple Inc. releases quarterly earnings Monday, Oct. 18, 2010, after the market close.(AP Photo/Eric Risberg, file)

(AP) -- Wall Street's bar was so high for Apple Inc. that the fact that it sold more iPads than Macs in the latest quarter wasn't enough to impress investors.

Shares fell nearly 6 percent after the release of results Monday, even though Apple reported record net income and revenue as iPhone sales nearly doubled from a year ago.

Apple said it sold 4.2 million iPads during the fiscal fourth quarter. Although that was more than the 3.9 million Macintosh computers Apple sold, it was fewer than the 5 million iPads that analysts had estimated.

And although Apple's gross margin - a measure of its profitability - was better than its own guidance, Wall Street was expecting even better.

"I think expectations got a little out of hand," Kaufman Bros. analyst Shaw Wu said in an interview.

Earlier in the quarter, Apple may have had a hard time making enough iPads to keep up with demand. But Apple said it was able to expand production by the end of the quarter.

The problem at that point, Wu said, may have been that Apple needed to increase the number of stores selling iPads. Now, with Verizon Wireless and AT&T Inc. on board to carry the iPad, the recent quarter's "missing" tablets may show up in the holiday-quarter results, Wu said.

Apple's net income rose 70 percent to $4.3 billion, or $4.64 per share, from $2.5 billion, or $2.77 per share, in the same period last year. Revenue jumped 67 percent to $20.3 billion, from $12.2 billion last year.

Both revenue and net income were record amounts for Apple. The company also did significantly better than Wall Street analysts expected. Analysts polled by Thomson Reuters expected Apple to earn $4.08 per share on $18.9 billion in revenue.

"When you're shipping the best products ever, these are the results you expect to see," Apple Chief Financial Officer Peter Oppenheimer said in an interview.

Apple sold 14.1 million iPhones from July through September, more than the 12 million or so analysts were looking for. Oppenheimer said that had the company been able to make more iPhones, that number would have been even higher.

Strong iPhone 4 sales in the quarter helped Apple beat its own gross margin guidance, because that device is more profitable than other Apple products. But gross margin overall declined from a year ago, in part because the iPhone 4 isn't as profitable as the previous model. It costs more to make the iPhone 4, but Apple isn't charging more for it.

Apple also said gross margin will be even lower in the current quarter. That's in part because Apple expects to sell more of its revamped iPods, which cost more to make at first. Apple has also been selling iPads for an average of $645, a price it calls aggressively low.

Apple CEO Steve Jobs made a rare appearance on a conference call with Wall Street analysts. He noted that Apple sold more iPhones than Research in Motion Ltd. sold BlackBerry phones in the most recent quarter. RIM sold 12.1 million BlackBerrys, 2 million fewer than the iPhone.

"I don't see them catching up with us in the foreseeable future," Jobs said.

Jobs also spoke disparagingly of the new tablet computers built on Google Inc.'s Android software. They include the Streak from Dell Inc.

"The seven-inch tablets are tweeners, too big to compete with a smart phone and too small to compete with an iPad," Jobs said. The iPad has a screen that measures nearly 10 inches diagonally.

Apple sold 9.1 million iPods in the quarter and 250,000 of its updated Apple TV, which came out last month.

Apple, which is based in Cupertino, Calif., said it expects to earn $4.80 per share during the holiday quarter on $23 billion in revenue. Apple is known for issuing low guidance and then sailing over, so the company's high revenue guidance was a surprise. Analysts are currently looking for $5.06 per share in net income on $22.3 billion in revenue.

For the full fiscal year, Apple's net income jumped 70 percent to $14 billion, or $15.15 per share, from $8.2 billion or $9.08 per share.

Revenue jumped 52 percent to $65.2 billion from $42.9 billion.

Shares declined $19.50, or 6.1 percent, to $298.50 in extended trading after the results were released. Earlier, Apple's stock gained $3.26 to close at $318, a sixth consecutive all-time high.

Explore further: US newspaper industry revenue fell 2.6 pct in 2013

not rated yet
add to favorites email to friend print save as pdf

Related Stories

Apple fiscal 3Q net income jumps 78 percent

Jul 20, 2010

(AP) -- Apple Inc. blew past expectations with its latest quarterly report on Tuesday, selling almost as many of its new iPad tablets as it sold Mac computers.

Apple rockets to most profitable quarter ever

Jan 25, 2010

(AP) -- Apple's holiday quarter was especially sweet this year, but Wall Street's response was muted as investors puzzled through an accounting change and lighter-than-expected iPhone sales.

TI 2Q revenue rises 42 pct as demand roars back

Jul 19, 2010

(AP) -- Texas Instruments Inc.' second-quarter income and revenue jumped as demand continued to recover after the recession. The company predicted even better results in the new quarter.

Apple 2Q profit gains 15 percent, beats Street

Apr 22, 2009

(AP) -- Strong sales of the iPhone helped Apple Inc. lift its quarterly profit 15 percent, well ahead of Wall Street's expectations Wednesday despite the global economic downturn.

Research In Motion's 1Q profit jumps 20 percent

Jun 24, 2010

(AP) -- BlackBerry maker Research In Motion Ltd. posted a 20 percent jump in net income for the most recent quarter, but the company's revenue and subscriber growth disappointed investors.

Recommended for you

Ex-Apple chief plans mobile phone for India

1 hour ago

Former Apple chief executive John Sculley, whose marketing skills helped bring the personal computer to desktops worldwide, says he plans to launch a mobile phone in India to exploit its still largely untapped ...

Airbnb rental site raises $450 mn

14 hours ago

Online lodging listings website Airbnb inked a $450 million funding deal with investors led by TPG, a source close to the matter said Friday.

US venture investments highest since 2001 (Update)

Apr 18, 2014

Funding for U.S. startup companies soared 57 percent in the first quarter to a level not seen since 2001, as venture capitalists piled more money into a growing number of deals, according to a report due out Friday.

User comments : 0

More news stories

Ex-Apple chief plans mobile phone for India

Former Apple chief executive John Sculley, whose marketing skills helped bring the personal computer to desktops worldwide, says he plans to launch a mobile phone in India to exploit its still largely untapped ...

Airbnb rental site raises $450 mn

Online lodging listings website Airbnb inked a $450 million funding deal with investors led by TPG, a source close to the matter said Friday.

Health care site flagged in Heartbleed review

People with accounts on the enrollment website for President Barack Obama's signature health care law are being told to change their passwords following an administration-wide review of the government's vulnerability to the ...

NASA's space station Robonaut finally getting legs

Robonaut, the first out-of-this-world humanoid, is finally getting its space legs. For three years, Robonaut has had to manage from the waist up. This new pair of legs means the experimental robot—now stuck ...

Filipino tests negative for Middle East virus

A Filipino nurse who tested positive for the Middle East virus has been found free of infection in a subsequent examination after he returned home, Philippine health officials said Saturday.

Egypt archaeologists find ancient writer's tomb

Egypt's minister of antiquities says a team of Spanish archaeologists has discovered two tombs in the southern part of the country, one of them belonging to a writer and containing a trove of artifacts including reed pens ...