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  • Apple Plays the Game: Beat the Street!

    April 21st, 2011

    Just hours ahead of Apple’s release of their financial statements for the March quarter, there was a story about how badly the supply chain interruption in Japan would hurt the company. This is a concern that’s been speculated on for weeks since the tragic earthquake and tsunami, considering that Apple depends on suppliers in that country for some of their parts. Or at least that’s how the theory goes.

    Well, Apple didn’t just report another blow-out quarter, way ahead of analyst expectations for the most part, but COO Tim Cook announced during the regular quarterly conference call with financial analysts that sales impact had been minimal for the last quarter, but it will rise to $200 million for this quarter. Well, that might not be minimal to other companies, but with total sales for their fiscal second quarter of $24.67, it’s chump change. Net profit for the quarter was $5.99 billon, or $6.40 per diluted share. This compares to revenue of $13.50 billion and a net profit of $3.07, or $3.33 per diluted share, for the same quarter in 2010. Talk about growth! Talk about over $100 billion sales for this year!

    When it comes to the supply chain, Cook, while saying they didn’t expect any material impact this quarter, did characterize the situation as “unpredictable.” Perhaps the picture will be clearer in July, when Apple releases their next financial statement. At the same time, Cook claims that Apple is continuing to successfully ramp up production of the iPad 2, where demand is still far outstripping supply. Cook predictably refused to give any breakdown of sales of the iPad and iPad 2, but referred to the current situation as “the mother of all backlogs.”

    At the same time, the back order situation at many of Apple’s online stores around the world has decreased from two to three weeks down to one to two weeks. More and more retailers have them in stock, at least part of the time. So maybe Apple is getting a hand on the situation.

    Now last quarter, Apple sold 4.69 million iPads. This appears to be down a million or so from what analysts estimated, but it’s not evidence that iPad demand is waning. Indeed, if demand is waning, it’s for pretty much all the would-be iPad killers out there. There doesn’t seem to be much of an uptake of the Motorola Xoom, any iteration of the Samsung Galaxy, and the new BlackBerry PlayBook appears to be stillborn.

    On other fronts, Apple moved higher numbers of iPhones than anticipated, with sales totaling 18.65 million. These figures represent an increase of 113% over the year-ago quarter, which ought to surprise some media pundits who imagine that Android OS phones are taking over the world. The U.S. increase totaled 155%, and the large part of the increase was clearly fueled by the availability of the iPhone at Verizon Wireless, though specific breakdowns haven’t been revealed, and probably won’t be until Verizon releases their own financials.

    As speculation grows about when the iPhone 5 will arrive, it was clear from the conference call that it won’t support the faster LTE technology that’s now being rolled out by some carriers. According to Cook, “The first generation of LTE chipsets force a lot of design compromises with the handset, and some of those we are just not willing to make.” So don’t expect Apple to be an early adopter, although other manufactures are diving in with both feet without regard to the drawbacks. They’ll support any new technology that offers something to boast about, even if that technology is a work in progress.

    In the PC universe, amid reports that sales of new personal computers are flagging, Mac sales increased by 28% over last year, to a total of 3.76 million units. Certainly the new MacBook Pro family, where the high-speed Thunderbolt peripheral port debuted, was largely responsible. Demand is also said to remain high for the MacBook Air, which got a major refresh last fall. There are also reports of sagging inventories of the iMac, which may indicate that this line will get an update in the next few weeks.

    What’s most interesting about these figures is that it doesn’t seem that the iPad is cannibalizing Mac sales, although industry pundits suggest that sales of netbooks and other PCs are being hurt by the rise of the tablets. That rise is clearly fueled by the iPad. Unfortunately, nobody thought to ask Cook whether sales of Macs would have otherwise been higher during the conference call. But it’s also true most questions tend to be related to sometimes obscure financial issues, and are often softball. If only a real journalist could get in there and attempt to ask the questions about issues regular people want to know about.

    As usual, I’m keeping this commentary relatively spare of numbers. If you want to know more, you can go ahead and gorge yourself on all the figures that were included in Apple’s press release about their quarterly financials.

    And, yes, Cook did rag on Google’s Android platform again, but what did you expect?



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