When it comes to Wall Street estimates of Apple’s quarterly results, it can be a lose-lose situation. Regardless of how the results actually end up, there’s going to be a complaint from someone that Apple failed at delivering the goods somewhere or other, and thus is in deep trouble.
In the run-up to the official announcement, Apple’s guidance was between $76 and $78 billion. Wall Street’s estimates were within that range, except for one that projected $80 billion. But there was also an extra week of sales, 14 weeks compared to 13 weeks, so that might somehow be factored into the numbers in a less-favorable way.
The real numbers were somewhat better than expected, with revenue of $78.4 billion. Earnings per share were $3.36, and total net profit was $17.9 billion. This compares to $75.9 billion and a slightly higher profit of $18.4 billon, or $3.28 per diluted share, in the December 2015 quarter. Some of the critics might attack the lower profits, and the fact that gross margins declined slightly from 40.1 percent to 38.5 percent.
Of course most companies would be envious of either result, but this is Apple after all.
In any case, 78.3 million iPhones were sold, compared to 74.8 million last year, setting a record. But the key indicator here is that the iPhone 7 Plus was unexpectedly popular and supplies were constrained throughout the quarter. This means they might have sold more if enough stocks were available. Average sale price (ASP) thus increased to $695, also a record.
Now the ASP is particularly notable in light of a recent article citing one uninformed analyst’s contention that the ASP would go down, because an alleged unexpected number of people decided to buy an iPhone 6s or an iPhone 6s Plus. It’s clear now how this really turned out.
As expected, the MacBook Pro with Touch Bar evidently led a slight Mac sales increase, from 5.3 million units in the year-ago quarter to 5.4 million units. This is in keeping with industry surveys of sales in the PC industry. Compare the modest increase to the “resilient” Microsoft Surface, where revenue declined by 2%. That was supposed to be good news according to some who want to find favorable indicators in anything Microsoft announces.
But there was something else. Microsoft claims a record number of switchers from the Mac platform, although the actual numbers weren’t revealed. During Apple’s quarterly conference call with financial analysts, it was announced that the majority of Mac buyers were Windows switchers. That means more than 2.7 million units, which is far above what the entire Surface lineup delivered for Microsoft.
Forgetting Microsoft’s spin on the situation, Apple’s numbers appear to indicate that there’s still lots of potential in the Mac platform. It also appears to show that more and more Mac users are hanging onto their existing computers, or maybe they are waiting for Apple to deliver even more credible updates for other models.
If it’s true that Apple hasn’t been giving much attention to Macs, perhaps it means the platform is prospering despite the inattention. Don’t forget that Apple’s Mac profits are higher than other PC companies.
Now about the iPad: Although it appeared, during the September quarter, that the sales declines were flattening, the trend didn’t continue in the December quarter. Total sales were 13.1 million, compared to 16.1 million in the year-ago quarter. It’s also true that there was only one iPad refresh last year, the 9.7-inch iPad Pro in the spring. And it’s not as if Apple put in a whole lot of energy to market tablets.
Contrary to early reports of lower Apple Watch sales, record revenue was reported for the December quarter. Unfortunately, Apple hides the specifics deep within the Other category, so industry analysts can only make guesses. But even a tiny increase over last year would be a record, and since Apple did not update the expensive Edition model, it’s even more encouraging.
Once again, Services were a shining light, coming in at $7.17 billon, an 18 percent increase over the year-ago quarter, where revenue totaled $6.05 billion.
It also appears that a quarter of higher sales isn’t a one-off by any means. For the current quarter, Apple predicts it will earn between $51.5 billion and $53.5 billion. This compares to sales of $50.6 billion in the March 2016 quarter. But the skeptics will remind us that Apple’s revenue in the comparable 2015 quarter was $58 billion.
But the trend still appears to are quite favorable, so Apple has plenty to crow about.
For this year, I’m hoping there will be lots of good news from the Mac front. I’m also wondering how the iPad will be dealt with, and whether Apple will make aggressive moves to restart sales, perhaps with new models and maybe lower prices to encourage people to upgrade.
The iPhone? Well, the iPhone 7 family has been regarded as an interim model despite higher sales than its predecessor. So as the year progresses, attention will no doubt focus on a possible 10th anniversary model where extra goodies are expected. This may include an edge-to-edge OLED display, or maybe a wrap-around display although I fail to see its value. Wireless charging? It would be nice if Apple could deliver a scheme that’s better than just putting the thing on a tray, which is a pretty old fashioned concept after all these years.
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