Best Quarterly Revenue and Earnings in Apple History
iPod Sales Set New Record
CUPERTINO, California—January 21, 2009—Apple® today announced financial results for its fiscal 2009 first quarter ended December 27, 2008. The Company posted record revenue of $10.17 billion and record net quarterly profit of $1.61 billion, or $1.78 per diluted share. These results compare to revenue of $9.6 billion and net quarterly profit of $1.58 billion, or $1.76 per diluted share, in the year-ago quarter. Gross margin was 34.7 percent, equal to the year-ago quarter. International sales accounted for 46 percent of the quarter’s revenue.
In accordance with the subscription accounting treatment required by GAAP, the Company recognizes revenue and cost of goods sold for iPhone™ and Apple TV® over their economic lives. Adjusting GAAP sales and product costs to eliminate the impact of subscription accounting, the corresponding non-GAAP measures* for the quarter are $11.8 billion of “Adjusted Sales” and $2.3 billion of “Adjusted Net Income.”
Apple sold 2,524,000 Macintosh® computers during the quarter, representing nine percent unit growth over the year-ago quarter. The Company sold a record 22,727,000 iPods during the quarter, representing three percent unit growth over the year-ago quarter. Quarterly iPhone units sold were 4,363,000, representing 88 percent unit growth over the year-ago quarter.
“Even in these economically challenging times, we are incredibly pleased to report our best quarterly revenue and earnings in Apple history—surpassing $10 billion in quarterly revenue for the first time ever,” said Steve Jobs, Apple’s CEO.
“Our outstanding results generated over $3.6 billion in cash during the quarter,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the second fiscal quarter of 2009, we expect revenue in the range of about $7.6 billion to $8 billion and we expect diluted earnings per share in the range of about $.90 to $1.00.”
Apple will provide live streaming of its Q1 2009 financial results conference call utilizing QuickTime®, Apple’s standards-based technology for live and on-demand audio and video streaming. The live webcast will begin at 2:00 p.m. PST on January 21, 2009 at www.apple.com/quicktime/qtv/earningsq109/ and will also be available for replay for approximately two weeks thereafter.
*Non-GAAP Financial Measures
During fiscal 2007, the Company began selling the iPhone and Apple TV. Because the Company may provide unspecified features and additional software products to iPhone and Apple TV customers in the future free of charge, in accordance with GAAP the Company recognizes revenue and cost of goods sold for these products on a straight-line basis over their economic lives, with any loss recognized at the time of sale. Currently, the economic lives of these products are estimated to be 24 months. This accounting treatment, referred to as subscription accounting, results in the deferral of almost all of the revenue and cost of goods during the quarter in which the products are sold to the customer. Other costs related to these products, including costs for engineering, sales, marketing and warranty, are expensed as incurred. Further, the costs to develop any future unspecified features and additional software products that may eventually be provided to customers also are expensed as incurred. In contrast, the Company generally recognizes revenue and cost of goods sold for its other products, such as Macs and iPods, at the time of sale, as the Company does not provide future unspecified features or additional software products to those customers free of charge.
In July 2008, the Company began selling iPhone 3G, the second-generation iPhone, and significantly expanded distribution by establishing carrier relationships in over 70 countries. Unit sales of iPhone 3G have been significantly greater than sales of the first-generation iPhone. During the first quarter of iPhone 3G availability ended September 27, 2008, 6.9 million units were sold, exceeding the 6.1 million first-generation iPhone units sold in the prior five quarters combined.
Unit sales of iPhone 3G continued to be significant in the quarter ended December 27, 2008, with 4.4 million iPhones sold. As a result, the amount of revenue and product cost related to those iPhone sales that the Company deferred for recognition in future periods under subscription accounting was substantial. While the GAAP results provide significant insight into the Company’s operations and financial position, management continues to supplement its analysis of the business using financial measures that look at the total sales, related product costs and resulting income for iPhones and Apple TVs sold to customers during the period. The presentation at the end of this press release includes the following non-GAAP measures: “Adjusted Sales,” “Adjusted Cost of Sales,” “Adjusted Gross Margin,” “Adjusted Operating Margin,” “Adjusted Income before Provision for Income Taxes,” “Adjusted Provision for Income Taxes,” “Adjusted Net Income” and “Adjusted Diluted Earnings per Share.” These financial measures are not consistent with GAAP because they do not reflect the deferral of revenue and product costs for recognition in later periods. The Company uses these financial measures, along with other measures discussed below, to provide additional insight into current operating and business trends not readily apparent from the GAAP results.
NOTE: I enjoy picking on STEVE JOBS because he is scary fellow (I watched "Pirates of Silicon Valley"), but obviously very successful CEO and visionary. I beg to differ with his strategy of selling the iPhone exclusively through AT&T. Analysts were forecasting iPhone aggregate unit sales of 45 million by the end of 2009. They didn't count on the recession AND putting all their eggs in the AT&T basket may prove to be a big mistake. Great job Steve!!
AT&T reported their revenues recently and they were terrible as is their arrogance. Their iPhone sales for the 1st quarter 2009 were a notch over 4.3 million units, which if this keeps up trends out to about 17 million iPhones sold in 2009. Okay, I will make it 20 million iPhones for you Apple Evangelists, because their sales during the holday months tend to be higher. Even with 20 million iPhones in 2009 plus the 11+ million units that have already been sold through the end of 2008, that tallies up to 31 million iPhones since the iPhone was introduced. It does not appear to me that they will meet that 45 millin unit forecast.
There are rumors that Apple will introduce a stripped down version of the 3G iPhone that will retail for $99 to attract new customers especially late adopters. Whether this is true or not, AT&T may not go along, because this will really take a bite out their profit margins, and at $99 per phone, there isn't a lot of profit margin, trust me. Whether this marketing strategy works for Apple is debatable. The recession is projected to continue through 2009 and maybe into 2010. Consumer confidence is still at near record lows and consumer spending is not showing signs of a turnaround.
Apple's salvation may come with new iPhone apps and games that are slated to hit the market in 2010. China may also play a big factor. This may generate sales from consumers who would like to advantage of the iPhones access of the Internet, video enhancements and added features.
I welcome your comments regarding Apple, the Iphone, distribution and marketing strategies.
NOTE: This commentary is courtesy of Tommy Toy, PBT Consulting
This article courtesy of APPLE
Comments