Apple today announced financial results for its fiscal 2012 second quarter ended March 31, 2012, and the results were in one word: INCREDIBLE.
Apple posted quarterly revenue of $39.2 billion and quarterly net profit of $11.6 billion, or $12.30 per diluted share. These results compare to revenue of $24.7 billion and net profit of $6.0 billion, or $6.40 per diluted share, in the year-ago quarter. Gross margin was 47.4 percent compared to 41.4 percent in the year-ago quarter. International sales accounted for 64 percent of the quarter’s revenue.
The Company announced the following unit sales of iPhones, iPads, Macs and iPods:
• 35.1 million iPhones in the quarter, representing 88 percent unit growth over the year-ago quarter.
• 11.8 million iPads during the quarter, a 151 percent unit increase over the year-ago quarter.
• 4 million Macs during the quarter, a 7 percent unit increase over the year-ago quarter.
• 7.7 million iPods, a 15 percent unit decline from the year-ago quarter.
Tim Cook, Apple’s CEO said.
“We’re thrilled with sales of over 35 million iPhones and almost 12 million iPads in the March quarter. The new iPad is off to a great start, and across the year you’re going to see a lot more of the kind of innovation that only Apple can deliver.”
Peter Oppenheimer, Apple’s CFO said.
“Our record March quarter results drove $14 billion in cash flow from operations. Looking ahead to the third fiscal quarter, we expect revenue of about $34 billion and diluted earnings per share of about $8.68.”
Apple Earnings Call for Q2 2012
Below is the full transcript of Apple's Earnings Call for Q2 2012 (March 31, 2012) courtesy of Seeking Alpha.
Catalyst For Apple's Stock Price
Bears have been beating the stock up for a week, with the shares tumbling from $644 to $556 earlier today. Investors need to keep their eyes on the ball and invest for long-term with Apple, and take the stock dips as gifts and buy the stock. This may be the last time we see Apple in the $500s. Herein I highlight points from Apple’s earnings outside the usual earnings reports.
Earnings expectations were $10.07 per share, and Apple outdelivered with $12.30 in earnings on $39.2B in revenues. Please note that this Q2 is Apple’s seasonally worst quarter, yet Apple delivered its second best quarter in history (with last quarter being the best). Apple’s first quarter this year (December 31, 2011) raised the bar on results both in terms of revenue levels and gross margin. Q1 FY12 was the highest gross margin quarter at 44.7% only to be bested this quarter by a gross margin of 47.4%. How can Apple continue to deliver outsized margins? Apple does so by focusing relentlessly on its supply chain and, for the last couple of product releases, by keeping its form factors consistent so that it can continue to improve manufacturing efficiencies.
The stock was hit over the past week for three reasons:
- Analysts read between the lines on earnings reports from Verizon and AT&T and extrapolated lower iPhones unit sales; Rumors are circulating that carriers will cut back on subsidies on the Apple iPhone thereby bringing down the gross margin, and Supply shortages emanating from Qualcomm will impact Apple. First, Verizon and AT&T are not the only distribution channels for iPhones. Analysts should not have extrapolated iPhone unit sales based upon the historical proportional contribution of AT&T and Verizon, given the breadth and expanding distribution network for iPhones.
- Carriers would like to reduce subsidies, obviously, but they don’t have the power or incentive to do so. The iPhone draws in customers (just recall the jump in AT&T subscriber numbers when AT&T exclusively introduced the iPhone in the US) and it draws in customers who use the higher margin data packages. Over time, in theory, what carriers lose in subsidies they should make up in data margins. Moreover, Apple claims that the iPhones are the most data efficient of the smartphones making it even more attractive to broadband-constrained carriers. Carriers report to Apple that they have the lowest churn on the iPhones of the phones they offer. Happy customers are loyal customers. So while carriers would like to eke out more profits, it is doubtful that they are going to bite the hand that feeds them, or that brings them higher margin loyal customers.
- Supply constraints at Qualcomm are an issue, but probably for Apple competitors. As was previously reported when Apple was dipping down, it is most conceivable that Apple has locked up its required supply and, when demand for Apple products exceeds supply, customers simply wait creating pent-up demand for the successive quarter.
There are three other important points to highlight from the call, which are long-term catalysts to the stock.
- Apple has historically been weak in the enterprise and has been considered a consumer technology, but that story has changed. Apple has 95% support within the Fortune 500 and 75% support within the Global 500 for the iPad, released less than two years ago. Moreover, Apple has an iOS enterprise developer program whereby in-house tech teams can develop to iOS devices. This is important because development equates to adoption, usage and entrenchment. On the call, Apple mentioned that the iPad had the strongest product adoption into the enterprise of any, ever. The iPad’s features of mobility and screen size make it convenient and appropriate for sales tools (ie Bechtel) and for guides (the Air Force).
- China is huge and will be even larger. Revenues in this past quarter to China were $7.9B up over three-fold year over year. It was the biggest quarter for China ever in Apple’s history, and over half of the $13.3B revenues of the entire last FY. The enormous growth has been largely due to the iPhone and The New iPad has not yet been released there. Apple only has four stores on mainland China plus one in Hong Kong. The potential for China remains large, and I highlighted the interest in China for luxury goods such as Apple products.
- Focus on the powerful distribution of Apple’s own stores. The entire buying experience for an iPhone is much more pleasurable at an Apple store than at a carrier store or big-box retailer, given the displays of iPads, iMacs, headphones, etc and given the level of expertise on the Apple products by the sales people at an Apple store. If you have bought an iPhone, you know what I mean. Simply put, the best buying experience for an Apple product is at an Apple store. And, clearly, consumers think so too. Sales per store increased from $9.9M a year ago to $12.2M in this past quarter. 85M people visited an Apple store in the past quarter, up 19% from the year before. And consistent with historical trends, over half of the Mac buyers were a first time Mac buyer. Consider this: Apple provides an excellent user experience, which is why people buy their products. Apple also provides an excellent buying experience, which is why people come to their stores.
Apple continues to be an attractively valued stock. It now has over $110B in cash, or $117 per share. With today’s earnings factored into the earnings estimates for FY12 (meaning adding in the extra $2.30 in earning for the quarter to annual estimate), Apple, trading at $600 after hours, is 10.4x FY12 earnings of $46.53 (excluding cash) and 9.5x FY13 earnings of $50.94. But expect earnings estimates to go up, making the stock an even more attractive buy for long-term investors. Ignore the intermediary noise and focus on the results, the products, and the lack of competition on the landscape. For now, Apple remains a long-term holding, and an attractive buy at these levels.
Apple Takes Larger Share of Smartphone Market
Android and Apple’s iOS platform both gained share of the North American smartphone market at the expense of BlackBerry, according to the latest data from mobile ad network InMobi. iOS maintained its narrow lead over Android in the first quarter, with as 36.8% share, up from 33.1% in the fourth quarter of 2011. Android came in at 34.1%, up from 32.5% in the prior quarter.
By contrast, Research in Motion’s BlackBerry OS dropped from a nearly 12% share in the fourth quarter to 7.3% in the first three months of 2012. The quarterly drop-off signals the troubled handset maker’s continuing decline as a result of Apple and Google’s growing dominance of smartphone operating systems.
RIM last month reported sales plummeted 25% in the fourth quarter.
Globally, Android was the top smartphone platform in Q1, however, with 22.2% of impressions compared to 18.2% for iOS.
The iPhone, iPad and iPod alone accounted for 37% of impressions on InMobi’s network in North America, with the BlackBerry 8520 a distant third among individual devices, generating almost 2% of impressions. Among phone manufacturers, Nokia was second behind Apple, with 14% share of impressions, followed by Samsung and HTC (both 9%), RIM (7%), LG (6%) and Motorola (5%).
Ann Frisbie, vice president and managing director, North America, at InMobi said.
"Apple maintained its lead over Android and further increased its share of impressions and handset dominance; the new iPad certainly helped its overall position. However, we know that fierce competition is created across the operating systems when new devices enter the market and this time last year Android surpassed iOS globally.”
Sales of the Apple tablet during Q2 2012 won’t reflect the full impact of the new iPad model, which was only launched last month. Frisbie suggested Apple could see heightened challenges in the U.S. market later this year with a rumored launch of an Android-based smartphone from Amazon and a 7-inch Google-branded tablet.
Microsoft is also expected to introduce a much-anticipated Windows 8 during the latter half of 2012.
InMobi’s North American network grew impressions 18% in the first quarter to 52.6 million, the vast majority of which (84%) came from smartphones.
COMMENTARY: There was never any doubt in my mind that Apple's sales and earnings for Q2 2012 would not be spectacular. The New iPad was impressive and the superior tablet of any introduced so far, bar none. There, I said it, to satisfy all Apple evangelists.
For those of you wondering what's with the Apple logo covered in blood, you'll just have to visit my blog more often and read what I say about Apple. HINT: Select my blog posts under the "Mobile" category and you will find out.
Courtesy of Apple's press release of April 24, 2012, an article dated April 24, 2012 appearing in Forbes and an article dated April 23, 2012 appearing in MediaPost Publications Online Media Daily and an article dated April 24, 2012 appearing in Seeking Alpha
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