Friday, July 15, 2011

Apple Inc. (NASDAQ: AAPL): Q3 Earnings Preview 2011

Apple Inc. (NASDAQ: AAPL) is scheduled to release its fiscal third-quarter earnings after the closing bell on Tuesday, July 19, 2011. Analysts, on average, expect the company to report earnings of $5.73 per share on revenue of $24.75 billion. In the year ago quarter, the company reported earnings of $3.51 per share on revenue of $15.70 billion.

Apple Inc., together with subsidiaries, designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Apple has beaten estimates for 31 straight quarters.

In the preceding fiscal second-quarter, the Cupertino, California-based company's net income was  $5.987 billion, or $6.40 per share, compared to $3.074 billion, or $3.33 per share, in the year-ago quarter. Revenue rose to $24.67 billion from $13.50 billion in the prior year quarter.. Analysts, on average, expected the company to report earnings of $5.35 per share on revenue of $23.27 billion. The company said that it sold 3.76 million Macs during the quarter, a 28 percent unit increase over the year-ago quarter. The Company sold 18.65 million iPhones in the quarter, representing 113 percent unit growth over the year-ago quarter. Apple sold 9.02 million iPods during the quarter, representing a 17 percent unit decline from the year-ago quarter. The Company also sold 4.69 million iPads during the quarter.

At its last earnings call in April, Apple said that it expects fiscal third-quarter revenue of about $23 billion and earnings per share of about $5.03. 

Apple continues to make innovative devices which appeal to consumers in a big way. The company is expected to post strong profit and revenues in the latest quarter, benefiting from the sales of its tablet computer iPad as well as the latest version of its wildly popular smartphone, iPhone. Their iPhone sales are nowhere near their maturity and are still in the growth phase. Additionally, enterprise support for iPhone has continually increased.The iPads are just in their infancy. The Mac too is on the move, taking market share from the Windows crowd quarter after quarter.The solid performance of Apple's fast-expanding store base also provides a positive feedback loop in terms of attracting new customers. Apple’s push into ads and TV could become big new sources of growth. 

However, the stock has been weighed mostly by uncertainty over the company’s product plans — which Apple never broadcasts ahead of time. The company has typically launched a new iPhone in the June-July time frame, but is not expected to update its popular smartphone until September, at the earliest. Expectations for a new device may cause some slowdown in sales for the fiscal third quarter ended June 31, as well as the portion of the current period while the market awaits details of the new iPhone. The June quarter is also too early for Apple to see much upside from the back-to-school shopping season for its Mac and iPod lines. The iPad 2 tablet is expected to be a strong seller for the quarter as demand has continued to outstrip supply in many markets.

The main driver of sales in the quarter will still be the iPhone. Most analysts currently expect unit shipments between 17-18 million for the period. While that would be a slight decline from the 18.65 million units shipped in the March quarter, it would more than double iPhone sales in last year’s third quarter, as Apple has added new carriers and markets for the device since that time. Sales of the iPad are expected to be around 8 million units — more than double the 3.27 million shipped in the same period last year, when the device first went on sale. Mac shipments are expected to be around 4 million units, while iPod shipments are expected to come in a little over the 8 million mark.

The company recently introduced iCloud, a new, free service that works seamlessly with applications on one's iPhones, iPads, iPods touch, Macs or PCs to automatically and wirelessly store contents in iCloud and automatically and wirelessly pushes it to all of one's devices. The free iCloud services include the company's former MobileMe services, the App Store and iBookstore etc. The service will also automatically and securely back up all content on all of an individual's iOS devices on a daily basis using WiFi connections. Earlier, Apple unveiled the eighth and latest version of the Mac OS X operating system, called Lion.

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