Lion's AppleWatch

	Tuesday, January 26, 2010

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Apple (AAPL:NYSE) estimates, target increased at Goldman. AAPL estimates were boosted through 2011. Higher Mac sales offset lower iPod unit volume. Neutral rating and new $230 price target. 4:26:44 PM

Apple Sales Top Estimates as Investors Turn Attention to Tablet
Jan. 26 (Bloomberg) -- Apple Inc. reported earnings that topped analysts’ estimates, buoyed by record sales of the Macintosh computer, as Chief Executive Officer Steve Jobs shifted attention to a new product to be unveiled tomorrow.

Apple gained as much as 2.6 percent in extended trading yesterday after the company reported a 50 percent jump in first- quarter profit to $3.38 billion, or $3.67 a share. Sales advanced 32 percent to $15.7 billion.

Jobs said yesterday to expect a “major new product” to be unveiled this week. Apple may offer a device with a 10-inch (25-centimeter) touch-screen display that delivers music, movies, Web pages and other content, according to analysts at Morgan Stanley and Piper Jaffray & Co.

“All eyes are now on the announcement,” said Michael Yoshikami, an analyst at YCMNet Advisors in Walnut Creek, California. The firm owned 7,582 Apple shares as of Dec. 31, according to Bloomberg data.

Apple, based in Cupertino, California, rose as much as $5.26 to $208.33 in late trading, after closing at $203.08 on the Nasdaq Stock Market. The shares more than doubled last year.

David Bailey, an analyst at Goldman Sachs Group Inc. in New York, had predicted earnings of $3.30 a share and revenue of $14.7 billion.

Chief Operating Officer Tim Cook, speaking with analysts on a conference call yesterday, declined to answer questions about what Apple might introduce this week. “I wouldn’t want to take away your joy of surprise on Wednesday,” he said.

IPhone Sales

Apple sold a record 8.7 million iPhones and 3.36 million Macs in the holiday shopping season, which has been Apple’s biggest sales quarter for the past four years. The iPhone and Mac together account for more than 60 percent of revenue.

Gene Munster, an analyst with Piper Jaffray in Minneapolis, said investors were looking for about 8.8 million iPhones and 3.1 million to 3.2 million Macs.

Apple also said it sold 21 million iPod media players in the quarter, an 8 percent decline from a year ago. The company said it saw a drop in demand for its traditional music player models and a pickup in sales of the iPod Touch, a touch-screen device that can connect to the Internet via Wi-Fi. Munster estimated Apple would sell 20.1 million iPods.

“Overall, it was a superb Apple quarter,” said Ryan Jacob, a fund manager at Jacob Internet Fund in Los Angeles. The fund held 15,000 Apple shares as of Sept. 30, according to Bloomberg data. “They really hit it on all metrics.”

Accounting Change

The report marked a change in the way Apple accounts for iPhone and Apple TV sales, which means earnings weren’t comparable to the average of analysts’ estimates.

The company had been recording those sales using a subscription-accounting approach, spreading out revenue over a 24-month period. In September, the Financial Accounting Standards Board approved a change in rules that lets companies record revenue earlier from products that combine hardware and subscription services, such as the iPhone.

Sales this quarter will be $11 billion to $11.4 billion and profit will be $2.06 to $2.18 a share, Apple said. Goldman Sachs’s Bailey said Apple’s forecast probably missed analysts’ estimates, reflecting Apple’s “typical conservatism.” He expected second-quarter sales of $11.7 billion and profit of $2.34 a share.

Cook said the company has activated more than 200,000 iPhones in China since the device went on sale there in late October. The company is working with China Unicom (Hong Kong) Ltd., the country’s second-biggest mobile-phone company. Cook didn’t directly answer questions about whether Apple plans to team up with other carriers in the country.

China Market

“We would prefer to move slow because we’re building the brand for the long term, and we’ve very much focused on the long term in that market because we think there’s significant potential there,” Cook said. “We’re very happy with working with China Unicom. They’re an excellent partner for us.”

Cook also was asked why Apple continues to stick with a single carrier in the U.S.: AT&T Inc. Cook said that company remains a “great partner.”

“AT&T has acknowledged that they are having some issues in a few cities and they have very detailed plans to address these,” he said. “We have personally reviewed these plans and we have very high confidence that they will make significant progress toward fixing them.”
12:10:03 PM

Analyzing the analysts.... again
Apple's earnings: The Street's big miss
The professional analysts were bested — once again — by the bloggers

Smackdown: Full spreadsheet below

There's a good reason most Wall Street analysts don't publicly review their predictions after the fact. It's called self-preservation. Who wants to advertise how badly they misunderstood the companies they follow?

Case in point: Apple (AAPL), and the quarterly report it issued Monday afternoon. Apple management gave ample warning that it wanted to change its accounting procedures under the rules revised last fall — recognizing iPhone revenue when it comes in, rather than spreading it out over 24 months (see The day Apple released its revenue bomb).

Yet nearly half the professional analysts we polled missed the boat entirely — never bothering to publish estimates for the so-called non-GAAP (generally accepted accounding procedures) numbers that pushed Apple's revenue to a record $15.68 billion in its first fiscal quarter of 2010.

And those who did were all over the lot, getting as many calls wrong as they got right. None of the professionals hit as close to the mark as our three favorite independent analysts: Turley Muller, Andy Zaky and the blogger who calls himself deagol.

Let's look at the numbers:

This quarter's chart is simpler than usual because the GAAP numbers — the ones most Wall Street analysts focused on — are no longer relevant. Without those, several analysts had nothing to show; they fell off the chart entirely. Even then, there are an awful lot of blanks in the grid below.

The best estimates are highlighted in green, the next two runners up in light green. The worst guesses are highlighted in blood red; the second and third worst in pink. Source: Apple 2.0

Adopting Stephen Colbert's system for handing out bouquets and brickbacks, we give a tip of the hat to:

Muller, Reiner and deagol, with one solid green and one light green each and not a trace of pink

Zaky, Reid, Gardner and Moskowitz, with one light green apiece and no reds or pinks

And a wag of the finger to:

McCourt with one red and one pink

Dede, with one red and no green

Rakesh, Reitzes, Shope, Misek, Wu and Abramsky with one pink each

Finally, special mention for the analysts who were over the lot:

Marshall, who guessed high across the board and scored one green, one red and one pink

Huberty, who scored the most reds (two) but also one solid green

Craig, Fidacaro and Chokshi, who turned in a rainbow of reds and greens and pinks.

Turley Muller, who writes a blog called Financial Alchemist, led the pack for the fifth quarter in a row. His estimates this quarter were off, on average, by less than 2% — a shade better than the other unaffiliated analysts, who as a group missed by an average of 2.5%.

The professionals, by contrast, missed by 6.9%. The standouts were Broadpoint Tech's Brian Marshall, who missed by 11.2%, Morgan Keegan's Travis McCourt (10.2%) and Morgan Stanley's Katy Huberty (10.1%).

To be fair, the professionals cover whole sectors, not just Apple, while the independents are free to concentrate on the complexities of Cupertino's balance sheet. With that balance sheet streamlined and simplified by the accounting change, perhaps the pros will do better next time.

See also:

Apple's record earnings, Wall Street's double whammy

Apple earnings: How the analysts got it so wrong

Apple's 2009 Q3: Analyzing the analysts

Apple's 2009 Q2: Analyzing the analysts

Apple's 2009 Q1: Analyzing the analysts

Apple's 2008 Q4: Analyzing the analysts

11:40:50 AM

Apple reports record earnings, hits Wall Street with double whammy
Net income grew nearly 50% in Apple's most profitable quarter ever
It seems no matter how high Wall Street's expectations these days, Apple (AAPL) still manages to blow past them.

On Monday it hit the Street with a double whammy: not only did it announce record sales and earnings, but it changed the way it reports its iPhone sales revenue, replacing what used to be its GAAP (generally accepted accounting procedure) earnings with considerably higher non-GAAP numbers

The result was a quarterly earnings report that left the Street's estimates in the dust. Even among those analysts who had anticipated non-GAAP results, all but one seriously underestimated Apple's performance.

For the first fiscal quarter of 2010, Apple earned $3.67 per share on revenue of $15.68 billion. The consensus among the analysts we polled who offered non-GAAP numbers was for earnings of $3.49 on revenue of $14.69 billion.

'If you annualize our quarterly revenue, it's surprising that Apple is now a $50+ billion company,' said Steve Jobs in a press release, adding a teaser for Wednesday's special event. 'The new products we are planning to release this year are very strong, starting this week with a major new product that we're really excited about.'

Trading in the Apple's stock was closed before the earnings report. Having regained much of the territory lost Friday, it had closed at $203.07, up 5.32 points (2.69%). The stock bounced up and down in after-hours trading as investors tried to make sense of the accounting change, but by 6:30 p.m. was trending up, adding another $1.6o to the closing price.

Sales of Macs and iPods were higher than most analysts expected; iPhone sales, despite 100% year over year growth, were slightly lower.

The biggest surprise was the company's gross margin: 40.9%, up from 37.9% and more than 5 points higher than the Street's consensus, albeit using the new accounting methods).

Still, Apple is simply the most profitable tech company in the business.

Here are the numbers:

Total sales: $15.68 billion, up 32% from last year's non-GAAP revenue

Earnings: $3.67 per share, up 46.8% from last year's non-GAAP EPS

Profit: $3.38 billion, up 49.6% from last year

Mac sales: 3.36 million units, up 33% year over year

iPhone sales: 8.7 million units, up 99.4% from last year

iPod sales: 21 million, down 7.6% from a year ago

iPod touch sales up 55% over last year

50.9 million visitors to Apple 283 stores, up 9% over last year

Gross margin: 40.9%, up from 37.9% last year

Guidance for the second fiscal quarter: revenue between $11 and $11.4 billion, EPS between $2.06 and $2.18

Apple's press release is available here.

A replay of the conference call will be available for the next two weeks, starting at 5 p.m. PT. You can get the instructions here. Seeking Alpha usually publishes a transcript within a day or two.

Tune in tomorrow for our color-coded analysis of the analysts. And come back Wednesday for our live blog of the "latest creation" event at which Steve Jobs is expected to unveil Apple's tablet computer. 2:00:01 AM

"best quarter ever..."
Apple posts record-high profit on strong iPhone sales
SAN FRANCISCO (AFP) – A doubling of iPhone sales helped Apple post record-high quarterly net profit on Monday of 3.38 billion dollars.

"We're thrilled to report our best quarter ever," Apple chief financial officer Peter Oppenheimer said in a conference call with financial analysts.

Apple said revenue in the first quarter rose to 15.68 billion dollars from 11.88 billion dollars in the corresponding quarter a year ago.

"If you annualize our quarterly revenue, it's surprising that Apple is now a 50-billion-dollar-plus company," said the iconic California firm's chief executive Steve Jobs.

"The new products we are planning to release this year are very strong, starting this week with a major new product that we're really excited about," Jobs said in a statement.

Apple has maintained trademark secrecy regarding a Wednesday event at which it is expected to unveil a tablet computer along the lines of a "iPhone on steroids," according to analysts.

Apple executives repeatedly refused to comment on the Wednesday event during the conference call telling analysts only to "stay tuned."

The firm's quarterly profit amounted to 3.67 dollars per share in a leap from the 2.50 dollars per share, or 2.26 billion dollars in net profit, in the final three months of 2008.

The 3.38-billion-dollar net profit reported in the recent quarter topped Apple's previous record high profit by nearly 850 million dollars, according to Oppenheimer.

Apple said it sold 3.36 million Macintosh computers during the quarter, 33 percent more than a year ago, and 8.7 million iPhones, up 100 percent from a year ago.

However, sales of iPods slid eight percent to 21 million units in a year-over-year comparison.

Apple executives noted that while sales of traditional iPod models declined as anticipated, those of top end iPod Touch models rose 55 percent resulting in a slight increase in revenue in that product category.

Apple said its share of the MP3 music player market remains at more than 70 percent and iPod models are gaining ground internationally. Apple's online iTunes store also had a record-breaking quarter, according to Oppenheimer.

Apple has expanded iPhone sales to 86 countries including China.

Apple has activated more than 200,000 iPhones in China since it began selling them in that country at the end of October, according to chief operating officer Tim Cook.

"We would prefer to move slow because we are focused on building the brand for the long term," Cook said during the conference call. "We are very happy working with China Unicom. They are an excellent partner for us."

Apple ended the last quarter with 1,500 points of sale for iPhones in China. Apple said 58 percent of its revenue in the quarter came from outside the United States.

"We are very pleased to have generated 5.8 billion dollars in cash during the quarter," said Oppenheimer.
Oppenheimer said Apple expects revenue in the current fiscal quarter to range from 11.0 billion dollars to 11.4 billion dollars and for diluted earnings per share to wind up between 2.06 dollars and 2.18 dollars.
1:22:13 AM

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