Apple is NOT Recession-Proof, but it Wallops the Street!

ByDon

Apple reported their 1st Quarter financial results on Wednesday after the market closed. Reporting for the Oct-Dec 2008 period, Apple posted the highest revenue and profit in the company’s history! I have run out of verbs to describe Apple’s performance, as quarter after quarter, year after year, they post record sales and profits. In the midst of the worst economic crisis in generations and a horrible retail environment, Apple continues to innovate and sell while the management team leads Apple to financial success.

Apple posted revenue of $10.7 billion and a net profit of $1.61 billion for the 3 months. If you count iPhone and Apple TV revenue that Apple spreads over 24 months, Apple had $11.8 billion in sales and a $2.3 billion profit. These are simply amazing numbers in good economic times; in the current climate, they are unprecedented. It was the first time ever that Apple posted quarterly revenue in excess of $10 billion. Apple now has $28.1 billion in cash and short-term securities and is not seeking a government bailout.

Earnings per share were $1.78, which was well above Apple’s guidance of $1 and well above the “whisper” number of $1.36. Apple provided optimistic guidance for the next quarter while cautioning that their crystal ball is a bit foggy given the economic climate. They are projecting revenue of $7.6 billion to $8 billion with earnings in the neighborhood of $1/share.

Here’s some other highlights:

The Mac Business

  • Apple sold an astounding 2.5 million Macs, 728,000 desktops and the balance MacBooks and MacBook Pros. This is a continuation of a trend from desktop to laptops that we have seen over the past few years.
  • Apple saw declines in the educational market due primarily to the poor economy.

During the analyst call Tim Cook was skeptical about netbooks because of the slow processors, cramped keyboards and displays, but continue to watch the space and has ideas.

Apple TV

There was a lot of speculation about the Apple TV over the past few months, but Tim Cook reported that Apple TV sales were up 300% and that Apple will continue to invest in the product but still considers it a “hobby.”

iPhone

  • Apple sold 4.3 million iPhones, easily surpassing their goal of 10 million for calendar year 2008. This represents 88% growth in units and 417% (!!) growth in revenue year over year.

In response to questions about competition, Tim Cook said that Apple is suited up and ready to face competition, and that they welcome it. He went on to say that Apple will fiercely protect its intellectual property in a not so veiled threat to Palm and the Palm Pre.

Apple Retail

  • Apple’s retail stores continue to mirror our experience in that about 1/2 of the sales of Macs are sold to new to Mac customers (“Switchers”).
  • 515,000 Macs were sold at Apple retail, and while year-over-year, revenue per store was down for the quarter, Apple retail stores are averaging $7 million in quarterly revenue.
  • Apple plans to open 25 stores worldwide in 2009 and half of those will be outside the USA.

iPods and iTunes

  • 22,727,000 iPods were sold, an all-time record for Apple.
  • Apple retains 73% of the MP3 player market and remarked upon the huge success of the App store on iTunes.

In other news, Microsoft posted quarterly results that missed expectations and will lay off 5,000 employees. They said they could no longer offer profit forecasts for the rest of the fiscal year.

For Apple, the news is quite different. Exceptional products, exceptional management, exceptional performance and a laser-like focus on innovation and quality have put Apple in this enviable position. This greatest story in American business continues!

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