Apple Baffles the Street
In the days leading up the release of Apple’s Quarterly Financial statements this week, the analysts were all predicting that Apple would miss its own guidance for sales and profit. There was talk that the smartphone market was saturated, that Apple had lost marketshare, and a lot of prophets of doom for Apple.
Instead, Apple posts revenue of $35.3 billion and a net profit for the quarter of nearly $7 billion, or $7.47 per diluted share. While the profit numbers are down somewhat from the same quarter last year, keep in mind that the 3rd generation iPad was released last year in this quarter resulting in higher inventory levels (sales) at places like Small Dog Electronics. If you take that new iPad inventory into account, iPad sales were down about 3% year-over-year. With new models expected this fall, I can imagine this turning around.
Apple’s gross margin declined (as predicted) from 42.8% to 36.9%, which reflects the maturing nature of the product lines. Boy, I wish we had margins that were just a point or two more. Not many realize this, but we make less than 10% margin on most Apple products and once we pay a credit card fee, the margin is very thin. These strong margins helped Apple to generate another $7.8 billion in free cash flow to add to their stash of cash. Apple spent some of that stash, as promised, by returning $18.8 billion to shareholders through share buy-backs or dividends. Apple’s stock purchases were about $16 billion, which is enough to buy a number of companies outright, but Apple wisely decided their own company was the better buy!
Apple also saw some big increases in its iTunes, Software and Services businesses, with sales rising to $3.9 billion, which is 25% year over year growth. It is an interesting ecosystem with developers making over $11 billion in sales, half of which was within the last year. Here are some other interesting numbers from this sector:
- 1 billion TV Episodes downloaded
- 390 million movies downloaded
- 900 thousand Apps
- 900 billion iMessages
- 8 trillion push notifications
There were more hints of exciting products to come this fall. Tim Cook, Apple CEO said:
“We are especially proud of our record June quarter iPhone sales of over 31 million and the strong growth in revenue from iTunes, Software and Services. We are really excited about the upcoming releases of iOS 7 and OS X Mavericks, and we are laser-focused and working hard on some amazing new products that we will introduce in the fall and across 2014.”
Congratulations to Apple for another great quarter!