Apple released their July, August, September numbers and posted some strong results with sales of 33.8 million iPhones, 14.21 million iPads, 4.6 million Macs resulting in $37.5 billion in sales, and $7.6 billion in profit for the quarter (or $8.26 per share). This was even better than the revised guidance Apple had issued in the middle of the quarter and beat the analyst’s best guesses.
When Apple CFO Peter Oppenheimer provided guidance for the holiday quarter of $55-$58 billion and a gross margin of 36.5 to 37.5%, some of those analysts started to freak out because those margins were a bit lower than they anticipated. As I watched the after-hours trading in Apple stock, it was plummeting; that is, until Peter answered the question as to why those margins were lower.
There were a number of reasons why, but the $1 billion reason was that Apple had changed the way that it accounts for deferred income. Since the release of the original iPhone, Apple has delayed recognition of a portion of its sales receipts over a two year period in order to comply with U.S. rules that do not allow companies to book revenue for products until they are fully delivered.
In making iLife and iWork apps free and iOS and OS X Mavericks updates free, the amount of collected revenue Apple will officially delay counting is increasing by almost another $1 billion in the holiday quarter alone. It was interesting to see the stock pick up all those panicky losses after this explanation.
By any measure, it was a great quarter for Apple and there is no doubt that Apple’s business is very strong. This was the 4th quarter for Apple’s fiscal year and for that year Apple earned $171 billion, completed 15 strategic acquisitions, paid $2.8 billion in dividends and bought back 47 million of their own shares. Tim Cook reported that Apple has a 94% share of tablets in education, too!
With a very strong product lineup for the holidays, including new iPhones, new iPads and new MacBook Pros, Apple is positioned for a great start to their new year. Apple hinted at more great products to come in 2014, including products in categories that Apple does not participate in today. Yeah! More toys!
Congratulations to Apple and the Apple team for great financial results, but better yet, for great products that make our lives easier.