In these hard economic times, there was a glimmer of hope as Apple once again trounced the street when they announced their quarterly earnings on Tuesday. Their spectacular earnings were outstanding on their own, but when you take a deeper look and understand the impact of the iPhone, they are significantly more impressive. One of the things that Apple does to maintain compliance with GAAP (generally accepted accounting principles) is to recognize revenue from the sale of the iPhone (and Apple TV) over 24 months, rather than at the point of sale.
This means that the revenue from the sale of over 10 million iPhones is only recognized about 12% of the revenue for the current quarter. If you compare their results with GAAP and non-GAAP analysis, you can see that the year-over-year growth for Apple is 75.1% with GAAP accounting, but if you count all the iPhone sales, it soars to 124.6% and the net income rises from $1.1 billion to over $2.4 billion. Considering this massive success of the iPhone, Apple’s financial performance is simply unprecedented.
In a surprise to the analysts gathered for the regular quarterly phone conference, Steve Jobs joined the call to answer questions. Among other things, Steve talked about the impact of the economic downturn and said that Apple “just reported one of the best quarters in its history, with a spectacular performance by the iPhone—we sold more phones than RIM. We don’t yet know how this economic downturn will affect Apple. But we’re armed with the strongest product line in our history, the most talented employees and the best customers in our industry. And $25 billion of cash safely in the bank with zero debt.”
Here are some notes of interest from the Apple financial results:
Macs
- Apple sold 2.611 million Macs, which is the most Apple has ever sold in a single quarter!
- Macs accounted for less than half of Apple’s total revenue at 45.9 percent. They did account for the largest dollar volume, however.
- Over 90 percent of the new Mac notebooks now ship with LED backlights. Apple has also taken several important steps in making their products greener and have less impact upon the environment. “You’ll hear more about this in the future,” Steve said.
iPhone
- Apple sold almost 7 million iPhones during the quarter and earned about $806M from these and related products over the quarter; this is more than all previous quarters combined.
- Apple has already beat their goal of selling 10 million iPhones in 2008.
- If revenue wasn’t deferred over 24 months, the iPhone would have represented 39 percent of all of Apple’s revenue for the quarter!!
iPods
- Over 11 million iPods were shipped this quarter, generating $1.678 billion in revenue. The unit shipments climbed 8 percent year-over-year, while revenues rose by 3 percent.
- Apple sold the most iPods ever in a non-holiday quarter.
Apple now has $24.5 billion of cash in the bank, having added $3.7 billion in the quarter that ended in September. Apple is in an extraordinary liquid position with lots of cash and no debt. That is an enviable position during a down economy. Steve Jobs simply said that during an economic downturn, this financial strength creates “extraordinary opportunities.” And of course, once again, Steve Jobs is correct. The amazing story of Apple continues to show how great products, great design, world-class customer service and a visionary at the helm can create more than just money.