Apple first-quarter 2010 earnings soared past Wall Street expectations Monday, with the company reporting a profit of $3.37 billion, or $3.74 per share.
That's up 50 percent from the same quarter a year ago, when profits reached $2.26 billion, or $2.54 per share.
Revenue for the quarter was $15.6 billion, up 32 percent from the same quarter a year ago. Wall Street was expecting between $11.21 billion and $12.6 billion in revenue on earnings of $2.07 per share. And Apple always gives an overly conservative estimate; last quarter, Apple said it was anticipating earnings between $1.70 per share and $1.78 per share, and revenue of between $11.3 billion and $11.6 billion.
In short, it was Apple's best quarter in company history. One of the reasons the numbers were so far ahead of what many had been anticipating is the company's decision to adopt the new accounting principles laid out by the Financial Accounting Standards Board last fall for the first quarter of 2010, which ended on December 26, 2009. That means that revenue from the iPhone and Apple TV can be recognized the same quarter that the sales are made, rather than over a two-year period, as had previously been Apple's practice.
As with the previous two quarters, there was good news on the Mac and iPhone fronts, with iPod sales lagging once again. Apple sold 3.36 million Macs, up 33 percent from a year ago, 8.7 million iPhones, a 100 percent gain over the last year, and 21 million iPods, 8 percent fewer.
In a statement, Apple CEO Steve Jobs called it "surprising" that Apple is now a $50 billion company, and he hinted at Wednesday's event, saying there will be a "major new product that we're really excited about." It's widely assumed that the new product will be a tablet computer.
Apple Chief Financial Officer Peter Oppenheimer said Apple's retail stores did their best business ever during October, November, and December of last year. Sales totaled $1.97 billion, up 13 percent from the same holiday shopping period a year ago, but Mac sales did particularly well. Together the 283 Apple Stores worldwide sold 689,000 Macs, a record for them. And half of them were to first-time Mac customers, Oppenheimer said. Foot traffic to the stores was also the highest ever: Apple says 50.9 million people went through their doors for the most recent quarter.
AT&T and Verizon
Oppenheimer handled the bulk of the earnings call. Chief Operating Officer Tim Cook stayed silent until it was time to respond to questions from investors. And when he did speak, he revealed some interesting tidbits. Notably, Cook came to the defense of AT&T, the exclusive iPhone carrier that has gotten battered on the public relations and customer service front for the past few months.
"AT&T is a great partner. We've been working with them since well before we announced the first iPhone. They had more mobile broadband usage than any other carrier in the world...In the vast majority of locations we think iPhone customers are having a great experience. As you know, AT&T has acknowledged they're having issues in a few cities," and are working on a plan to correct them, Cook said. "We have personally viewed these plans and we have high confidence that they'll make significant progress in addressing them."
Though he appeared to be standing by AT&T, it wasn't what potential and current iPhone users who hope to see the iPhone on Verizon soon probably wanted to hear. However, Cook didn't rule out new or additional carrier partners in the future. As with most things in Apple's future, he was vague. In response to a question from an analyst about iPhone growth in countries where additional carriers had been recently added, Cook said this:
"We've seen in the countries where we had (added carriers) the sales are largely incremental as we add carriers."
He said it was true for the U.K., France, and Scandinavian countries, and he expected it to be the same for Canada.
He added: "However, we've also selected in most cases countries that we thought that would happen in. I don't want to imply that would happen in every market or that we are headed that way in every market."
Waiting for Wednesday
But despite the record-breaking quarter, most investors and analysts are more curious about the future than the past. Several analysts tried to ask questions about the impending Apple tablet and were rebuffed. Oppenheimer flat-out refused to answer a question about whether the guidance for the next quarter included any unannounced products, and Cook told another analyst, "I wouldn't want to take away your joy of surprise when we reveal our latest creation on Wednesday."
Looking ahead to the next quarter, Apple again stayed conservative, saying it expects revenue between $11 billion and $11.4 billion, and earnings per share from $2.06 to $2.18.
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