Apple, Business, Companies

Apple Reports Record Fiscal 4Q 2010

Apple Inc,[AAPL] yesterday on the 18th of October reported their fiscal 4Q 2010 earnings to investors. Apple?s 4Q 2010 is almost identical to the calendar 3Q 2010, but it does end a few days earlier. The quarter ending September 25th, Apple posted a record profit of $4.31B on revenue of $20.34B [$4.64EPS]. This is up from sequentially from $3.25B of profit on $15.7B in revenue. That means that Apple increased their revenue by 33% and profit by 21%. Both of these are great improvements for any company to achieve, especially when you begin to consider the sheer size of a company like Apple having $20B quarters. Furthermore, Apple?s gross margin was 36.9% which is down from the previous quarter by 2.2% and 3.9% from the same quarter a year ago. While this may be a concern for many companies? bottom lines, it appears that Apple is still capable of having their gross margins shrink while increasing revenue enough to improve overall profit. This may eventually become a point of concern for Apple if not addressed as there will be a point where Apple ceases to increase their revenue and market share and will have to improve their margins.

In the fiscal Q4 2010[calendar Q3 2010], Apple sold 3.89M Macs which was an increase of 420,000 over the previous quarter. Also, Apple sold 14.1M iPhones increasing iPhone sales by nearly 50% over the previous quarter. Apple also sold 9.05M iPods and 4.19M iPads in the quarter, which marks a decrease in iPod sales of 360,000 and an increase of iPad sales of almost a million. These numbers are what have allowed Apple to increase their revenue and profit consistently quarter over quarter and the loss of iPod sales shouldn?t be too concerning considering that the iPhone and iPad do duplicate the functionalities of the iPod and therefore are likely to take away sales.

Apple has been very forthcoming with their regional and division sales numbers, so analyzing their movement is made much easier and we don?t have to deal with estimates from groups like the IDC. Looking at their regional sales, we notice that Apple grew fairly well in every single global market in respect to sales and units. Apple may look to the Japanese market to see how they can improve their overall margins as they actually decreased in units shipped, but significantly improved their revenue nonetheless. Since these figures are quarterly, though, they are unaudited so we can only rely on this being a fairly good figure that will likely be adjusted once Apple finishes their audit for the fiscal year 2010.

Some of the other statements that came out from Apple CEO Steve Jobs during the earnings call were probably the biggest news makers beyond the actual earnings report itself. Steve Jobs uncharacteristically joins into the earnings call and brings up competitors like RIM[RIMM] and states that Apple has sold more iPhones than Blackberry has sold Blackberry devices and that Blackberry will have a hard time catching back up to Apple. He then shifts his focus to his next competitor, Google[GOOG], and brings up the figures regarding Android and their ever increasing devices that are being activated every single day. Jobs specifically states that there are no accurate figures from the actual manufacturers to show exactly how many Android devices are being sold and that is a problem. Steve Jobs comes back to the talking point that he always refers to when comparing Apple?s iOS to Android. He claims that Android is far too fragmented and that Apple?s system is much more unified and simpler and that the user interfaces differentiate too much. The problem with this perception of the market is that not everyone wants to have the exact same user interface. The iOS is a static interface that is simple and almost never changes, because of this many people are comfortable with it and enjoy using it, but this does not satisfy everyone. And if Android was simply just one blanket interface, there would be less value in going with Android over iOS and there would also be less personal choice. Because different manufacturers have different interface overlays on top of Android [not all do], this enables consumers to choose and find one that they like rather than being forced to stick with one choice. Android talks about being open, part of being open is giving you a choice. The question is how can Steve Jobs claim to be open when there is literally no choice? In this call, Steve actually does not actually claim that Apple is open anymore? he almost alludes to the fact that they are a closed and unified system.

Steve Jobs then proceeds to talk about tablets and specifically mentions 7? tablets [like the Samsung Tab] and states that these devices are too small for consumers. Not all tablets will be 7?, but Steve Jobs is claiming that 10? is the perfect size for a tablet, as 7? is an in between size that cannot compete with smartphones nor the iPad. He then proceeds to criticize manufacturers for using Android 2.2 on their devices even though he claims that Google told them to wait for 3.0 to put on their tablets. Having used the iPad extensively, we can definitely see the argument in saying that the iPad?s size is nearly perfect [9.7?] but it also lacks quite a few things that consumers demand in order to have a fully functional tablet device and not just another entertainment toy. If apple chooses to integrate a USB port and webcam into their newest version of the iPad, there is a good chance that many other manufacturers out there will have a nearly impossible time catching up. But we would be shocked to see Apple putting a USB port onto an iOS device as there is no precedent for it whatsoever, especially since they?d end up point you towards a $999 Macbook if you need USB ports.