Wednesday, 25 January 2012

Apple has another blow-out quarter

Red-hot iPhone and iPad sales helped Apple (AAPL) supercharge its first earnings report of 2012 with a breathtaking 118-percent jump in profit, leaving the tech giant with nearly $100 billion in cash and strong momentum on the increasingly crowded digital playing field.

The Cupertino company on Tuesday reported profits of $13.06 billion, or $13.87 per diluted share, for its first fiscal quarter, which ended Dec. 24. Revenues soared to $46.3 billion, up from $26.7 billion for the same quarter a year ago, putting Apple on course to become the world's largest technology company in terms of revenue.

"This is more than spectacular," said analyst Tim Bajarin with Creative Strategies. "They had a record-setting blowout quarter with incremental upgrades to the iPhone and the Mac. Imagine what 2012 will be like with a new version of the iPhone, the iPad and maybe even an all-new Mac."

In a clear sign that Apple, at least for now, is doing remarkably well without co-founder and CEO Steve Jobs, the numbers blew past Wall Street's projections. Analysts polled by Thomson Reuters expected the company to earn $10.07 a share on sales of $38.76 billion in the first full quarter under CEO Tim Cook's stewardship.

"We're thrilled with our

outstanding results and record-breaking sales of iPhones, iPads and Macs," said Apple CEO Tim Cook, who took over from an ailing Steve Jobs last August just weeks before Jobs died after a long battle with pancreatic cancer. "Apple's momentum is incredibly strong, and we have some amazing new products in the pipeline."

Once again, the iPhone was the star of the show, driving Apple revenue to an all-time high even though the iPhone 4S, introduced at the start of the quarter, was initially criticized for being too similar to its predecessor. The public obviously disagreed, buying more than 37 million iPhones during the quarter, up 128 percent from the same quarter a year earlier.

The iPad played a strong supporting role, with Apple selling 15.43 million, a jump of 111 percent from the same period last year. Apple also sold 5.2 million Mac computers in the quarter, a 26-percent increase.

Apple said its gross margin was 44.7 percent, compared to 38.5 percent in the year-ago quarter. International sales accounted for 58 percent of the quarter's revenue.

Even as some analysts have begun to question whether Apple can continue to strut its spectacular bottom line with ever-increasing revenue and profit, the company sailed into the new calendar year cash-flush and even-keeled with the seemingly steady hand of Cook at the helm. Meanwhile, excitement continues to build over rumored releases of a new iPhone, iPad and possibly an improved Apple TV.

Apple had $127.8 billion in sales during the 2011 calendar year, putting it neck-and-neck with Hewlett-Packard(HPQ), the nation's largest tech company in terms of sales. For its fiscal year ended Oct. 31, HP had sales of $127.2 billion.

The big numbers also raise the possibility that Apple, just as it did temporarily last April, could once again overtake Exxon Mobile as the world's most valuable company. That could happen as early as Wednesday morning if Apple stock opens anywhere near the $454 it hit in after-hours trading, giving it a market cap of more than $423 billion, topping Exxon Mobil's $417 billion.

Many analysts think Apple will continue to astonish the world with its performance in coming years.

"This is just a stepping point for it to go another 15 to 20 percent higher than it is now," said Michael Yoshikami, CEO of YCMNET Advisors, which owns Apple shares, adding that international expansion will drive much of the upside. "The stock is cheap relative to companies like Google (GOOG). It's a good value, especially considering what a growth trajectory this company is on."

Analyst Avi Greengart with Current Analysis said that the coming year could be a momentous one for Apple, widely expected to release newer and flashier versions of both the iPhone and iPad. But the elephant in the room continues to be the company's rumored advances with its Apple TV, key to helping it establish a dominating presence in the digital living room of the future.

"There's no question we're seeing a convergence of mobile systems with the digital living room and that remains Apple's weakest point,'' said Greengart. "I'm expecting Apple to press on in the TV business in some way, shape or form, but it still isn't clear what they might come up with.''

On the after-earnings conference call with analysts, Apple's cash holdings became the subject of some tantalizing comments by the company's executives, who raised the possibility of Apple making some earth-shaking acquisitions in the coming months.

"We are actively discussing uses of our cash balance and don't have anything specific to announce today," Chief Financial Officer Peter Oppenheimer told the analysts. "In the meantime, we continue to be very disciplined with the cash and are not letting it burn a hole in our pocket."

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