Apple returns to form, blows Street targets away

SAN FRANCISCO Tue Jan 24, 2012 6:19pm EST

The Apple Inc. logo hangs inside the newest Apple Store in New York City's Grand Central Station in this December 7, 2011, file photo. Apple Inc. coasts into 2012 with a strong wind in its sails, a clutch of envelope-pushing products in its hold, a record share price, and a steady hand at the tiller. REUTERS/Mike Segar/Files

The Apple Inc. logo hangs inside the newest Apple Store in New York City's Grand Central Station in this December 7, 2011, file photo. Apple Inc. coasts into 2012 with a strong wind in its sails, a clutch of envelope-pushing products in its hold, a record share price, and a steady hand at the tiller.

Credit: Reuters/Mike Segar/Files

SAN FRANCISCO (Reuters) - Apple Inc's quarterly results blew past Wall Street's expectations after U.S. consumers snapped up near-unprecedented numbers of iPhones and iPads, sending its shares up 8 percent into record territory.

The world's most valuable technology corporation returned to form after a rare miss in the previous quarter, assuaging investors' worries that its sheer size meant it was headed into a period of slower growth.

It sold 37.04 million iPhones - its flagship product - and 15.43 million iPad tablets, doubling from a year earlier and easily outpacing already heightened expectations for a strong holiday season. That helped swell its cash hoard to almost $100 billion - more than enough to plug December's U.S. budget deficit.

"Going into 2012, I expect strength of iPhone, iPod Touch and iPad should carry on into the year. Apple still has some tailwind, including opening up new retail stores and expanding its distribution channels," said Hendi Susanto at Gabelli & Co.

"I would say Apple still has many unpenetrated international markets ... Apple is still far from its saturation."

The company founded by late Silicon Valley titan Steve Jobs - who died in October after a years-long battle with cancer - smashed estimates on all its results including gross margin, which came in at 44.7 percent during the quarter.

Revenue leapt 73 percent to $46.33 billion, handily beating the average Wall Street analyst estimate of $38.91 billion, according to Thomson Reuters I/B/E/S.

Apple's sales in the United States were particularly strong, with revenue rising 90 percent in the Americas region. Sales in Europe were up 55 percent even though the region is in the grip of a debt crisis that has pummeled consumer confidence.

Shares in Apple leapt 8 percent to about $452 in extended trade following the earnings report. The stock - which set a record high of $427.75 just this month - closed at $420.41 on the Nasdaq.

MONSTER QUARTER

Several analysts had warned that Apple might face a rougher ride than usual in 2012.

Google Inc's Android - a free software to run smartphones, adopted heavily by Samsung Electronics, Motorola and others - is chipping away at Apple's market share. A host of tablets from Amazon.com Inc, among others, offers buyers viable alternatives.

And then there are the inherent difficulties in maintaining growth momentum. In fiscal 2011, Apple tacked on $43 billion to its revenue, which analysts likened to birthing a Fortune 500 from scratch - every year. Its market value stood just shy of $400 billion, rivaling Exxon Mobil for the title of largest U.S. corporation.

Still, some analysts said the stellar fiscal first quarter suggested such fears were premature, particularly given a 2012 pipeline that many expect to include the third iteration of the market-leading iPad and a fifth-generation iPhone that will trigger a new round of consumer mania.

"Customer demand was off the charts in the quarter," Apple Chief Financial Office Peter Oppenheimer told Reuters in an interview.

Apple reported a net profit of $13.06 billion, or $13.87 a share. Analysts had expected Apple to earn $10.16 per share.

Average projections for sales of Apple products during the fiscal first quarter, which includes the holiday shopping season and one more week than is typical, were for roughly 31 million iPhones, 13.5 million to 14 million iPads and 5 million Mac computers.

On Tuesday, Apple also forecast results for its fiscal second quarter that were ahead of analyst estimates. It expects revenue of about $32.5 billion and diluted earnings per share of about $8.50. Wall Street had expected earnings of $8.04 per share on revenue of $32.1 billion in the fiscal second quarter.

"It sets up Apple well for the rest of the year," said Canaccord Genuity's Michael Walkley. "They are still ramping up the new geographies like the iPhone 4 in China, which they just started selling in January and we'll see in March results."

"IPhones and Siri (voice-activated software) still driving strong. An iPhone 5 for the end of the year with a new form factor and with LTE (next-generation mobile technology) will drive another set of gains in 2012," he added.

(Writing by Edwin Chan; Editing by Gary Hill)

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Comments (6)
UnPartisan wrote:
I wish they would take some of the cash they have and open up manufacturing plant back stateside. They could show the rest of the world how manufacturing is supposed to treat their employees, and end their bad press for being a big customer of foxconn.

Jan 24, 2012 5:14pm EST  --  Report as abuse
Fern wrote:
Great. Now that he’s out of the way, perhaps they could backtrack on his statement that the manufacturing jobs were never coming back to the U.S.. That went over OK when we were still marching toward the recession, but now that we see the U.S. economy and quality of life declining as a result of offshoring policies, among other things, Apple needs to stop using Chinese slaves to manufacture their products, before the bad press and resulting consumer disgust turn buyers against their products. This is a great opportunity for their competition, as Apple is currently at a high point where they cannot possibly see their own impending decline, sort of like the former illusory perception of the U.S. economy.

Jan 24, 2012 5:46pm EST  --  Report as abuse
Eideard wrote:
UnPartisan, sadly – is ignorant of contemporary production requirements. It would take years just to provide the engineering staff for a plant in the United States or most countries outside China for products like those FoxConn is setup for.

Just one FoxConn plant has over 8000 process engineers. We don’t produce sufficient skilled management for a cat food plant.

Here – go read this:

http://tinyurl.com/7ntdopr

Jan 24, 2012 5:49pm EST  --  Report as abuse
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