2nd Apple Profits Nearly Double On IPhone, IPad Sales
First Published Tuesday, 24th April 2012 10:51 pm - © 2012 Dow Jones
--Apple profits up 94% over previous year
--Highest Mac, iPhone, iPad sales in a March quarter
--Cash hoard above $110 billion
(Incorporates changes at bottom with quote from CEO.)
By Ian Sherr and Jessica E. Vascellaro
SAN FRANCISCO -(Dow Jones)- Apple Inc.'s (AAPL) fiscal second-quarter profits nearly doubled as the consumer electronics giant reported strong sales of its iPhone and iPad products.
Shares rose 7.2% to $600.76 in after-hours trading, and briefly went above $600 again, as results topped analyst expectations. Apple said it was the highest revenue and earnings ever for the March quarter.
The latest results come after Apple reported a blockbuster first-quarter, which set new sales and profit records, thanks to the surging popularity of its smartphone and tablet computer. The company's iPhone continued to be a key driver of growth in the latest period, as Apple sold 35.1 million iPhone units last quarter, up 88% from the prior year's total.
"For the first half of the fiscal year, we have sold more than 72 million iPhones, growth of over 100% and above the market by two times," Chief Financial Officer Peter Oppenheimer said in an interview.
Ahead of Apple's earnings, concerns were rising about the company's iPhone sales after U.S. carriers Verizon Wireless and AT&T Inc. (T) reported fewer iPhone activations than some were expecting. Tuesday, Apple said its iPhone sales growth was led by its Asia and Pacific segments.
"We continue to see tremendous momentum in greater China where Iphone sales were five times the level of the year-ago quarter, aided by the launch of the iPhone 4S in China in January and the addition of China Telecom as a carrier in March," Oppenheimer said on the company's conference call.
Apple sold 11.8 million iPad units in the most-recent period, more than double from a year earlier. Apple began selling the third-generation iPad last month, the first major product launch for Apple since the latest iPhone went on sale in October. Apple had said it sold a record 3 million iPads in the product's first weekend of sales.
"Demand is staggering, and we're selling them as fast as we can make them," Oppenheimer said, possibly easing any concerns from those expecting higher iPad sales. Many analysts had projected iPad sales above 12 million for the March quarter.
For the second quarter, Apple reported a profit of $11.62 billion, or $12.30 a share, up from $5.98 billion, or $6.40 a share, a year earlier. Revenue increased 59% to $39.19 billion, with 64% of the top line coming from international sales.
In January, the company projected earnings of about $8.50 a share on revenue of about $32.5 billion, above Wall Street's estimates at the time. Analysts had forecast a per-share profit of $10.04 and revenue of $36.81 billion.
Gross margin widened to 47.4% from 41.4%, and above the company's recent high of 44.7%.
Apple said it generated more than $14 billion in cash flow from operations in the second quarter and reported about $110.18 billion in overall cash holdings. In comparison, only 19 companies in the S&P 500--not counting Apple itself--have higher market valuations than Apple's cash holdings.
Last month, Apple unveiled plans to return some of its cash hoard to shareholders by declaring a long-awaited quarterly dividend, its first in more than a decade, and authorizing a $10 billion share repurchase program to begin in the quarter starting Sept. 30.
The maker of computers and electronics devices, known for traditionally giving conservative guidance, said it expects third-quarter earnings of about $8.68 a share on revenue of about $34 billion. Analysts surveyed by Thomson Reuters forecast a profit of $9.93 a share on $37.45 billion in revenue.
Oppenheimer said that because Apple was able to fulfill so much demand for its iPhones and iPads in the March quarter, it would likely sell less than it would have in the June quarter. But, he added, demand for the iPad is still outstripping supply.
According to research firm Piper Jaffray, Apple's per-share earnings guidance has lagged Wall Street estimates by about 9%, on average, over the past several years, while revenue guidance is usually about 2% below Wall Street.
In the second quarter, Apple sold 4 million Macintosh computers, up 7% from a year ago and registering the products' best March quarter. The result is interesting because Apple's laptops and desktops are thought to be near the end of their product upgrade cycle, as many haven't been upgraded with new chips in nearly a year.
Apple also sold 7.7 million iPod media players, a 15% decline. Apple has reported declining sales for the iPod in recent quarters although the unit has likely benefited from higher average selling prices, as more consumers gravitate toward the iPod Touch. Desipte the declines, Apple said its device is still the highest selling in every country it tracks, including the U.S. where it represents more than 70% of the market.
Tim Cook, Apple's chief executive, also gave insight into the company's ongoing patent battles with rivals such as Samsung Electronics Co. (005930.SE, SSNHY), Motorola Mobility Holdings Inc. (MMI) and HTC Corp. (2498.TW, HTCXF). He said that he was open to settlements, and that at its heart, Apple is fighting in court because it believes competitors have stolen its designs.
"I've always hated litigation, and I continue to hate it," he said. "We just want people to invent their own stuff. And so if we could get some kind of arrangement where we could be assured that that's the case and a fair settlement on the stuff that's occurred, I would highly prefer to settle versus battle."
Apple's stock hit an all-time high of $644 earlier this month but had fallen 13% through the close Tuesday.
--Nathalie Tadena contributed to this report.