“Apple beats Street in holiday quarter; shares soar” (AP)
“Apple trounces Wall Street estimates” (CNN Money)
“Apple Understates The Insanely Great” (Forbes)
In a very tough environment, where consumers (supposedly) aren’t spending and high-end products don’t get bought, Apple took industry analysts’ projections out to the woodshed and gave them a good old fashioned whupping (see detailed projections chart put together by Andy Zaks HERE).
How much of a whupping? Well, on average, analysts were projecting for Apple a profit of $1.39 per share on $9.75 billion in sales, and the company instead delivered $1.78 per share and $10.2 billion in sales, respectively.
But that doesn't tell the real story since it does not take into account Apple's adjusted earnings when you factor out a quirky decision (by Apple) to spread revenue recognition on iPhone and Apple TV sales over two years, based on subscription-accounting revenue recognition. Add those numbers in, and the real sales are actually $11.8 billion - $1.6B HIGHER!
All of this dropped an additional $3.6 billion in cash to Apple’s coffers during the quarter, and the company now sits with a $28B war chest.
Why should you care? As noted in my recent post, ‘Punishing the Wizard: On Apple and Steve Jobs,’ most people give analysts and business media way too much credit for parsing the salient details that separate the wheat from the chaff in the investing universe.
This is compounded by the fact that we all look for the simple story, meaning that the complexities of different revenue recognition across product lines, relativity to industry peers and aggregate versus relative growth metrics across product lines, are thus lost.
Net it out, and the one company that actually seems to have a differentiated strategy, instead, looks like a laggard, and not surprisingly, ends up trading at a discount to its so-called peers.
On a personal level, I am simply left wondering, "Who looks better against the template that Apple has put together; namely, differentiated products, diverse revenue lines, a deep product pipeline, stellar management team, huge profits, high operating margins, massive cash reserves and ungodly cashflow?"
After all, shouldn’t any analysis of how Apple's strategy is working fit within the larger context of who's doing better at delivering technical, marketing and cash generating wizardry?
(Disclosure: I sold Me.com to Apple last year, so I have a vested interest in being right on my analysis.)
Other Notes of Interest from the Earnings Call:
- 22.7M iPods sold in the quarter: this is a jaw-dropping number considering how the device is a logical step path into iPod touch (a subset of the overall iPod sales numbers) and iPhone (a different unit count bucket), and increasingly part of one unified ecosystem.
- Apple will continue to invest in Apple TV: The company noted that it has received a tremendous uptick in sales performance, thanks in part to iTunes rentals, and that unit sales, though unpublished, are three times higher than they were last year. While they continue to refer to the device as a "hobby," I think that the tea leaves are clear on this one (also, see my posts on the Apple-centered Media Center Universe: 'Apple, TV and the Smart Connected Living Room' and 'What it Means to be a Social Media Center: Boxee, Apple TV and Square Connect').
- Apple sent a clear warning shot to competitors that it is going on offense to protect its intellectual property, something that I blogged about in 'Upward Mobility, Land Grabs and the iPhone Universe.' Palm Pre, which is the first device to incorporate multi-touch functionality, feels like a lawsuit in the offing.
Related Posts of Note:
- Holy Shit! Apple's Halo Effect: how Apple has turned gravity into its friend.
- Ringing Up Apple's Earnings Call: analysis of last quarter's earnings call.
- iPhone 2.0 - What it Means to be Mobile: a detailed summary of my experience to date with the iPhone 2.0 platform.
- Innovation, Inevitability and Why R&D is So Hard
