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Apple's record Q1 no match for pessimism over economy
Someone activate the reality distortion field
Apple reported its best quarter ever, as sales of iPods, Macs and iPhones lifted profit by a staggering 57 per cent. But unexpectedly low guidance for the current quarter, combined with flattening iPod sales in the US, sparked analyst concerns that a flagging US economy might dampen Apple's future.
For its current quarter, which ends in March, Apple expects to generate profit of about 94 cents a share, well below the $1.09 consensus estimate from financial analysts. Apple also forecast lower-than-expected revenue of $6.8bn, compared with analysts' expectations of $6.99bn.
Apple bean counters are legendary for their conservatism in providing financial forecasts. But for a couple reasons, this one was enough to spook investors, who drove down Apple shares 11 per cent in after-hours trading following the company's report.
For one thing, according to Apple CFO Peter Oppenheimer, US-based iPod sales in November and December were flatter than in previous years. That prompted questions about whether the slumping US economy was beginning to weaken consumer demand for the once must-have devices. Rather than answer the questions directly, Oppenheimer repeatedly danced around them.
"We'll leave the economic forecasting to others," he said at one point. "We're focused on managing our business." Oh, Apple execs also remain "very confident in our business and in our products and our strategy."
But confidence is cheap, and that's not exactly the assurance of an iPod Everywhere world that Wall Street sought.
Another reason for jitters was the size of the this quarter's revenue fall. Over the past few years, there's usually a decline of about 25 per cent in the second quarter compared with the previous one. But this time around Apple is forecasting a fall off of 29 per cent.
The concerns came as Apple reported that net income in the first quarter jumped 57 per cent to $1.58bn, compared with $1bn in the year-earlier period. Revenue surged 35 per cent to $9.61bn from $7.12bn. The company shipped 2.3 million Macs, representing a 44 per cent increase in unit growth and 47 per cent increase in revenue. Apple sold 22.1 million iPods, a unit increase of 5 per cent that increased revenue by 17 per cent.
Oppenheimer said 2.3 million iPhones were sold in the quarter and reiterated Apple's forecast of hitting the 10 million mark by the end of this year. ®