iPhones Low Despite Apple Earnings

UPDATE Apple today announced better-than-expected results for the first quarter of fiscal year 2009–even if its iPhone didn’t do as well as Wall Street had forecast. Cupertino reported that it sold 4.36 million of its handset, pointing out that this is up 88 percent from the year-ago quarter. The consensus of analysts surveyed by Thomson …   Read More

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UPDATE Apple today announced better-than-expected results for the first quarter of fiscal year 2009–even if its iPhone didn’t do as well as Wall Street had forecast.

Cupertino reported that it sold 4.36 million of its handset, pointing out that this is up 88 percent from the year-ago quarter. The consensus of analysts surveyed by Thomson Financial, however, had put iPhone sales at 4.5 million units.

The phone figures didn’t seem to harm Apple’s bottom line, however: The company earned $1.78 per share on revenue of $10.1 billion, compared to analyst expectations of $1.38 EPS on sales of $9.74 billion. The results are also up from the same quarter last year, when Apple earned $1.76 per share on revenue of $9.6 billion.

Still, the iPhone’s performance makes me wonder whether it’s due to that handset alone (perhaps the number of consumers willing to buy the thing is reaching saturation); or if it’s foretelling of smart phones in general. Earlier Bloomberg pointed out that the global handset market is expected to shrink for the first time in eight years while consumers downgrade to cheaper devices. Citigroup analysts predict a 13 percent drop in the industry, while Bloomberg reports that top cell phone maker Nokia may post a 47 percent fall in profit tomorrow.

During Apple’s earnings call with press and analysts, COO Tim Cook said, “On the iPhone, it’s difficult to say how we performed versus what it was supposed to be like. I can’t really make an educated comment since it was only our second December of the business.”

Mr. Cook touted the iPhone’s growth and uniqueness, while surreptitiously addressing the unit sales figure with a “quality vs. quantity” argument.

“We’re not going to play in the low-end voice business. It’s not who we are, it’s not why we’re here,” the COO said. “The goal is not to be the leader in share of the (mobile) phone industry–it’s to build the world’s best phone.”

Mr. Cook noted, “We are now in 70 countries… Our sales are materially less in non-subsidized markets than in subsidized markets… We’re constantly evaluating the best way to play in these markets.” On iPhone inventories, he reiterated: “We were in 70 countries for the first time last quarter, so quite frankly we’re uncertain as to seasonal demand from quarter to quarter.”

He pointed out what makes the handset remain competitive:

“iPhone has sold 17 million units, it has the highest rating of customer satisfaction, and software is the key ingredient–and we believe we’re years ahead on software,” Mr. Cook said. “We approach this business as a software platform business, so i think we approach it fundamentally different from people who approach it from a hardware point of view.”

The COO also threw down against those whose would-be iPhone killers are a little too familiar: “We are confident, we are watching the landscape, and we like competition–unless they rip off our IP.” That last jab may be aimed at Palm’s upcoming Pre, which one analyst said “seems to emulate the iPhone.”

Finally, in relation to my point about the declining cell phone market, Mr. Cook said, “Generally smart phones command heavy (data usage) fees, which may” prevent consumers from wanting to invest in one. A reminder, from the maker of the world’s buzz-iest handset, that mobiles with SMS or other basic capabilities are still the best way to reach consumers.

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4 comments

  1. berater

    600 USD is much better than prepayment of 279 EUROS and 24 Month each for 49 EUROS. These are the conditions in germany. i buyed mys for 649 EUROS = 850 USD.

    In netherlands you pay only 29 EUR x 24 Month

  2. Los Maniacos

    The price of the phone in Russia is more than $ 600. It is not worth it of money (

  3. eydie

    Sleepy, the unit sales figure I used was from Apple’s own press release and earnings sheet. Unless we hear otherwise, I’m sticking with that 4.36 M figure, which was less than the 4.5 consensus expectation.

    As for Tim Cook warning about consumers possibly not wanting to invest in smartphones, yes, I did paraphrase for brevity’s sake. Here’s the full quote according to the Seeking Alpha transcript:

    “But the fear that we would have and I think that everyone has in this market, is that the economy may slow the adoption rate of smartphones, because generally smartphones generally command higher monthly fees and that may keep some customers to not signing up for higher contracts.”

  4. sleepy

    Your headline is mistaken.

    iPhone channel inventory was 2M at the end of the 3G launch quarter, but now is 250k less at the end of this current quarter being reported. So end-user sell-through was 4.9M in the launch quarter, 4.6M this quarter. That’s actually higher than analyst consensus of 4.5, not lower. It suggests sales are holding up well, taking into account the pent-up demand at 3G launch after months with no iPhone availability.

    Your final paragraph puts words into Tim Cook’s mouth which he did not say. Only the approximate words in quotation marks are his; the rest of the sentence is your invention. Interested readers should check the transcript at Seeking Alpha.

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