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iPads, iPhones Propel Apple’s $8.8 billion Q3 2012 Profit

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Apple has reported slightly lower-than-expected profits for many of its products during its Q3 2012 time period. With revenues of $35 billion and net profits of $8.8 billion ($9.32 per diluted share), the company’s revenues are up 22.4 percent compared to the year-ago quarter (see “Apple Reports Q3 2011 Record Financial Results,” 19 July 2011). Although the results disappointed analysts, who had expected even higher profits, and drove Apple’s share price lower in after-hours trading, Apple did record its highest June quarter earnings ever.

During the quarter, Apple sold 4 million Macs, a 2 percent increase over last year, compared to a decline in PC sales during the quarter. This is the 26th consecutive quarter that Mac sales have outperformed competitors in the PC market. Moreover, according to Apple management during the call with analysts after results were announced, Mac sales would have been higher in the quarter if the recently released Macs like the MacBook Pro with Retina Display had come out earlier in the reporting period. In particular, portables represented about 75 percent of Mac education sales.

Though iPod sales continue their slow decline in a saturated market, the decline was less than expected, with 6.8 million sold; analysts had predicted 5.9 million in iPod sales.

iPhone sales increased 28 percent over the year-ago quarter with 26 million sold (analysts had predicted 29 million), bringing in $16.2 billion. Sales of the device to Fortune 500 companies more than doubled. In the analyst call, both CEO Tim Cook and COO Peter Oppenheimer pointed to “rumors and speculation” about new products, but the lower-than-expected iPhone sales figures can also be attributed to Apple’s established timeline of iPhone releases. It’s also impressive that 26 million iPhones were sold, even with the expectation that a new iPhone is likely to appear in the next three months; the iPhone 4S arrived in October 2011.

iPad sales continued to shine, with 17 million sold as compared to 9.2 million sold in the same quarter last year. iPad sales brought in $9.2 billion in revenue. Sales of iPads to education purchasers, especially the low-cost model, were high: iPads outsold Macs in education by a two to one ratio. Apple’s recent refocusing on education was also reflected in the 14 million downloads of the educationally oriented iTunes U app.

Apple TV still remains “a hobby,” said Cook, with 1.3 million sold during the quarter; 4 million of the devices have been sold this fiscal year. Cook said that Apple “continue(s) to pull the string to see where it takes us. We’re not ones to keep around products we don’t believe in.”

Overall, Apple sold 45 million iOS devices during the quarter, which is almost 11 percent of the 410 million iOS devices that have been sold since Apple started making them. This should please developers, who have received a total $5.5 billion from App Store sales since inception. The iTunes Store (which includes music and video in the iTunes Store, apps in App Store and Mac App Store, and books in the iBookstore) accounted for $1.8 billion in sales this quarter.

The retail Apple Stores saw slightly increased sales year over year, bringing in $4.1 billion in revenue. Once again, about 50 percent of the sales through the retail stores were to first time Apple buyers.

Apple ended the quarter with $117.2 billion in cash ($81 billion of which was held offshore), and, in an announcement that should please stockholders if not analysts, said that a quarterly dividend of $2.65 per share would be paid out on 16 August 2012 (see “Apple to Pay Quarterly Dividends and Repurchase Stock,” 19 March 2012). Future dividend amounts and dates will be announced at the same time as quarterly results from now on.

All in all, even in the face of a strong dollar (resulting in lower international revenues), even with the anticipated release of the next iPhone adversely affecting sales of the current model, and despite the overenthusiastic analyst expectations, it was yet another exceptional quarter for Apple.

 

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