Despite the poor state of the economy, Apple has good news for its latest quarter of results. The computer company hit $10.2 billion in revenue and $1.6 billion in profit, and sold oodles of products: 4.4 million iPhones, 22.7 million iPods, and 2.5 million Macs in the quarter ending 27-Dec-08 (the second highest number in Apple’s history for Mac sales). Revenue was up slightly over the same quarter in 2008, which saw $9.6 billion in revenue (see “Apple Beats Earnings Records with Q1 2008 Results,” 2008-01-22); sales of Macs were up 9 percent in the same period, iPods up 3 percent, and iPhones up 88 percent.
The company ended the quarter with about $28 billion in cash, cash equivalents, and marketable securities as part of $35 billion in a variety of current assets. On the downside of the ledger, Apple owes or has to count as a liability about $15 billion in bills to pay, expenses they’ve incurred, or revenue they deferred.
The numbers above are the official figures using GAAP (Generally Accepted Accounting Principles). Apple now also releases a separate set of “adjusted sales” and “adjusted net income” reports that deal with how they account for revenue from iPhones on a subscription basis over two years. The adjusted sales figure was $11.8 billion for the quarter, while adjusted net income was $2.3 billion. This is a closer representation of actual dollars taken in and net dollars retained. This accounting was designed to cushion the flow of revenue from the devices and allow zero-cost software upgrades, in contrast with the iPod touch, which has its revenue realized when sold (which is why major system software updates for the iPod touch require a fee).
With the normal slowing in sales following the holiday quarter, Apple is still projecting fairly robust sales of $7.6 to $8 billion in the current fiscal quarter.
Apple said it sold a cumulative total of 13.7 million iPhones in 2008, and has sold a total of 17 million, which is far ahead of the 10 million units figure that Apple projected back in 2007. Passing 10 million units sold seemed unlikely until mid-2008 when Apple introduced the iPhone 3G. Apple now sells iPhones in over 70 countries.
Despite the high level of sales, which puts Apple up against Research in Motion BlackBerry phones in the United States, acting company head Tim Cook said during a conference call with analysts, “Our objective is not to be the unit-share leader in the industry. Our objective is to build the world’s best phone.”
Cook also emphasized that there’s a bit of buy-in by developers writing software for the iPhone. “We approached this as a software business,” he said, which differentiates the iPhone for third-party developers from products like the Android platform used by the T-Mobile G1 or the Palm Pre (not yet released).
Cook also fired a shot across the bow, noting that competition was good, but only, “as long as they don’t rip off our IP,” referring to “intellectual property” such as patented ideas. “We will not stand for having our IP ripped off and we’ll use any weapons we have at our disposal,” Cook said. While he wouldn’t single out any particular company, it’s possible this was meant as a warning to Palm. (The Palm Pre project is run by former Apple hardware engineering chief Jon Rubenstein.)
Apple Stores continue to drive traffic in huge numbers, with 46.7 million visitors in the last quarter alone, or 14,400 visitors per week in each store on average. The company expects to open about 25 new stores this year adding to 251 stores open in 10 countries today.
Cook was clear on Apple’s future in the netbook category, one that’s been on fire as tiny laptops with decent capabilities have captured what Cook said was 3 percent of the PC market. Cook reiterated a point made by Steve Jobs in the previous quarter’s earnings call with some additional detail: netbooks are underpowered and lack the quality that Apple wants to put in its devices. “We think the products are inferior,” Cook said, though he noted that Apple is still watching the category.
Cook offered no new information about Mac OS X 10.6 Snow Leopard, which Apple said last year would be available somewhere in the middle of 2009.
Unsurprisingly, the first question of the conference call was about Steve Jobs’s health: “How is Steve?” Without actually answering the question, Cook responded at length, with a fluency that indicated he was certainly prepared for the question: “There is an extraordinary breadth and depth and tenure among Apple’s executive team. And these executives lead over 35,000 employees that I would all call wicked smart. And that’s in all areas of the company: in engineering, marketing, operations, sales, and all the rest. And the values of the company are extremely well-entrenched. We believe we’re on the face of the Earth to make great products, and that’s not changing.”