Key Takeaways From Apple's Monster Earnings

Pascal-Emmanuel Gobry | Jan. 24, 2012, 6:18 PM | 41 |

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Apple's earnings were a huge blowout. Here's a rundown of the numbers from SAI's Jay Yarow and Piper Jaffray's Gene Munster:

  • Revenue: $46.33 Billion versus $38.76 billion expected
  • EPS: $13.87 versus $10.07 expected
  • iPhone units: 37.04 million versus 30.2 million expected (34 million whisper number)
  • iPad units: 15.4 million 13.2 million expected (13 million whisper number)
  • Mac units: 5.2 million versus 5 million expected (4.8 million whisper number)
  • iPod: 15.4 million versus 13.9 million expected, according to Bloomberg
  • Gross Margin: 44.7% versus 41.8% expected
  • March quarter revenue: $32.5 billion versus $31.9 billion expected
  • March quarter EPS: $8.50 versus $8.00 expected
  • Apple now has $97 billion in cash, short term, and long term securities
  • The iPhone's average selling price is up to $660

What to take away from these hard-to-fathom numbers, except that they are just incredibly breathtaking? 

  • Apple is now an iOS company. (See chart below.) The iPhone is now over 50% of revenue and you'll see Apple described as an iPhone company. But what matters to Apple's long-term future is the entire iOS platform, iPhone + iPad, and iPad is where Apple actually has the strongest lead. 

apple revenues by product 

  • We ARE in a post-PC era. Tablet sales surpassed desktop PC sales last quarter per IDC, CEO Tim Cook noted on the earnings call. The iPad is for real. Tablets are for real. Consensus iPad expectations were lukewarm but it's now increasingly clear that tablets, and more broadly a universe of multiple devices linked via the cloud, are the future. This has extremely broad implications. 
  • The power of brand is an amazing thing. Apple, it seems, behaves on a very consumer-driven cycle: the September quarter was weaker-than-expected because of consumers delaying iPhone purchases; by contrast, it delivered a monster holiday quarter because iPhones and iPads are "must-have" gifts that teens clamor for. Android marketshare fluctuates less because it is less of a consumer brand and owes its consumer adoption to strategic factors like price to partners and carrier pushing.   
  • Superb execution. Such an incredible quarter is the result of everything that's been lauded about Apple: great products of course, but marketing, supply chain (none of the supply hiccups that have been seen in the past), distribution (all those stores).
  • Google's network effect has to wait. The Android-bull argument goes something like this: the future is mobile, and mobile is about platforms, and platforms have network effects, which means the platform with the most marketshare will grow inevitably larger and destroy everyone else. It ain't happening. Why? A combination of things. First of all, Android has huge consumer marketshare but lower developer marketshare, which also matters. Second of all, the importance of web apps and the growing importance of HTML5 means the particular platform matters less and so it's less likely the network effect will be all-consuming the way it was on the PC. Third of all, phones remain consumer goods that people have a personal attachement to in a way they don't a desktop computer and so things like brand, design and such matter more. (Read here why we think network effects matter less than most people do.) This means that it may be possible that Android's marketshare gains don't spell doom for iOS. After all, the mobile opportunity is still wide open.

Another point on tablets: Tim Cook said he saw no impact from the Kindle Fire on iPad sales. Yet by all accounts the Kindle Fire is a success. A couple thoughts as to why that is:

  • They're playing in different markets. This is what Cook mused on the call. It may be true to an extent, but hard to believe. The Fire is a tablet. It's different from the iPad in many ways, but it is unmistakably a tablet. It also helps that Apple consumers are less price-sensitive than most.
  • The market opportunity is so large that both can be huge successes without slowing each other's growth. This seems possible. If so, it means Apple's growth should be even more extraordinary.

THE BOTTOM LINE:

  • Android/Kindle et al aren't denting Apple's growth, for a variety of reasons. And it will probably stay that way. 
  • We're in a post-PC era, and Apple embodies that.

By the way, this quarter proved us wrong. We predicted Apple would "grow boringly in line with analyst estimates" this year. We thought Android, Kindle and sharper analysts would cause the company to surprise less. Didn't happen. Apple surprised everyone again.

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