Filed under: Apple Financial

Apple just announced its third quarter results and they are astounding. Revenues of $15.7 billion. Net quarterly profit of $3.25 billion. Their margins were down 1% from a year ago, but who is going to argue when you're raking in billions of cash each quarter? Not me, that's who. (Note that to the best of my knowledge I'm not a stockholder in Apple).

Read the full press release here, or bask in the opulence of CFO Peter Oppenheimer's words, "We're really pleased to have generated over $4 billion of cash during the quarter. Looking ahead to the fourth fiscal quarter of 2010, we expect revenue of about $18 billion and we expect diluted earnings per share of about $3.44"

Apple is set to announce their Q3 2010 financial results today. As usual, Apple will stream a webcast of the event at 2:00pm PT/5:00pm ET on Tuesday, July 20, 2010. The main device that is expected to move Q3 results is the iPhone 4, but this will also be the first full quarter of iPad sales.

As always estimates vary, but the average consensus is that Apple sold 8.17 million iPhone units this quarter and 3.3 million iPad units. 9.3 million iPods are expected to have been sold and 3.2 million Macs. Apple is expected to report earnings of $3.11 per share on sales of $14.75 billion for Q3 2010.

That's what's expected, but Apple has typically had a history of blowing past analyst expectations. Will this be another "best non-holiday quarter" in Apple's history? We'll find out at 2:00pm PT. Until then, tell us what you're predicting in the poll.

After a stellar second quarter, Wall Street is now scrambling to figure out what the effect of Steve Jobs' announcement on Friday regarding "Antennagate" will have on the company's stock, as Apple prepares to deliver the company's Q3 earnings on Tuesday.

As reported by Fortune, analysts must consider whether or not to take into account the negative publicity surrounding the iPhone 4, or focus on unit sales and gross margins. Analysts also must look at the iPad's continued spread into other countries; that despite the issues, more than 3 million iPhone 4s have been sold to date -- and we can't forget our good friend, the Mac.

TUAW will host a liveblog tomorrow starting at 5 pm ET as Apple begins its conference call to report earnings for the quarter.

Predicting Apple's sales numbers is always a guessing game. Phillip-Elmer DeWitt notes that, despite Apple announcing the 3 millionth iPad sale 5 days before the quarter ended, this time will be no different.

He's compiled a number of estimates over at Apple 2.0, with an average around the 3 million mark. On the low end of the range is 2.50 million units sold from Mike Abramsky of RBC Capital. Mark Moskowitz of J.P. Morgan is more optimistic with a projection of 3.75 million units sold.

Most were surprised by the sheer volume of sales. At one point, Apple was selling 45,000 iPads per day. Bernstein Research's Toni Sacconaghi considered what could happen if that "scorching pace" was maintained: "Apple could sell from 25 million to 42 million units in fiscal 2011, its first full year of sales...revenues would amount to about $15B, and likely grow about $10B [year over year]. This would make iPad revenues in their first full year nearly as large as Apple's current Mac ($18B) business."

Of course, it's unlikely that such a rate of sales could be maintained, even if the iPad has truly joined its smaller brethren in breaking out of the core Apple customer base. Sacconaghi estimates that 18 million iPads will be sold in fiscal year 2010.

Apple's Q3 financial conference call will take place on July 20th. We'll be live blogging it as usual.

We expected it to happen eventually, but not quite this fast: Apple's market capitalization now exceeds that of longtime rival Microsoft. As of the 4pm ET market close today, Apple's total share value bests Microsoft's by nearly US$3 billion -- Apple stands at US$222.5 billion, while Microsoft is at US$219.53 billion. You may see some further fluctuation in aftermarket trading.

This means that, at least in terms of market capitalization, the only US company worth more than Apple is Exxon, at US$278 billion. Apple surpassed Walmart's market cap last month, and Henry Blodget pointed out this morning that Apple was already ahead of Microsoft via the 'enterprise value' metric (accounting for the companies' relative amounts of cash and debt).

Oddly, Apple's leapfrogging of Microsoft's market cap has had less to do with Apple's stock and more to do with Microsoft's; over the past 60 days or so, Apple's market cap has grown by less than US$10 billion, while Microsoft's has plummeted by almost $40 billion. No matter which way you look at it, though, Apple's surpassing of Microsoft's market cap is, just as the New York Times says, an absolutely stunning turnaround.

Not bad for a company that was all but on its deathbed in the late 1990s.

Immediately after the iPad's introduction, Piper Jaffray analyst Gene Munster predicted that the iPad would have a minimal effect on sales of the Mac. "The gadget is a premium mobile device, not a computer," Munster said. "Consumers looking for an affordable portable computer will likely stick with the MacBook lineup." The latest NPD data has proven Munster's prediction correct. US Mac sales were up 39 percent year-over-year in April, and Munster believes Mac sales will continue to grow from 19-23% over 2009 sales. At that rate, Apple may sell as many as 3.2 million Macs during the current quarter. Part of that sales increase can be attributed to recent updates to the MacBook Pro, with forthcoming updates for the MacBook and MacBook Air also expected any day now.

Sales data for the iPod is less encouraging, but this is also in line with Munster's January prediction that the iPad would likely cannibalize sales of Apple's lower-priced media players. iPod sales are down by 17% year-over-year, which is an even worse dropoff than what Munster predicted. However, there's an upshot to the decline in iPod sales: according to the data, many people deciding against buying an iPod are buying an iPad instead, leading to increased revenue for Apple. With an average price four times that of the average iPod, Munster calls iPad cannibalization of iPod sales "a net positive for Apple's business."

There's no indication from NPD of what effect, if any, the iPad is having on the iPhone's sales. However, it seems unlikely that the iPad is significantly affecting the iPhone's sales compared to other factors. Numerous media leaks have pretty much cemented the notion that iPhone updates are due soon, with coverage so widespread and mainstream that even average consumers must be well aware that it's a good idea (for them) to hold off on buying an iPhone until the likely update next month. Apple reportedly told police that Gizmodo's leak was "immensely damaging" to Apple for that very reason; we'll probably have to wait until Apple's next earnings release sometime in July before we know just how immense the damage has been.

In 1997, a lot of investors felt that Apple was well on the way to oblivion. That's the same year that Michael Dell, founder and CEO of Dell, Inc., uttered his famous comment to an audience of IT managers: "I'd shut it [Apple] down and give the money back to the shareholders."

The Wall Street Journal's SmartMoney.com is reporting that since Apple is now the country's third-largest company in terms of stock market value and the #1 (Exxon-Mobil) and #2 (Microsoft) companies are seeing declines in their value, Apple could very well end up being the company with the highest valuation by year-end.

As the article points out, stock market value isn't always the best indicator of a company's size or economic value. In terms of sales, Apple ranks a paltry #42, which is even lower than Dell at #38. On the other hand, Apple is able to convert 29 cents of each sales dollar into operating profit, while Dell sees only 5 cents on each dollar.

Whatever the standard for valuation or "size" of a company may be, it's clear that Apple has made an incredible journey since the bleak days of 1997.

Apple just continues to ignore the bad economic conditions -- sales at Apple Stores have reportedly gone up 8% during the quarter that ended in March. That's a pretty wholesome figure considering no new Apple computers were offered -- before you protest and ask about the iPad and the new MacBooks, don't forget that that's all happened since April started. So there was more traffic in the stores even before there were new shinies to buy.

This good news for Apple comes from analyst Charlie Wolf, from Needham & Company. He told investors that the March numbers followed 19.8 percent year-over-year growth of same-store sales in December. In March of last year, Mac retail sales were down about 22%.

Same-store year-over-year March Mac revenues were up 31.2 percent, while non-Mac revenues -- including software, iPhones, iPods and accessories increased by 14.5 percent. Starting in September of 2003, Apple has opened 123 U.S. stores. Apple's U.S. market share went from 3% to 9% according to Morgan Stanley. Those are numbers any company would covet.

[Via AppleInsider]

Apple held their latest earnings call this past week, which means we're right in the middle of a flood of analysts' charts and graphs about how well they're doing. This one's extra interesting, though -- we've talked before on this site about Apple's interesting position between its past of PCs and OS X and its apparent future as the "largest mobile device company in the world," but here it is, in bright colorful stripes put together by Silicon Alley Insider: the iPhone, the iPod, and iTunes make up the majority of this company's business, and have for quite a while. This chart only goes back to June of 2007, but notice how the whole thing trends upwards -- at some point here that I'd imagine is sooner than you might think, we'll reach a spot where the iPhone and various Apple iProducts will have made more money than the Mac ever did.

Not that Apple is abandoning the Mac at all, and neither are we -- we're still an unofficial Apple weblog, and we're still committed to covering the whole company. But I even noticed this back at Macworld earlier this year -- there's definitely two factions in the Apple audience, one that hearkens back to the old school pre-OS X Mac identity, and another that can't get enough of the iPhone and the iPad (which, you'll notice, is still missing from the chart above) and apps and so on. As time goes on, that iFaction is growing bigger and bigger, both inside of Apple and out.

As we approach 2010's halfway point, it's interesting to reflect on Apple's successful navigation of the American economy's recession. With some careful inspection, we realize that Apple's portfolio of non-Macs saw it through.

Philip Elmer-DeWitt at Apple 2.0 has published a chart demonstrating unit sales of Macs vs PCs over the last nine years. While the industry suffered as a whole, as did so many others, Apple sold more Macs in that span. You'll notice an off-the-chart dip in 2005-2006, which coincides with the Intel transition; a time when many users stopped buying as they waited for the new machines (The first Intel iMacs were released in January 2006).

During that waiting period, Apple relied on iPod sales. By the time iPod sales slowed, shoppers were buying Macs again. Likewise, as the current recession prevented many customers from buying Macs, the iPhone sustained Apple. It will be interesting to see what the iPad has done in another year.

The Mac Observer's Alexis W. Cabot has his own interpretation of this data. "Macs have been on a roll ever since I have comparable data, with an exception during the [2005-2006] Intel transition," he says. "This proves either that value is always in high demand, or that we will always have the rich among us."

The fun is just beginning... listen along here.

Estimates, shmestimates. Apple reported adjusted earnings of $3.33 per share, blowing past the consensus Wall Street numbers. Total revenues were $13.5B. That's more than $700 millon above even the most optimistic predictions. Gross margins up to 41.7 percent, from 39.9 percent a year ago.

We're listening in on the conference call right now, and Apple is reporting remarkable sales across the board. Apple is reporting their highest quarter of iPhone sales ever, with 8.75 million iPhones sold in the last quarter, the best sales during the same period ever. Additionally, iPod touch sales are up 63% year over year, and Apple has kept a hold on 70% of the mp3 player market, with 10.9 million iPods sold in the last quarter.

iTunes is also a profit machine, churning out $1.1 billion in revenue. 185,000 apps are now available, and there have been over four billion downloads on those apps for iPhone and iPod touch. We'll have more information forthcoming as the call carries on, but it appears that Apple is continuing to impress with their sales and reach in the market.

In a report issued today (cited by Apple 2.0 and SAI), Piper Jaffray's leading light on all things AAPL gazed into his crystal ball and served up some notes on NPD retail sales data. Gene Munster's numbers are especially interesting as we head into tomorrow's earnings report.

The lowdown: Munster is looking for a Mac sales number between 2.8 and 2.9 million machines, based off of NPD's retail data showing a 25% year over year boost in Mac sales for the quarter. He's also looking for iPod sales between 9 and 10 million, and 7.5 million iPhone sales. What's weird is that NPD data showed Mac sales up 39% for January and February... perhaps there was a March slowdown as anticipation built for new laptop models.

Considering that Q2 2009 was a record quarter for both revenue and earnings for Apple -- 2.22 million Macs sold, 11 million iPods and 3.79 million iPhones -- it will be interesting to see where this year's numbers end up, with a rebounding economy and more outlets for the iPhone 3GS. This is the second quarter of Apple's new revenue recognition scheme for iPhone and Apple TV, meaning every single sale of an iPhone hits the bottom line in full force (not to mention the 1/8th share of iPhone sale prices from previous quarters).

Apple 2.0 has its quarterly rundown of analyst predictions at the ready, with a consensus earnings number close to 12 billion. I'll get out my dartboard and make my predictions here: Revenues of $12.79B, 3.25 million Macs sold, 7.75m iPhones sold.

Disclaimer: I hold a small long-term position in AAPL.

Apple filed suit against Kodak on April 15th, 2010, claiming that it has infringed on two of Apple's granted patents. This comes after Kodak filed suits against both Apple and RiM in January.

The suit targets Kodak's C, M and Z series EasyShare cameras as well as the popular Zi8. Apple claims that Kodak is guilty of copying technology relating to image processing, energy management and memory design. Additionally, Apple has listed a formal ITC complaint that would prevent sales of all affected cameras if the claim is validated.

This is a response to claims Kodak made in against Apple and RIM in January. Specifically, Kodak claims that Apple and RIM infringed upon Kodak's method of previewing images with the iPhone and Blackberry. An additional complaint, pointed at Apple only, addresses processing images at different resolutions. Finally, Apple is also accused of infringements on processes of software programs calling to each other.

This counter-suit strategy is common and usually an effort to produce a settlement and avoid a long and costly court battle.

[Via MacDailyNews]

With the total market value of AAPL at about US$220 billion, over the past year Apple has managed to de-throne Google as Silicon Valley's most valuable company. By comparison, the search and cellphone-centric Big G has a market capitalization of about $174B as of today's prices.

In a retrospective piece, the Silicon Valley Mercury News points out that Apple's market cap is up 107 percent from one year ago. There are only two companies in the United States with a market capitalization greater than Apple's: Exxon Mobil and Microsoft.

Earlier this month, Apple's market cap passed that of Wal-Mart; the margin was $2.84 billion as of April 2nd, 2010 and is about $18B today.

Needham & Co. analyst Charles Wolf notes Apple's success at riding out the USA's economic recession. "It's just mind-boggling. Thanks to the iPhone, it just sailed through the recession. It was just an incredible engine." For the latest on Apple's financial health, follow our live blog of its 2nd quarter analysts call, tomorrow at 2 pm PDT/5 pm EDT.

AAPL is down about 1.5% today at 1 pm.

[Via Macsimum News]