Apple posts solid Q3 profit, but iPhone sales don't wow
Apple posted good, but not great results in the quarter ahead of its anticipated iPhone launch. The Cupertino, Calif., electronics giant on Tuesday reported earnings in the fiscal third quarter that topped Wall Street expectations, but iPhone sales, revenue results, and fourth-quarter guidance weren't quite the blowout analysts had hoped for. It also reported disappointing iPad sales for the second period in a row. Apple CEO Tim Cook didn't mention the iPad during his comment in the company's press release but said "revenue was fueled by strong sales of iPhone and Mac and the continued growth of revenue from the Apple ecosystem, driving our highest EPS growth rate in seven quarters."For the current quarter, which ends in September, Apple expects revenue of $37 billion to $40 billion, slightly less than the $40.44 billion projected by analysts. It also anticipated a gross margin of 37 percent to 38 percent. Analysts often look at fiscal fourth-quarter guidance as a sign for what sort of iPhone launch Apple anticipates, and it appears the company is staying conservative. The iPhone, which contributes to more than half of Apple's total revenue, serves as the lynchpin to its overall growth, particularly as the market awaits the widely speculated iWatch and as the iPad struggles against lower-cost rivals and larger phones. Apple iOS 8 at WWDC 2014 (pictures)See full gallery1 - 4 / 17NextPrevThe fiscal third quarter is an "off period" in between product announcements. Many market watchers expect Apple in September to introduce two new iPhone 6 models with display sizes of 4.7 and 5.5 inches, though some recent reports speculate one device could be released at a later date. Apple has asked manufacturing partners to produce 70 million to 80 million units of its larger screen iPhones by Dec. 30, The Wall Street Journal reported Monday. That's up from its initial order of 50 million to 60 million units of the iPhone 5S and 5C, the paper said."Tonight's conference call is of much less significance than past quarterly reports, as we believe investors are more focused on the 'Fab Fall' launch," said Cantor Fitzgerald analyst Brian White.Apple sold 35.2 million iPhones during the fiscal third quarter, helping the device remain its biggest moneymaker. Analysts, on average, had expected Apple to sell 35.9 million iPhones in the period, according to a calculation by Fortune. Apple sold 31.2 million iPhones in the year-ago period.It also sold 13.3 million iPads in the most recent quarter, down 9 percent from a year ago. Analysts expected the company to sell about 14.4 million iPads, Fortune said.Apple in June split its stock 7-for-1 to make its shares more accessible to a larger number of investors. The move caused the company to adjust its previous financial results for comparison. Before the split, shares were trading around $650, and the stock, when adjusted for the split, has jumped about 25 percent since Apple announced the move during its last earnings report in April. Shares closed Tuesday at $94.72 and slipped half a percent to $94.24 in after-hours trading.See alsoWWDC set the stage. Now Apple needs to deliverWith no 'amazing' devices due at WWDC, Apple's Tim Cook feels the heatApple WWDC 2014: Heavy on apps, services, and tweaksApple’s iPad sales are not so magical after allApple CEO defends iPad sales, but admits softer demandApple's results have been fueled by the iPhone for the past several years, but the company is facing more competition than ever before. Samsung and others are pressuring the company at the high end, while Apple is largely missing out on the low end of the market. That's a big concern as more and more mobile sales come from emerging markets like China, where inexpensive phones from companies such as Huawei and ZTE are popular.So far, though, Apple's customers have remained loyal, and it's attracting buyers despite offering devices that are nearly a year old. In April, Apple said it had nearly 800 million iTunes accounts, a number that Cook described at that time as "staggering." About a year earlier, Apple announced it had 575 million accounts.By comparison, Samsung earlier this month said its second-quarter operating profit likely fell about 24 percent from the previous year to 7.2 trillion won ($7.12 billion). It also said sales likely totaled 52 trillion won, a 9.4 percent decline. Both figures fell short of analysts' projections for the June period. The results would be Samsung's worst in about two years and the third straight quarterly profit decline. Samsung didn't disclose how many devices it sold, but it blamed its weak results on a slowdown in overall smartphone market growth and a strong Korean won.Even though Apple's iPhone sales have been holding up, the pressure is on for Apple to release new devices that prove it still has that magic touch. Cook has promised several times over the past year that Apple would enter "exciting new product categories" in 2014. And Eddy Cue, head of iTunes and the man behind Apple's $3 billion acquisition of headphone and streaming service Beats, in May upped the ante by boasting that the consumer electronics giant is working on its "best product pipeline in 25 years." Until those items hit the market, Apple will need to keep pushing its current devices.Michael Obuchowski, Apple shareholder and chief investment officer of Merlin Asset Management, called the fiscal third quarter "pretty amazing, considering the competition is shipping better phones every few months.""They are able to squeeze more out of their current devices -- after all that is what Tim Cook is best at," he told CNET News. Apple earlier this year started selling the iPhone through China Mobile, the world's biggest wireless carrier. And in September, it introduced two new versions of the iPhone for the first time ever, including the less-expensive but more colorful iPhone 5C. Apple also rolled out the new iPad Air and iPad Mini with Retina Display the following month.Apple iPad AirSee full gallery1 - 4 / 14NextPrevOne weak area for Apple has been the iPad. Sales of the tablet fell short of analyst expectations in the fiscal second quarter, which Apple blamed on the number of devices held in channel inventory (which means it's either sitting in stores or on trucks). But even after adjusting for inventory differences, iPad sales still declined by more than 3 percent, analysts said. And the drop continued in the fiscal third quarter. Apple likely has been hurt by a few factors that could continue to plague iPad sales. It's easy for people to pass older tablets to relatives or friends when they upgrade. People also don't have the two-year upgrade incentive that smartphones get from wireless carriers, and Apple hasn't made big enough changes to the iPad to compel even their most ardent fans to immediately buy the newest model. In addition, most people who crave a tablet likely already have one, and Apple is going up against dozens of new, inexpensive devices that run Google's rival Android mobile operating system.Cook on Tuesday said while iPad sales fell short of analysts' expectations, they met Apple's internal projections. He again blamed the weakness on inventory issues but also said demand was soft in some regions, such as the US and Europe. However, Cook said the iPad "did extremely well" in the so-called BRIC countries of Brazil, Russia, India, and China. In China alone, iPad sales rose in the 50 percent range, and sales jumped in the 60 percent range in the Middle East. Cook said he's "bullish" about Apple's prospects in the tablet market. "We still feel the category as a whole is in its early days, and there's still significant innovation that can be brought to the iPad and we can do that," he said.Cook expects Apple's recently announced partnership with IBM to also help iPad sales. The two companies will work together on pushing Apple devices and iOS apps with business users. "I honestly believe the opportunity is huge," Cook said.Apple's iPad Air hasn't sold as well as hoped in recent months.Josh Miller/CNETMeanwhile, Apple reported Mac unit sales rose 18 percent to4.4 million. Analysts polled by Fortune expected sales of 3.9 million units. Apple now generates less than 15 percent of its total revenue from Macs, but the devices help Apple build its ecosystem. The company at times has posted strong Mac sales in periods the rest of the PC market has struggled, but it also has had troubles of its own in recent quarters.Cook on Tuesday, though, said the Mac boosted Apple's results, and it saw strong sales in some regions weak for other PC makers. The US, for instance, was a "very, very" strong market for the Mac in the quarter, he said.iPod sales, which have been falling sharply in recent quarters, actually increased sequentially to 2.9 million from 2.8 million in the fiscal second quarter. However, they still tumbled 36 percent from the same period a year ago. For the fiscal third quarter, Apple posted earnings of $7.75 billion, or $1.28 a share, up from $6.9 billion, or $1.07, in the year-earlier period. Per-share earnings were better than the $1.23 projected by analysts.Sales for the period ended June 28 rose 6 percent to $37.4 billion, in line with what Apple estimated but a little lighter than analysts' forecast. Apple in April had projected third-quarter revenue of $36 billion to $38 billion. Analysts, meanwhile, estimated revenue would total $37.99 billion.Apple's gross margin rose to 39.4 percent from 36.9 percent in the year-ago quarter. The company in April projected a gross margin of 37 percent to 38 percent. Apple's gross margin, a measure of sales after removing costs like manufacturing, has fallen since its high of 47.4 percent in early 2012 as customers opt for lower-cost devices.But RBC Capital Markets analyst Amit Daryanani called the margins in the third quarter "impressive."Updates, 2 p.m., 3:20 p.m., and 4:30 p.m. PT: Adds additional details and comments from conference call throughout.
Mac OS X Lion first take- Apple's next big cat
Mac OS X Lion first take: Apple's next big cat
The next feature in Lion will be the Home Screen feature called the Launch Pad. This looks like a merge between the current Dashboard and the iPhone home screen, and it will show you the available applications on the system, which can be launched with a single click. Like the current Dock, you can create folders for applications, but the larger screen real estate allows for more to be viewed at once, and be better organized not only in folders but also on multiple screens. This addition makes us wonder whether or not Apple is going to be replacing the Dock with this new feature. Beyond home screens, as with iPhoto and recent releases of Safari, Apple is concentrating on full-screen and has options for supporting applications that can be viewed in full screen, allowing users to take their own full workspace but also be flicked off the screen with a multitouch gesture. Apple is also working on implementing auto-save features for applications in OS X Lion, which has been a lacking option for many applications including Apple's own, since the implementation has been up to individual developers. This should also be a welcomed addition to the program. Finally, Apple is trying a new approach to Expose, Dashboard, Spaces, as well as the new full-screen application support in Lion, which is to merge them all into a single view called Mission Control. This will show all running applications, with individual windows for each application being lumped into stacks called "clusters." This will likely be a huge relief for those who keep many windows open at once and get lost when Expose is invoked. It might have been nice to see a cover-flow feature implemented in Expose, but the clusters view looks like it will suffice. Mission Control allows you to see all running applications on your Mac, lumping respective windows into "clusters" and showing full-screen applications in a separate section along the top.AppleWhen Mission Control is invoked, not only are applications lumped together, but full-screen applications are shown in a separate section, allowing you to quickly switch between them as well. It looks like Apple is ironing out some of the clutter that can happen in multitasking environments, and Mission Control seems so far to be a good enhancement to previous multitasking management options. These new features in Lion do bring up a few unanswered quiestions, such as what will happen to the Dock, or the Command-Tab switching abilities prior versions of OS X? Additionally, since many of these implement multitouch gestures, will they require the use of a multitouch input device? Many systems that should support Lion have limited multitouch options, so hopefully Apple will implement options for these systems. Apple has just given us a preview release of Lion, and many of these answers will come over the next few months as Apple rolls out new information about Lion. The OS is on track to be released sometime in the summer of 2011, and if Apple sticks to its past reputation, that means it will likely be released in late September or early October. Meanwhile current and future information about OS X 10.7 "Lion" should be available on Apple's "OS X Lion" Web page.Questions? Comments? Have a fix? Post them below or e-mail us!Be sure to check us out on Twitter and the CNET Mac forums.
The next feature in Lion will be the Home Screen feature called the Launch Pad. This looks like a merge between the current Dashboard and the iPhone home screen, and it will show you the available applications on the system, which can be launched with a single click. Like the current Dock, you can create folders for applications, but the larger screen real estate allows for more to be viewed at once, and be better organized not only in folders but also on multiple screens. This addition makes us wonder whether or not Apple is going to be replacing the Dock with this new feature. Beyond home screens, as with iPhoto and recent releases of Safari, Apple is concentrating on full-screen and has options for supporting applications that can be viewed in full screen, allowing users to take their own full workspace but also be flicked off the screen with a multitouch gesture. Apple is also working on implementing auto-save features for applications in OS X Lion, which has been a lacking option for many applications including Apple's own, since the implementation has been up to individual developers. This should also be a welcomed addition to the program. Finally, Apple is trying a new approach to Expose, Dashboard, Spaces, as well as the new full-screen application support in Lion, which is to merge them all into a single view called Mission Control. This will show all running applications, with individual windows for each application being lumped into stacks called "clusters." This will likely be a huge relief for those who keep many windows open at once and get lost when Expose is invoked. It might have been nice to see a cover-flow feature implemented in Expose, but the clusters view looks like it will suffice. Mission Control allows you to see all running applications on your Mac, lumping respective windows into "clusters" and showing full-screen applications in a separate section along the top.AppleWhen Mission Control is invoked, not only are applications lumped together, but full-screen applications are shown in a separate section, allowing you to quickly switch between them as well. It looks like Apple is ironing out some of the clutter that can happen in multitasking environments, and Mission Control seems so far to be a good enhancement to previous multitasking management options. These new features in Lion do bring up a few unanswered quiestions, such as what will happen to the Dock, or the Command-Tab switching abilities prior versions of OS X? Additionally, since many of these implement multitouch gestures, will they require the use of a multitouch input device? Many systems that should support Lion have limited multitouch options, so hopefully Apple will implement options for these systems. Apple has just given us a preview release of Lion, and many of these answers will come over the next few months as Apple rolls out new information about Lion. The OS is on track to be released sometime in the summer of 2011, and if Apple sticks to its past reputation, that means it will likely be released in late September or early October. Meanwhile current and future information about OS X 10.7 "Lion" should be available on Apple's "OS X Lion" Web page.Questions? Comments? Have a fix? Post them below or e-mail us!Be sure to check us out on Twitter and the CNET Mac forums.
Apple's in-app purchase settlement faces approval
Apple's in-app purchase settlement faces approval
SAN JOSE, Calif. -- The settlement that will give some iTunes customers a refund for in-app purchases made by minors marched one step closer to approval today.The two sides met in a federal courthouse here to hash out some final details before it's passed along to a judge for approval early next week.As part of the proposed settlement, Apple will be required to pay out $5 in iTunes creditto those who say purchases were made on their device by a minor, and without them being aware of it. The company plans to send notices to more than 23 million iTunes account holders who bought something from within one of of the "qualified apps." During today's hearing, Apple attorneys noted that the company believes the actual number of affected customers to be much smaller, given that the purchases would have needed to been made by minors, and without permission. The company also said that the "vast majority" of purchases were under $5. Customers who spent more than $30 or who no longer have an iTunes account can choose to get a cash refund, as long as they meet a handful of requirements, including filling out a form that details what apps the charges originated from. U.S. District Court Judge Edward Davila today raised some concerns with how much effort would be needed by consumers to track down purchase information. "It seems like you're asking the plaintiffs to do a lot,"Davila told both sides, pointing to the fact that users would need to seek out their purchase history in the event that they were filing for something besides the $5 iTunes gift card that will be offered. "Apple has this information," he continued. "They're in the best position to retrieve this information."Apple's attorney countered by noting that users could quickly find their entire iTunes purchase history, as well as search for the apps in question, using an online tool that will be included on the settlement Web site when it goes live. Related stories5-year-old sorry for racking up $2,500 iPad bill in 10 minutesShould Apple countersue parents for neglecting their kids?Parent sues Apple for in-app buying policyJudge Davila also raised concerns about the plan to send out notices digitally, saying the U.S. postal service could benefit with the business. Both sides successfully made the case that the digital nature of the in-app purchase issue would bring about a high response by e-mail, and that notices would be sent by mail for any addresses that bounced.The 2011 suitstemmed from parents who complained that it was far too easy to buy digital goods in apps and games without the need to re-enter an Apple ID password. In practice, this meant that a parent could download a free or paid title using their password, then the child (or someone else) could proceed to make purchases without those credentials, as long as it was within a certain time period.Apple changed that behavior as part of a system software update in March 2011, but not before some parents were hit with massive bills. A report from the BBC earlier today noted that it's still possible to rack up charges, given the case of a 5-year-old from southwest England who spent more than $2,500 in purchases on his parents' iPad without the password, an amount that was reportedly refunded by Apple. The parties plan to file a finalized version of the settlement on Monday. A final decision on the settlement from Davila is expected in the coming weeks.
SAN JOSE, Calif. -- The settlement that will give some iTunes customers a refund for in-app purchases made by minors marched one step closer to approval today.The two sides met in a federal courthouse here to hash out some final details before it's passed along to a judge for approval early next week.As part of the proposed settlement, Apple will be required to pay out $5 in iTunes creditto those who say purchases were made on their device by a minor, and without them being aware of it. The company plans to send notices to more than 23 million iTunes account holders who bought something from within one of of the "qualified apps." During today's hearing, Apple attorneys noted that the company believes the actual number of affected customers to be much smaller, given that the purchases would have needed to been made by minors, and without permission. The company also said that the "vast majority" of purchases were under $5. Customers who spent more than $30 or who no longer have an iTunes account can choose to get a cash refund, as long as they meet a handful of requirements, including filling out a form that details what apps the charges originated from. U.S. District Court Judge Edward Davila today raised some concerns with how much effort would be needed by consumers to track down purchase information. "It seems like you're asking the plaintiffs to do a lot,"Davila told both sides, pointing to the fact that users would need to seek out their purchase history in the event that they were filing for something besides the $5 iTunes gift card that will be offered. "Apple has this information," he continued. "They're in the best position to retrieve this information."Apple's attorney countered by noting that users could quickly find their entire iTunes purchase history, as well as search for the apps in question, using an online tool that will be included on the settlement Web site when it goes live. Related stories5-year-old sorry for racking up $2,500 iPad bill in 10 minutesShould Apple countersue parents for neglecting their kids?Parent sues Apple for in-app buying policyJudge Davila also raised concerns about the plan to send out notices digitally, saying the U.S. postal service could benefit with the business. Both sides successfully made the case that the digital nature of the in-app purchase issue would bring about a high response by e-mail, and that notices would be sent by mail for any addresses that bounced.The 2011 suitstemmed from parents who complained that it was far too easy to buy digital goods in apps and games without the need to re-enter an Apple ID password. In practice, this meant that a parent could download a free or paid title using their password, then the child (or someone else) could proceed to make purchases without those credentials, as long as it was within a certain time period.Apple changed that behavior as part of a system software update in March 2011, but not before some parents were hit with massive bills. A report from the BBC earlier today noted that it's still possible to rack up charges, given the case of a 5-year-old from southwest England who spent more than $2,500 in purchases on his parents' iPad without the password, an amount that was reportedly refunded by Apple. The parties plan to file a finalized version of the settlement on Monday. A final decision on the settlement from Davila is expected in the coming weeks.
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