Four Things to Follow in Apple's Earnings Announcement

Apple will announce its quarterly earnings Monday afternoon. As always, you can follow Apple's 2 p.m. PT conference call with Wall Street analysts with live coverage of the event at Macworld.com.

What can you expect from chief financial officer Peter Oppenheimer, chief operating officer Tim Cook, and any other Apple executives who join in on Monday's conference call? As you would expect before an earnings announcement, Apple has given no indication of the quarter that was. But a scan of recent headlines and a little historical context can give us a pretty good idea of what might come up when Apple gives us a quarterly look at its financial picture.

Recession? What recession?

You may have read something about the global economy not being its usual robust self. The picture is certainly less grim than it was a year ago when the near-collapse of the banking system made things look so dire that Steve Jobs made a rare conference call appearance to outline Apple's plan for weathering a recession, but conditions are hardly ideal for a consumer electronics company to thrive.

And yet, Apple has done exactly that during its 2009 fiscal year. The company announced a record profit for its first quarter back in January and its third-quarter sales and profits were the best of any non-holiday shopping quarter in Apple's history. Just about the only hiccup was Apple's fiscal second quarter, when Mac sales fell 3 percent, but even then, the company turned a profit on strong iPhone and iPod sales.

Apple's performance in the past year has confounded analysts to the point where they're expecting another strong quarter out of Cupertino. Last week, market-research firms Gartner and IDC predicted year-over-year increases in quarterly Mac sales of 6.8 percent and 11.8 percent, respectively. Consensus analysts estimates have Apple earning $1.42 a share on sales of $9.2 billion for the fourth quarter--both would be increases from last year's results of $1.26 a share in earnings and $7.9 billion in sales.

(For Apple's part, Oppenheimer told analysts back in July that the company expected to earn between $1.18 and $1.23 per share on sales of $8.7 to $8.9 billion for the fourth quarter. Oppenheimer's guidance, it should be noted, is famously conservative.)

How about that iPhone?

Following its June release, the iPhone 3GS has now logged a full quarter of sales. Analysts will be particularly interested in seeing how Apple's latest iPhone performed and whether it's continuing Apple's momentum in the smartphone market.

Also of interest--insofar as accounting rules can be interesting--is a change in the way Apple tallies iPhone sales. Previously, the company recognized revenue from the iPhone (and the Apple TV) over a two-year period. Under a rule change OK'd by the Financial Accounting Standards Board in September, Apple can now adjust the percentage of revenue it realizes at sale. Apple says this approach will paint a more accurate picture of iPhone sales--it's certain to make the numbers more robust.

Don't forget about the iPod

Apple refreshed the iPod line a little more than a month ago, meaning it's far too early to gauge whether an iPod nano equipped with a video camera will persuade people to keep snapping up Apple's music devices. Apple times those releases with the holiday shopping season in mind, anyhow, meaning the real impact of the new iPods will be seen when the company announces earnings in January 2010.

Still, analysts are persistent creatures, and they'll be sure to pepper Oppenheimer and Cook with questions aimed at getting some sort of indication of how iPod sales might be shaping up.

Another attention-worthy piece of iPod news: iPod touch sales. At September's iPod event, senior vice president of worldwide product marketing Phil Schiller said that the iPod touch is Apple's fastest growing iPod model. The widescreen handheld makes up 40 percent of the devices running the iPhone operating system. It will be interesting to see if any of the figures Apple releases on Monday point to that trend continuing.

The other operating system

I fully expect some of the questions Monday afternoon to focus on a product Apple doesn't even sell--Windows 7. The latest version of Microsoft's operating system debuts this week.

There's some debate among analysts as to what kind of impact Windows 7 will have on Apple's attempt to expand the Mac market. Last week, Piper Jaffray analyst Gene Munster called Windows 7 "the biggest challenge to Apple in years" in a BusinessWeek article. But Broadpoint AmTech's Brian Marshall expects no impact on Mac sales; in fact, Marshall writes, most of the time, Apple's sales either hold steady or increase after Microsoft updates its OS.

Analysts will doubtlessly want Apple's opinion on the matter. If nothing else, it gives company executives the chance to take a little dig at Redmond's expense--an opportunity Apple rarely fails to take advantage of these days.

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