Apple Sales Top $20 Billion in Fiscal Fourth Quarter

Apple on Monday reported record revenue and earnings for its fiscal fourth quarter, thanks to strong sales of Macs, iPhones, and iPads.

In what chief financial officer Peter Oppenheimer called a "great fiscal quarter," Apple reported a quarterly profit of $4.31 billion, compared to $2.53 billion for the same period last year. For the three months ended Sept. 25, Apple recorded $20.34 billion in revenue, an increase of nearly 67 percent from the year-ago quarter's sales figure of $12.21 billion.

Apple's earnings of $4.64 per diluted share handily beat estimates by Wall Street analysts who were expecting the company to report earnings of $4.06 a share on $18.86 billion in revenue for September quarter.

"We still have a few surprises left for the remainder of the calendar year," said CEO Steve Jobs in a statement accompanying the earnings. Apple has scheduled a press event for this Wednesday where the company is expected to focus on the Mac.

iPad and iPhone sales

Oppenheimer credited record iPhone sales, enthusiasm for the iPad, and a new quarterly sales record for Mac sales as the drivers behind Apple's strong quarterly performance. In particular, Apple sold 4.19 million iPads during the first full quarter of sales for the tablet; all told, the company sold 7.5 million iPads during its 2010 fiscal year.

"We're thrilled with its momentum," Oppenheimer said during a Monday conference call with financial analysts. "We're seeing great enthusiasm from consumers, educators, and businesses."

For the fiscal fourth quarter, Apple recorded $2.8 billion in sales of iPads and related accessories, with the iPad accounting for $2.7 billion of that figure. That translates to an average selling price of around $645 for the tablet, Oppenheimer said.

iPad sales may disappoint some analysts, who were expecting Apple to sell close to 5 million tablets. One of the issues may be with inventory -- Apple says it has three to four weeks worth of channel inventory, which is below its target range of four to six weeks. The company plans to expand its iPad distribution efforts, adding retailers such as Verizon, Walmart, Target, and AT&T into the mix as well as launching in additional countries.

As for the iPhone, the launch of the new iPhone 4 helped Apple sell 14.1 million phones during the quarter. That's a 91 percent increase over the 7.4 million phones sold during the year-ago quarter and a new quarterly record for smartphone sales for the company.

More to the point, Apple's iPhone sales topped the 12.1 million phones the company claims that rival smartphone maker Research In Motion sold during its most recent quarter--a fact highlighted by CEO Steve Jobs during a rare appearance on the quarterly earnings call with analysts.

"We've now passed RIM, and I don't see them catching up to us in the future," said Jobs, who targeted most of his remarks during the conference call at Google and its Android operating system. Jobs called Google's claims that Android is more open than Apple's iOS "a bit disingenuous" and a "smokescreen" to distract consumers from the benefits of the integrated experience Apple provides with its iPhone and iPad product lines.

Jobs also took aim at the number of potential iPad competitors poised to hit the tablet market in the coming months. "It appears to be a handful of credible entrants and not an avalanche," said Jobs, who thinks would-be iPad rivals will suffer by offering a smaller screen size, a fragmented experience, and uncompetitive prices.

Recognized revenue from the iPhone rose 92 percent to $8.82 billion. The phone is now available through 166 carriers in 89 countries. That includes China, which just started selling the iPhone 4 on the final day of Apple's fiscal fourth quarter. The phone has been a success there, with partner China Unicom selling 100,000 phones during the first four days the new smartphone went on sale. According to Apple COO Tim Cook, 85 of those 89 countries are selling the iPhone 4, with the last four slated to get the newest model by the end of year.

For the 2010 fiscal year, Apple sold 40 million phones, a 93 percent jump over 2009. During September, the company says it passed the 125 million mark for cumulative iOS sales of its iPhone, iPad, and iPod touch offerings.

Don't forget the Mac

Apple also saw a record quarter for its Mac business. The company sold 3.89 million computers, up 27 percent from its year-ago sales. Fourth-quarter Mac sales topped the previous high-water mark of 3.47 million mark set during the June quarter. Year-over-year sales growth was more than double the growth rate projected for the overall PC market by research firm IDC, according to Oppenheimer.

Laptops continue to be the driving force behind Apple's Mac sales, with portable products accounting for 71 percent of the Macs sold during the September quarter. However, sales of desktops rose nearly 28 percent to a little more than 1 million units, on the strength of the company's iMac and Mac Pro updates over the summer.

Apple saw year-over-year growth in Mac sales across all of its geographic segments. Growth was particularly strong in the Asia-Pacific and Japan markets, which saw revenue rise 157 percent and 121 percent, respectively, from last year's fourth quarter.

iPod sales drop

Not all of Apple's product lines are growing. The iPod segment continues to shrink, with Apple selling 9.05 million music players during the quarter -- that's an 11 percent drop from last year's figures. Apple updated its iPod line in September, though the company usually sees the fruits of those efforts during the holiday quarter.

While iPod sales growth stalled throughout 2010, Apple opted to focus on the positive Monday. It noted that the iPod's share of the MP3 player market in the U.S. continues to top 70 percent, according to research firm NPD's figures. And Apple says its music player gained market share internationally from the year-ago quarter. The company also reported that its iTunes Store brought in more than $1 billion in revenue for the September quarter.

Jobs even took a minute to comment on the company's "hobby" product, the Apple TV, announcing that it had moved more than 250,000 units since the device went on sale. That's the first time the company has ever revealed sales information for the device, which has gone through a number of iterations since its original introduction in 2007. Jobs confirmed that Apple had moved to an all-streaming model for content for the device, which will allow streaming of media from iOS devices in November when Apple ships iOS 4.2.

Retail rules

Apple's retail segment had what Oppenheimer called a "record-breaking quarter," with revenue rising 75 percent to $3.57 billion. Apple sold 874,000 Macs through its retail arm, an increase of 30 percent from the year-ago quarter. The company said that half of the Mac sales through its brick-and-mortar outlets continue to be to customers who are new to the platform.

Apple ended the fourth quarter with 317 stores, 84 of which were outside the U.S. The company opened 24 new stores during the quarter, with 16 of those opening outside of U.S. borders. In fact, with new store openings in Spain, Apple now has retail outlets in 11 countries.

As with the iPhone, China proved to be a fertile ground for Apple's retail efforts. Newly opened stores in Beijing and Shanghai recorded the highest opening day revenue when they launched during the quarter. Apple says its four stores in China have the highest traffic of any of its outlets.

Look for the company to continue to expand internationally during 2011. It plans to open 40 to 50 stores during the coming fiscal year, with half of those slated for outside the U.S. The company also plans to start renovating several of its U.S. stores during 2011.

This year and next

Monday's earnings report closes the book on Apple's 2010 fiscal year, which saw the company record $65.2 billion in sales. That's an increase of 52 percent from the $42.9 billion in revenue recorded in 2009. Apple turned a $14 billion profit in 2010, an increase of 72 percent from the previous year.

"The September quarter was the culmination of a monumental year for Apple," Oppenheimer said.

For the first quarter of 2011, Oppenheimer told analysts to expect revenue of $23 billion and earnings per share of $4.80. Apple's guidance tends to be on the conservative side. Prior to Monday's briefing, analysts were predicting earnings of $5.04 per share on $22 billion in revenue for the coming quarter.

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