Apple's well-oiled relationship with financial analysts suffered a rare misstep this week when Apple released stellar financial results that inexplicably fell below expectations for the first time in a decade. It's curious to see a company post such stunning results—a net profit of $6.62 billion on revenues of $28.27 billion—only to see the stock tumble in after-hours trading. How did this happen?
Apple, you see, plays an interesting game with the market every quarter. It purposefully underplays its financial expectations, providing compliant analysts with a foundation for their own conservative predictions that Apple can then steamroll over, providing the necessary "Apple exceeded all expectations" line in news stories around the world.
But not this time. Perhaps blinded by the company's meteoric quarter-over-quarter gains for the past several years, analysts didn't get the message that Apple's guidance for the quarter—wink, wink—was perhaps a bit closer to reality than usual. So they did the usual dance, publishing shockingly identical predictions for Apple's quarterly performance, only to see those predictions dashed against the rocks of reality.
Of course, that reality is still pretty darn fantastic. So let's ignore the analyst lemmings as usual and see what Apple really did.
iPhone. The company sold 17 million iPhones in the quarter, down from 20 million the quarter before, yes, but then we don't compare sales quarter over quarter; we compare them year over year. And in the same quarter a year ago, Apple sold 21 percent fewer iPhones. So that business is growing solidly, even in a supposedly down quarter in which consumers were quite obviously waiting on a new version of the device. (And let's not forget that the iPhone 4S rocketed to record preorders of 4 million units over its first weekend alone.)
iPad. Apple sold 11 million iPad tablet computing devices in the quarter, a huge improvement of 166 percent over the same quarter a year ago (though you might recall that was a curiously down quarter for iPad sales). Apple notes that it has sold 40 million iPads in 18 months, a run rate of 27 million devices a year. That's only about 7 percent the size of the overall PC market, but not too shabby for a device category that didn't even exist two years ago. (Plus, many will add the iPad and Mac together and arrive at approximately 12 percent of the wider PC market. That makes Apple the world's single largest supplier of computing devices.)
Mac. The Macintosh experienced its best-ever quarter, thanks to explosive sales of the new MacBook Air, which features modern CPUs, a backlit keyboard, and a design that PC makers are rushing to copy. Apple sold almost 5 million Macs for the first time ever—4.9 million units, really—up 26 percent year over year. Not too shabby for a supposedly also-ran product line that is, on paper, still getting steamrolled by the wider PC industry. But let's be serious here: The Mac isn't going anywhere, and it's slowly clawing its way up the market share chart.
iPod. As has been the case for several quarters, Apple's venerable iPod product line continued its steep decline, dropping 27 percent to 6.6 million units. I'd imagine that many of those sales are for the iOS-based iPod touch, and not the other models, which are being quickly de-emphasized by Apple.
In a conference call with the very analysts who betrayed it, Apple said that explosive growth in China played a big role in its results, as did the new MacBook Airs. CEO Tim Cook also noted that Apple was "very confident that [it] will set an all-time record in the December quarter for iPhone sales," a strong sign for the future. Hopefully, the analysts will read the tea leaves correctly this time.
