Why are Apple’s finances being bad-mouthed?
Surprisingly, responses have been mixed on the results of Apple’s record first quarter financial report issued on Jan. 23.
While the company accurately headlined the favorable results in its official press release, “Apple reports record results,” some investors and media have not been so kind.
“Apple still in the doghouse with Wall Street” said CNET. The Wall Street Journal tagged their story “Apple’s magic wears thin as its earnings disappoint.” The USA Today headlined its story, “Apple misses iPhone forecasts.”
Negative press reports caused investors to abruptly dump Apple’s stock recently, sending it tumbling nearly $47 billion overnight. Individual stock shares selling at $514 on Jan. 23 dropped $53.87 or nearly 10 percent in after-hours trading, opening the next day at $460. It had reached its high of $700 a share not too many months ago.
What’s going on here?
Apple’s 13-week fiscal first quarter, that ended Dec. 29, showed a record quarterly revenue of $54.5 billion with a record quarterly net profit of $13.1 billion. The results when compared with the previous year’s first quarter (which included an additional week in it) showed total revenue of $46.3 billion, and net profit of $13.1 billion.
Not bad, I would say. Why then the unappreciated response from some in the media and investors?
Rolfe Winkler, columnist for the Wall Street Journal, points out that the first quarter, with the week’s difference from the same quarter a year ago, obviously skews some of the results. For example, the company sold a record 47.8 million iPhones in the recent first quarter (including the new iPhone 5), compared to 37 million phones in the year-ago quarter.
A record 22.9 million iPads (which included the new iPad Mini) were sold in the quarter, with only 15.4 million in the previous year‘s quarter. Tablet and phone sales are booming now over computer sales.
Apple sold 4.1 million iMac computers, compared to 5.2 million in the previous year’s quarter. However, industry-wide computer sales are down 3.2 percent this year from the previous year. And 12.7 million iPods were sold in the quarter, versus 15.4 in the year-ago quarter.
Apple’s CEO Tim Cook said he is thrilled with the company’s record revenue of over $54 billion and selling 75 million iOS devices in a single quarter that generated over $23 billion in operational cash flow.
“We’re very confident in our product pipeline as we continue to focus on innovation and making the best products in the world,” Cook said.
But some of the investment analysts thought the quarterly results should have been better.
They had anticipated even higher iPhone 5 sales, even though that was the quarter when the new iPhone hit the market..
And while they were generally pleased that tablet sales, including the new iPad Minis seem to be selling well, they were concerned about the sluggishness in the laptop and desktop iMac computer lines.
Some lean towards Apple offering a low-cost iPhone that can be sold to less-affluent consumers primarily overseas. The current iPhone 5 sells here at $642 (but less with carrier deals) and the Android models are cheaper. They point out that Apple is already doing this with its tablets, selling the iPad Mini for less than its iPad 3.
WSJ Columnist Winkler concludes, “Clearly, Apple didn’t provide the kind of blowout quarter many have grown accustomed to. But the results aren’t the total disaster implied by the market meltdown,” he concludes.
Frankly, I think the results are pretty darn good. I find it hard to accept such pessisium attributed to the world’s largest market capitalized company. While our domestic economic is still dicey, Apple’s financials are solid and the company continues to focus on innovation and product quality.
No, Tim Cook is not a clone of Steve Jobs. Steve was one of a kind. But he has had many years of tutelage under the late guru and is now showing his own strengths in running this complex technology company.
Apple stockholders hang in there. Don’t be scared out. You have made a sound investment. Apple’s Board of Directors has declared a cash dividend of $2.65 per common share payable on February 14. Could there be a stock split in the future?