Apple Inc’s results smashed Wall Street’s expectations after iPhone and Mac sales scaled new heights, while iPad supplies could not keep up with roaring global demand.
Shares of the world’s most valuable technology firm rose 3 percent after it said a record 18.65 million units of the category-defining iPhone — its flagship product — moved in the fiscal second quarter, which ended on March 26, outpacing the 16 million or so expected.
Apple sold just 4.69 million iPads — which command an 80 percent share of a burgeoning tablet market in which Motorola Inc and Samsung Electronics also compete — but investors argued that would not detract from strong long-term demand.
Investors largely ignored the lower-than-expected sales for iPads during the quarter as company executives said they were scrambling to meet “staggering” demand and were heavily backlogged for now.
“I’m not going to predict when supply and demand will come into balance,” chief operating officer Tim Cook said. “I can only be confident on supply side.”
Apple’s iPad 2 dominated the nascent market for tablets with competing products like Research In Motion’s PlayBook receiving poor reviews from customers and experts.
The stellar results on Wednesday came as concern is growing over how component supply constraints after Japan’s earthquake and tsunami would squeeze margins and restrain iPhone and iPad sales in coming months.
“Dynamite numbers across the board. The only hiccup is lower-than-expected iPad numbers,” Capital Advisors Growth Fund portfolio manager Channing Smith said.
“We can attribute some of the weakness to stocking issues at some of the retail outlets and obviously the supply chain issue in Japan. Unfortunately, the supply chain issue will likely persist for the coming months, but once we get past summer and the supply chain issues are resolved it’s all systems go again for Apple,” Smith said.
Apple executives told analysts via a conference call they foresaw a hit to revenue this quarter of about US$200 million — less than 1 percent of projected global quarterly sales — but expected no cost impact.
Japan accounts for an estimated 6 percent of overall revenue.
“We source hundreds, literally hundreds, of items from Japan, and they range from components such as LCDs, optical drives, NAND flash and DRAM, to base materials such as resins, coatings,” Cook said.
Apple did see some revenue impact from the crisis during the fiscal second quarter, but it was not material to the results, Cook said, adding that he did not see any unsolvable problems related to the disaster.
On rising prices for memory chips, Cook said he felt “good” for the fiscal third quarter as the company does not typically buy in the spot market.
The March quarterly report was Apple’s first under the stewardship of Cook after CEO Steve Jobs went on his third medical leave in January.
Cook, who is known as an -operations and supply chain maven, said his boss — who has undergone a liver transplant and survived a rare form of pancreatic cancer — still played an active role in important decisions.
“He is still on medical leave, but we do see him on a regular basis. He continues to be involved in major strategic decisions. I know he wants to be back full time as soon as he can,” Cook told analysts.
Apple’s iPad sales last quarter fell well short of Wall Street’s expectations: Some analysts had projected shipments of closer to or even more than 6 million for the tablet computer launched on March 11.
However, the lower-than-expected number could be attributed to the fact that Apple recognizes revenue from its stores when its customers receive the products. The initial wait time for the iPad 2 was four to five weeks.
“We sold every iPad 2 we could make and the demand was stunning,” Apple chief financial officer Peter Oppenheimer said in an interview.
It reported a net profit of US$5.99 billion, or US$6.40 a share, while revenue surged 83 percent to US$24.67 billion. That surpassed expectations for US$5.37 in earnings and US$23.4 billion in revenue.
A large spike in sales of Mac computers, driven by the refreshed MacBook Pro, beefed up last quarter’s earnings. Apple said it sold 3.76 million Macs, up 28 percent from a year ago.
Gross margins in the fiscal second quarter came to 41.4 percent, above Wall Street’s average forecast of 39.03 percent.
Apple, which generally provides an ultra-conservative forecast, said it expected fiscal third quarter earnings of US$5.03 a share on revenue of about US$23 billion.
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