Apple "firing on all cylinders" in record financial and Mac sales 2011 Q1 report

by Bill Fox, January 19, 2011

Apple again announced the highest quarterly revenue ever for any financial quarter in its history during the first fiscal quarter (Q1) of 2011. Earnings per share (EPS) of $6.43 for Q1 of 2011 exceeded the $5.38 consensus estimate of Wall Street analysts by nearly 20%. Revenue was $26.7 billion with a net quarterly profit of $6 billion, which represents incredible increases over the Q1 of 2010 of nearly 71 percent and nearly 78 percent respectively. Gross margin was down a bit to nearly 39 percent from nearly 41 percent last year.

Apple's cash on hand and short-term investments grew over 17% to $59.7 billion in 2011 Q1 from $51 billion in Q4 of 2010.

Steve Jobs summed up the company's performance as "We are firing on all cylinders and we've got some exciting things in the pipeline for this year including iPhone 4 on Verizon which customers can't wait to get their hands on."

Mac sales were up 23 percent again to over 4.1 million (a new quarterly record), iPhone sales were up 86 percent to 16.2 million and iPod sales were down 7 percent to over 19.5 million, all as compared with the first quarter of 2009. Apple's iPad sales reached over 7.3 million, up 75% from Q4 of 2010. Apple is still selling all the iPhone 4's that they can make.

The Mac's growth rate exceeded the projected growth of the PC market as a whole of 3% by about 8-fold, resulting in Apple's market share continuing to improve. Exceeding PC sales growth has happened now for 19 consecutive quarters according to Apple CFO Peter Oppenheimer during the afternoon telephone conference call with financial analysts that I listened to.

Oppenheimer also stated that the new MacBook Air was a major driver of the record Macs sales. This quarter the portable unit Mac sales growth of 37 percent greatly exceeded the desktop unit sales change of a 1 percent decrease, returning to the recent Mac type sales performance where portables have led desktops. Portables again out sold desktops by over 2 to 1.

As I have pointed out, Apple finally got the MacBook Air mostly right. Only the loss of a built-in remote for presentations and loss of a backlit keyboard are issues to me but minor ones since there are acceptable third-party solutions. The decreased price points, decreased thickness and weight, increase in USB ports, increased RAM option to 4MB, substantially improved graphics and switch to all solid state drives, plus the new 11" model, made the MacBook Air the best portable computer available for routine computing.

All of Apple's operating segments (Americas, Europe, Japan, Asia Pacific and retail stores) scored increased unit sales and revenue over the same quarter in 2010, averaging 23 percent growth in unit sales and 71 percent growth in revenue. The revenue of Apple's Asia-Pacific division grew a phenomenal 175%! Apple's retail stores also had increases in unit sales and revenue of 24 percent and 95 percent respectively. There are now 323 Apple retail stores globally.

Enterprise traction is growing rapidly, according to Apple COO Tim Cook, who has taken over Apple's helm temporarily while Steve Jobs is on health leave. Cook said nearly 90% of Fortune 100 companies have deployed iPhone 4's and over 83% of Fortune 100 companies have done so. The terrific Asia-Pacific growth of 175% is due in large part to Apple's heavy focus on China. Cook also took a swipe at the 7" iPad rumor as Jobs did last quarter. Finally, Cook answered a question about the iPad cannibalizing laptops, by responding there's probably some but citing the halo effect of increasing sales of all of Apple's products and the products growth rates he stated, "If this is cannibalization, it feels pretty good!" He also stated that one of the magical things about Apple is that there are no hard lines between Apple's products so that the product teams all work together collaboratively to increase Apple's overall performance. Interesting stuff that is posted here if you want to listen.

Apple's forecast for next quarter's revenue is lower at about $22 billion, which would still be the second highest on record, with a lower earnings per share of about $4.90. On the latter, the current consensus financial analyst estimate stands at $4.43. Apple's forecasts have been quite conservative in the past.

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