Apple Reports Fourth Quarter Results

http://www.apple.com/pr/library/2010/10/18results.html

by ugh • 16 years ago

142 107 16 years ago

Down 5.8% (-18.70) in AH trading: http://www.google.com/finance?client=ig&q=AAPL

edit: whew, and seeming to stabilize around a 4.5% drop still leaving it above $300. I was amazed it broke $300 so easily last week and was afraid it'd fall back below with this drop.

jamesaguilar• 16 years ago

Why so down? I assume market expectations were higher than what they reported, but in what categories did Apple fall short / what else was as good as expected?

Grouper• 16 years ago

It could also be because their predicted net revenue and profit for next quarter is not as high as the market expected it to be.

seb• 16 years ago

The Ipad and Ipod sales are much lower then expected.

larsberg• 16 years ago

"Buy the rumor, sell the news"

:-)

slyn• 16 years ago

The AAPL stock M/O for as long as I have kept track of it is buy on rumors, sell on news, regardless of how accurate the rumors were or how good the news is.

mikeryan• 16 years ago

If you look at the past few weeks it looks like most analysts already expected pretty good news from Apple.

This might not have been quite as good as expected - considering they were at 280 on Oct 1 and now are still 30 points higher I'm guessing there's a lot of investors trying to take some money off the table now.

protomyth4• 16 years ago

drop in gross margin from 41.8% to 36.9%

also, someone mentioned (CNBC?) that Wall Street thinks Apple should have sold more than 4.19 million iPads this quarter. Errr...

gamble2• 16 years ago

Apple announcements are a magnet for traders. There's no point trying to interpret the stock's gyrations as a judgement of their performance.

aaronbrethorst4• 16 years ago

Who's offering any interpretation? I'm sure not.

msbarnett3• 16 years ago

Profit taking from the "Buy on rumour, sell on news" crowd. Happens every time.

andrewljohnson3• 16 years ago

That was profit-taking. The sell-off wasn't because the news was bad.

aaronbrethorst4• 16 years ago

ah, you edited your post since i was about to reply (and HN crapped out on me). here was my original response:

Finance-related articles: I read several. Margins are depressed[1]. iPad sales were lower than expected[2]. Revenue was above expectations, but profits were below [3].

[1] http://www.nytimes.com/2010/10/19/technology/19apple.html

[2] http://online.wsj.com/article/BT-CO-20101018-713881.html

[3] http://blogs.barrons.com/techtraderdaily/2010/10/18/apple-fy...

Eliezer• 16 years ago

If it was predictable it would not have happened. Markets are anti-inductive... oh, never mind.

cosmicray• 16 years ago

I'll throw my spin on that drop-off...

Say you're an Apple key employee. One who is prohibited from trading within so many days prior to the earnings report (because you have insider information). You sit there, note the stock price runup, and say "man, I'd like to sell a few of my shares at $300".

So you talk to your broker, personal financial advisor, etc, and tell them "I want to move 1,000 shares at $300 once the quiet period is over.

Bam, stock price drops temporarily, and then starts to trickle back up. I have no idea how many people are in this category, but I'm sure there are more than a few at Apple.

kgutteridge2• 16 years ago

27 million iOS devices in the last 3 months, thats a very nice demographic to target that does not seem to be slowing down even with Androids rapid growth also gaining real momentum, I like being in mobile its certainly interesting!

protomyth4• 16 years ago

Yeah, I'm doing my last work on 3 desktop apps and then moving into iOS for the forceable future.

megablast• 16 years ago

Android is doing well, but we know that Apple users buy apps, not so much with android users.

kgutteridge2• 16 years ago

Android was slower to rolling out frictionless payment onto their store, only recently did it roll out in a lot more countries http://android-developers.blogspot.com/2010/09/more-countrie... So I would not necessarily use the past history of paid apps on Androids market as direct comparison to Apples app store. However the self selecting fact that more Apple users are likely to have a disposable income is very appealing when choosing to just target an iOS device if you do not need reach, I think for non hit applications, that are more of a business though reach is very important as cracking the top 100 in Apples app store is rather difficult and you have very few other options if you do not succeed in this endeavor

jokermatt999• 16 years ago

I think part of the reason is not just the whole Android culture of free, but the poor Market experience. Once Google cleans up the Market, I think sales will increase. Perhaps not to iOS levels, but I would be surprised if there isn't a significant improvement.

ugh5• 16 years ago

Steve Jobs is just now highlighting Android’s “fragmentation” and discussing Android’s openness. He is also talking about upcoming tablets and their 7" screens. (Trash talking them, that is. No 7" screen from Apple anytime soon.) Ars Technica is blogging: http://arstechnica.com/apple/news/2010/10/liveblog-q4-2010-e...

solutionyogi2• 16 years ago

Select Q&A:

Q: What do you think about the 7" tablets?

A: one naturally thinks a 7" screen offers 70% of the benefits of a 10" screen, but this is far from the truth a 7% screen is only 45% as large as a 10% screen because the measurements are diagonal. This size isn't sufficient to create great tablet apps, in our opinion. One could increase the resolution to make up for the difference, it's meaningless unless the thing also includes sandpaper so users can sand down their fingers.

Another comment by Steve:

"It's being grabbed out of our hands. I talk to people every day in every kind of business who are using iPads boards of directors, nurses, doctors, etc. The more time that passes, the more i am convinced that we have a tiger by the tail here."

Q: Could this be your second biggest business behind iPhone?

A: I try not to predict, I just report.

Q: Any updates on you stance on Flash?

A: Ah, Flash memory? We love Flash memory! [I wonder if the reporter who asked the question understood the joke. ;)]

Q: So if the market starts to move toward lower-functionality smartphones and dramatically lower price points, and you feel you can't make an appropriate product on those price points, you'll throw in the towel?

A: You're looking at it wrong. you're looking at it as a hardware person who doesn't know much about software. who doesn't think about an integrated product and thinks the software will just take care of itself. You assume the software will just somehow come alive on this product you're dreaming up, but it won't. Because these app developers are taking advantage of products that came before it, with larger screens and more capabilities. it throws you back to the beginning of the chicken and egg problem again most developers won't follow you.

Pure gold from Steve. Competitors better listen to this call and learn from the man himself.

-------------------------------------------------

You really gotta hand it to Steve. Absolute no corporate speak (aka bullshit) when he talks. Compare this with recent email from Steve Ballmer,

"I sent a message to the world that we’re ‘all in’ when it comes to the cloud. In that speech I noted that Ray’s Internet Services Disruption memo nearly five years ago, and his work since, stimulated thinking across the company and helped catalyze our drive to the cloud." (from http://www.microsoft.com/presspass/press/2010/oct10/10-18ste... )

Cloud? Why do executive use the word 'cloud' when the word 'Internet' is so much better. 'Stimulated thinking'... 'catalyze our drive', looks like someone has been reading too much of Dilbert.

The difference between Steve Jobs and Steve Ballmer is staggering.

ugh5• 16 years ago

Aw, cute!

Q: Any updates on you stance on Flash?

A: Ah, Flash memory? We love Flash memory!

butterfi• 16 years ago

Interesting article in WSJ about some research around the language used by lying CEO's:

http://blogs.wsj.com/deals/2010/08/11/how-can-you-tell-if-a-...

I'm not saying Ballmers lying, it's just interesting to read the quote above after reading the article.

kenjackson6• 16 years ago

Actually the term "cloud" and "internet" generally mean different things. The cloud refers to services sitting on endpoints that you don't maintain (or likely don't own either).

The internet generally refers to the communication infrastructure between endpoints. You can be all in on the internet and not care about the cloud. The opposite is more difficult though.

Also Steve's 7" answer seemed odd. The iPod Touch is a 3.5" tablet. He's saying that he can't figure out how to create a device that made good use of twice the diagonal?

marze2• 16 years ago

There were rumors of an Apple 7" device earlier this year. I wonder if they were deliberately started by Apple to send competitors down what they considered a blind alley.

CamperBob2• 16 years ago

More likely Apple's feverishly working on a 7" device but it wasn't ready to be announced yet. This is a recurring trope in Steve Jobs's speeches -- slag an idea as being unworkable or undesirable, only to announce it at the next major conference.

cletus• 16 years ago

I don't buy into this kind of conspiracy thinking.

Apple builds more products than it releases. It's entirely possible (if not probable) that Apple developed a 7" prototype. Just like I'm sure there's been a CDMA iPhone prototype. That means nothing however. Just because there is/was a prototype doesn't mean there will be a product.

I believe the 7" competitors come down to two things:

1. The competitors might feel like they need to differentiate themselves from the iPad; or, more likely,

2. Apple has tied up the world supply of 10" capacitative touch screens so the competitors needed to go for parts they could get.

Unfortunately a lot of these Apple rumours are started and propagated by people who simply don't understand how Apple operates or are simply link-baiting.

DougBTX• 16 years ago

Not wanting to point out the obvious, but Apple is the leading seller of 3.5 inch tablets - the iPod touch.

ugh5• 16 years ago

I’m only quoting Jobs here, not presenting my own opinion but I think I can shed some light on that point: iPad and iPod touch do not use the same UI, they do not have the same intended uses. Jobs obviously seems to think that 3.5" (where you sacrifice functionality for compactness) and 10" (where you sacrifice compactness for functionality) are local optima.

danilocampos5• 16 years ago

The iPad sales are just staggering. Moving that many units of a product that didn't even exist a year ago, in a category that was long thought dead, is incredible.

Identify an optimal user experience, polish the hell out of it, then perform an airtight integration of every single component, from end-to-end. The software and hardware, the content ecosystem, the physical distribution, all of it fits together perfectly.

When you look at it closely, Apple, as a portfolio of talent, technologies and interacting businesses, resembles the sort of microorganism that Intelligent Design proponents advance as evidence of a god. Everything cooperates in such a concerted, integrated way it's almost impossible to imagine developing any of it in simpler phases.

In a world filled with corporations whose in-fighting and conflicting agendas make them look like mosh pits, Apple has the tightest marching band in history.

edit: Also, anyone notice how often Apple reports their "best quarter ever?"

jw84• 16 years ago

Apple wasn't always like that. Took a long time for that maturity and took a lot of centralizing power before everything came into being.

danilocampos5• 16 years ago

It took Steve Jobs returning and demanding extraordinary focus. It started with Apple's now famous matrix of consumer and pro for mobile and desktop. New products were added only after judicious consideration of both the user experience and business cases. As new parts of the business emerged, they were tightly integrated with existing products (iTunes + iPod, OS X + iPhone, etc)

edit: It's also worth mentioning that he cleared out all the dead wood, in terms of leadership, fired the board and re-organized Apple around people whose talent and passion positioned the company well for the future. Most famously, Jonathan Ive was on his way out. Steve discovered him languishing in Apple's Industrial Design labs, creatively wilting, dying to be set loose on something daring. Jobs let him have his way, he built the first iMac and now he's a VP.

The most interesting thing about Apple, from my perspective and theirs, is how often they say no to new opportunities. Focus is the sword they used to cut through bullshit before the turnaround and the sword they use now to plow through a field of opportunities, executing on only the best of the best.

Apple of the early-to-mid-90's was just like any other company. Management fiefdoms, conflicting product strategies, and a sea of impossible to understand variations on the same products. Nothing got done. It survived on the fumes that came from the power of the original Mac, and the DNA that was baked into the company: computers should be made to empower everyone.

InclinedPlane• 16 years ago

And a lot of experience, with Macs, with the iPod, with the iPhone, etc.

apike2• 16 years ago

Having been an Apple employee, it's funny to me when people describe Apple this way. If you think of their operations as perfect, godlike, or seamless, you have no chance of really understanding them or replicating the good parts yourself.

At Apple there are indeed conflicting agendas, moments of doubt, in-fights, technical debts, and lame-duck products. There might be less of these things than other big companies, but it's still just a group of thousands of individuals trying to make great stuff.

danilocampos5• 16 years ago

> Having been an Apple employee, it's funny to me when people describe Apple this way. If you think of their operations as perfect, godlike, or seamless, you have no chance of really understanding them or replicating the good parts yourself.

A completely agree, so I think you may have missed my point.

It's worth noting that I think Intelligent Design is horseshit, so god leaps neither from that argument nor from Apple for me. For reference, here's the background:

Flagellar motor (real):

http://en.wikipedia.org/wiki/Flagellum#Evolution_of_flagella...

Irreducible complexity (horseshit):

http://en.wikipedia.org/wiki/Irreducible_complexity

Apple, of course, did evolve from a much less complex organism than it is now, but the overall harmony of its successful products is impressive and demonstrably difficult to replicate. The easy route is to ascribe supernatural powers to Apple's success, but of course the history demonstrates methodical system planning, keen insight, hard work, a bit of fanaticism, and some good timing.

The difference between Apple and other organizations is that while in-fighting and conflicting agendas may exist (as in any human system) this doesn't seem to get in the way of a coherent user product. Compare that with Sony, which can't muster a coherent consumer strategy to save its life. (Well, absent saddling every last product with the proprietary storage device du jour.) Apple may itself not be seamless but the overall experience for users of Apple products is shockingly so, especially when compared to competing gear.

What internal back biting can you share from your tenure at Apple, though? It would be interesting to learn just how aggressively leadership must filter and otherwise confine these impulses to end up with the focus, profits and product mix we see today.

jfb2• 16 years ago

This corresponds closely with my experience, as well. What keeps the wheels from falling off is largely people's emotional investment in product; the harshest assessments of Apple's product I've ever heard came from Apple employees. Too, everybody loves a winner, and Apple's been doing a lot of winning lately; it keeps people motivated when they can read about their projects in the Times.

But it's a big company, and it has a lot of big company problems.

eru• 16 years ago

> edit: Also, anyone notice how often Apple reports their "best quarter ever?"

It would be slighty more meaningful if you took inflation into account. (Though they are growing way faster than inflation.)

barredo• 16 years ago

Most interesting of the press release "We still have a few surprises left for the remainder of this calendar year."

mattparcher4• 16 years ago

(This sentence is immediately preceded by a highlight of iPhone sales and a dismissal of iPhone competition from RIM.)

mattparcher4• 16 years ago

Just to clarify, it was my impression that the coming “surprises” specifically relate to the iPhone, based on the context of the statement.

(Though, as glhaynes notes, we are now less than two days away from the “Back to the Mac” event, which will almost certainly have a number of non-iPhone surprises.)

glhaynes6• 16 years ago

They always say something like that, and there's a big Mac event scheduled for Wednesday.

protomyth4• 16 years ago

one of the Q&A yielded the AppleTV number at being over a 250,000

melling• 16 years ago

Will iPad sales dissuade developers from using Flash or promote the development of iPad apps to augment rich Flash sites?

glhaynes6• 16 years ago

I think the onus is now on Flash developers now to make the case for why Flash is necessary in new development. And I think that's an important threshold.

benologist4• 16 years ago

It's not really. Right now Flash can be used to deploy for iOS finally thanks to Jobs' recent change of heart so essentially "Flash vs. iOS" is a solved problem (although it needs and will get more work from Adobe).

Flash cops a bad rap but it is a massive platform for gaming with hundreds of millions of people choosing Flash games over every other form of entertainment and distraction all day, every day. Yesterday I tracked almost 6 million people that collectively spent 171 years playing Flash games.

There are a handful of technologies that promise we'll be able to make once, deploy everywhere - whoever does it best is going to win the developers. It's not Flash vs. iOS, it's "how do I get my game on n platforms". Adobe fancies themselves in the running, people are working on positioning Mono to solve that problem, Unity are a very likely contender, and of course there's HTML5.

smackfu• 16 years ago

I haven't seen it. Not having Flash is still a big bummer on the iPad.

Along the same lines, plenty of developers haven't bothered making iPad versions of their iPhone apps. I think Apple expected too much there. And the crappy pixel-doubled version is not exactly showing off the iPad.

dasht2• 16 years ago

Hehe.

You know the old saying "always darkest just before the storm"?

How's about: "always highest revenue just before the bubble bursts"?

Huge numbers of consumer leaders or consumer suckers have, in the past few years, bought lots of this line of products. Either a large number of them and non-buyers agree "Well, that was worth it" or, the opposite.

Place your bet.

(I'm not saying "droid wins" or "MSFT wins". I'm saying "the category of products is suspect for sustained growth ... Apple is just accelerating the rate at which we find out.")

ugh5• 16 years ago

What would be the consequences of the “bubble bursting”?

I’m asking because there is really no way you can respond to a statement like that. What is your specific prediction? Will Apple be bankrupt in the short or long term? Will their iPhone sales decrease? Will they plateau? Will they grow slower than the Smartphone market? Are you only talking about the iPhone or maybe all iOS devices? Maybe the Mac, too?

blantonl• 16 years ago

in all fairness the OP might be referring to Microsoft as an example.

mattparcher4• 16 years ago

To be honest, each time Apple has a record quarter (which has been quite often lately) folks doubt that they will sustain that growth, but they’re almost always proven wrong.

Where is Apple slowing? In Macs, which see only modest increases year over year, and iPods, which are in decline. But both of those categories are not losing to competitors — they are being cannibalized by Apple itself, who is busy selling incredible numbers of iPhones and iPads.

If you’re wondering whether Apple’s customers are happy, Apple just earned the highest-ever score in the American Customer Satisfaction Index, in large part due to the iPad: http://digitaldaily.allthingsd.com/20100921/ipad-boosts-appl...

macrael• 16 years ago

I'm not sure I would characterize the Mac growth as "modest" for the past several years they gave been growing several times faster than the industry average.

dasht2• 16 years ago

I don't think it is so much Apple, per se, that is nearing the bubble burst as the broad category of mobile gadgets. The "was it worth it" question applies to the category more than the particular company.

Right now I see a lot of these mobile gizmos being sold as status markers and fun toys. Sure, for some they are valued tools but mostly: status marker and/or toy. A status marker branding for a mass produced, mass market item is inherently self-limiting (status markers have to be unusually expensive and scarce to last). A fun toy branding for a product that is fundamentally expensive to obtain and operate month to month is on a collision course with economic reality -- especially when it's a product that breaks easily, is easily stolen, and, anyway, needs to be replaced every few years.

I'm not claiming I can "time markets". Apple may very well have several more great quarter or, if the stars align, might tank after two. I am saying a sharp downturn seems to me to be inevitable and not too far out.

aaronblohowiak• 16 years ago

Anecdotally, Apple has a lot of repeat customers. I know lots of people that have purchased Iphone, iphone 3g, 3gs, 4g, ipad, macbook pro (often one work and one personal.) Once you get into the apple ecosystem, things are nice. interoperability is another issue altogether (and dont get me started on the old apple tvs)

brown9-2• 16 years ago

"always highest revenue just before the bubble bursts"?

Isn't this a bit like asking why a lost item is always in the last place you look for it?

Of course revenues are highest before a decline starts. The decline has to start from somewhere; some event has to happen to turn your fortunes from positive to negative. Your revenue has to be climbing upwards for anyone to label it a "bubble". Mediocre companies that implode don't warrant the "bubble" label.

This is just misinterpreting a turn of language.

danieldon• 16 years ago

Proclamations predicting the imminent decline of Apple got old many years ago.

mattmaroon• 16 years ago

I wish I was Apple's CFO. That strikes me as right up there with San Diego Weatherman as the easiest job in the world. Yesterday was sunny and 80 degrees, today is sunny and 80, and tomorrow is going to be sunny and 80.

CamperBob2• 16 years ago

Then when it does rain, they come after you with tar and pitchforks.

linuxhansl2• 16 years ago

Not a single cent of my money.

I stopped using Apple products when they started to lock down the iPods (by using encryption) and tied devices to a specific installation of iTunes.

And do not even get me started on the closed platforms that are the iPhone or the iPad (i.e. the Apple Store).

The amount good will this company has with consumers is staggering.

forensic• 16 years ago

Your religion is not serving you.

linuxhansl2• 16 years ago

Yes, I could have stated it more friendly:

I disagree with Apple's policies so I do not buy their products. On some level I also do not understand why not more people are bothered by Apple.

jscore• 16 years ago

I guarantee in a generation or so we will look back and do case studies of Apple and Steve Jobs. What made them so successful, etc. Things like to how to develop amazing products, create compelling user experiences, create new markets, market to customers, etc, etc.

Companies like this aren't created everyday.

lwhi• 16 years ago

Steve Jobs is an amazing showman. He's got the ability to work the _full_ crowd, but he'll always have his eye on the audience members who have reserved the box seats .. the VIPs (i.e. shareholders).

By ensuring that shareholders are delighted, he makes sure that the show is lubricated with enough cash; so that they're able to ensure even more daring stunts and fireworks are available for the next season's performances.

I think it's wrong to assume that Apple are perfect. In my opinion, there are many things that could be improved about their products, but Jobs realises that perception is _everything_ and he's worked hard to ensure that Apple's image is carefully crafted and actually fulfils emotional needs that Apple's customers have grown to appreciate - and would gravely miss if Apple wasn't around.

The amount of vitriol that's produced by Apple's advocates (when the parent company is attacked) consistently amazes me.

Watching the show from the cheap seats, I'm reminded how every business action can serve multiple aims. Every (slightly or even, overtly) nefarious action can be teamed with a more egalitarian or idealistic aim; each of which can be used by advocates to fight Apple's corner. It's supremely clever work.

I'm not sure if a corporation which operates such a cunning, clever operation should necessarily be congratulated every time they release results. When smoke and mirrors are involved, I think it's worth trying to preserve some critical judgement.

Apple Reports Fourth Quarter Results

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