Apple Financial Results Q2 2003

[MacRumors]

Apple is webcasting (http://www.apple.com/quicktime/qtv/earningsq203/) their Q2 2003 Financial Results.

Apple posted a profit of $14 million on revenues of $1.475 billion.
711,000 CPUs shipped

[wsteineker]

So did Apple meet earnings expectations?

[richard5mith]

I believe 2 cents was expected, and they made 4. Per Share. So that's not bad.

It might not be much, but the fact is, they're still MAKING money. That's more than some companies can say (*cough* AOL *cough*).

[Macurious]

There's still some work to be done. Dell is routinely posting a .20 cents a shore profit and holds a market value of approximately 15x that of apple. This is apple's real competition.

[Mr. MacPhisto]

Originally posted by Macurious
There's still some work to be done. Dell is routinely posting a .20 cents a shore profit and holds a market value of approximately 15x that of apple. This is apple's real competition.

Dell is not Apple's real competition. Dell is nothing more than a reseller. Apple's competition is really MS and other PC corps. Fact is, Apple is one of the few computer companies posting a profit now.

While Dell's value may be high, let's remember that there are more Apple badged computers in the world than any other label. Dell controls the PC market, but can't control their profit margins as well. I don't see Dell as being overly strong competition - especially since their product has gotten worse over the past few years.

[jholzner]

Well, thank god their back in the black after two quarters of red ink!!

[NavyIntel007]

47% of the revenue is coming from international sales. I wonder if this is the sign of things to come as far as the economy. Remember the Asian markets were way way down 6 months before the Dot-com bubble burst.

[daedelgt]

Originally posted by NavyIntel007
47% of the revenue is coming from international sales. I wonder if this is the sign of things to come as far as the economy. Remember the Asian markets were way way down 6 months before the Dot-com bubble burst.

Do you mean to say that because their market is doing so well, we are turning around?

[IJ Reilly]

Did anyone else listen to the conference call? It seemed to me that Fred Anderson was even more Sphinx-like then usual. He would not even hint at, let alone comment about, new products, including the music download service or CPUs. He responded to a question about talks with Vivendi by reading the press release issued today denying the whole thing, but nothing more. In fact it seems to me that this press release was issued today just so that Anderson would not have answer any questions about this.

The entire tone of this conference call seemed more mum than usual. Which, of course, may be significant...

[suzerain]

Originally posted by NavyIntel007
47% of the revenue is coming from international sales. I wonder if this is the sign of things to come as far as the economy. Remember the Asian markets were way way down 6 months before the Dot-com bubble burst.

Just FYI: This isn't really much different than usual.

Apple's sales have almost been 50/50 international/American for quite a while, as far as I can recollect.

I've been saying for a long time that Apple needs to market more aggressively in other countries, because the American market is saturated.

Put another way, it's a lot easier to get first-time buyers than switchers.

[QCassidy352]

with the computer market hurting in the bad economy, I'd say this is very good news. Not huge profits, but they're making money at a time when purchases of so-called luxury goods are down and they continue to fall further behind intel in the speed wars. My point being that if they can still be profitable now, things could get really good if/ when the economy turns around and if/ when the 970 closes the speed gap with intel.

[Titian]

One thing I learned in my 20 years experience in the "financial world" is to never believe in financial results. They can be legaly "adjusted" to the circumstances just like interpretating a statistic.
For me these results mean not much.

[ThomasJefferson]

And if the m*o*R*o*n*s at apple had been selling 5 gig ipods the last 4 months, just think ...

[dstorey]

could be spin to try to get people to buy powermacs now but 'Looking ahead to the third quarter of 2003, we expect revenue to be relatively flat with the March quarter and expect a slight profit for the quarter." doesnt sound too good for a 970 intro does it, if you belive what they say anyway...with 970's introduced at the end of 2nd to beginning of 3rd quater i'd expect sales to be much higher than this march when the powermac sales must have been pretty much flat, keep hearing about iMac not doing too well, no 5 gig iPod, just shipping 17" powerbooks and i cant see the iBooks flying off the shelf last month with them being near due for revision. All in all it was quite impressive to see a profit with all the supply chain problems and lack of competitive powermac...

[wymer100]

Actually, Apple (and AOL-TW for that matter) *did* bring in more money than they spent during Q4 2002. Apple and AOL had big one-time right downs that got charged to their finances. If you look at the numbers before these charges, they both had profits.

Apple's financial picture is amazingly great given the current financial situation. Lots of cash and very little debt. Think about this: Apple could lose $100mil every quarter for the next 10 years and still have money in the bank (even without interest). :-) That's a sign of financial strength.

Apple is really positioning itself to gain marketshare once markets improve. They are getting into the conscienceness of the consumer. Five years ago, noone would have thought about talking about mac products. Now, you even have people like CNET and TechTV talking about macs. While not always in a good light, at least apple is getting press now. Bad companies die in economies like these. Apple may not be gaining marketshare right now, but they are setting themselves up for a good run in the next couple of years. Should be fun to watch.

[deepkid]

[i]Originally posted by Macrumors
Apple posted a profit of $14 million on revenues of $1.475 billion.
711,000 CPUs shipped

Please note that interest income is what has been helping Apple to avoid reporting losses in recent quarters. (Interest on that $4.52 billion in the bank.)

It's a great safety net, but over time they'll have to introduce/investigate more revenue streams to hopefully supplant dependence on it.

[DakotaGuy]

The only thing keeping them going is two things...
iBooks and Powerbooks.

[shadowfax]

Originally posted by Abercrombieboy
The only thing keeping them going is two things...
iBooks and Powerbooks.
hopefully a new iPod will bring that back into the running, but ultimately, "what else is new?"

apple's been best at laptops and only laptops for some time now.

[3.1416]

doesnt sound too good for a 970 intro does it, if you belive what they say anyway...with 970's introduced at the end of 2nd to beginning of 3rd quater

3rd quarter for Apple is April through June, that's what they were giving guidance for. The 970 won't be a factor, except that Power Mac sales will continue to suck as customers wait for better machines. 4th quarter should be much more interesting, assuming an optimistic 970 schedule (announced at WWDC, shipping less than 2 months later).

[KingJobs]

How come Apple is calling this the 2nd Quarter of 2003 when all the other companies are calling this the 1st Quater?

[DHagan4755]

Maybe their fiscal calendar starts earlier than other companies.

[IJ Reilly]

Originally posted by DHagan4755
Maybe their fiscal calendar starts earlier than other companies.

Not really "earlier" -- a fiscal year can start whenever a company wants it to start. Fiscal years are unrelated to calendar years.

[MrMacMan]

Originally posted by jholzner
Well, thank god their back in the black after two quarters of red ink!!

Bah, last quarter was nothing really.
They had a restructing charge, don't you hate those? :rolleyes:

Originally posted by Titian
One thing I learned in my 20 years experience in the "financial world" is to never believe in financial results. They can be legaly "adjusted" to the circumstances just like interpretating a statistic.
For me these results mean not much.

Um... Apple is Not the next enron, sorry. Earnings can be inflated, but why make the earnings to low then? No reason.

Originally posted by KingJobs
How come Apple is calling this the 2nd Quarter of 2003 when all the other companies are calling this the 1st Quater?

The business year has absoultly nothing to do with the christian/roman calandar. Its like comparing jewish new year to 'new years' :rolleyes:

[Titian]

Originally posted by MrMacman
Um... Apple is Not the next enron, sorry. Earnings can be inflated, but why make the earnings to low then? No reason.


I am not talking about illegal ways of "adjusting" the results but about LEGAL ways!
There are so many ways to make the results be better or worse without going against the law. Company bookkeeping is very complex....

[RandomDeadHead]

And if the m*o*R*o*n*s at apple

Doesent anyone except me take offense to this comment?:rolleyes:

I mean really, do you think Jobs just woke up on morning and said, wow we are selling hundreds of thousands of these little guys, and we make huge profits off of them, lets stop selling them just to fu*k with people? I dont think so.

I am SHURE they have their reasons.

[JW Pepper]

It looks to me as though more of Apples revenue has come from software this quater than ever before. I wonder if we are starting to see a shift in dependence. Ater all Apple cannot relly onpeople to keep upgrading hardware. On the otherhand software sales are open to an bigger market.

It seems that froma business point of view the Microsoft Business Model works, so if you can't beat them perhaps you should copy them.

[matznentosh]

Apple's financial year starts in October. 1st quarter report was sent out in January and I think showed a loss due, they said, to a one time cost. So this report sounds good.

I think you can depend on Apple's financial reports, unlike a lot of other companies (that Bush's friends run). They seem to be very conservative in their estimates. Notice they have not had to report revised earnings a la AOL and the others.

[GPTurismo]

They have money, and they are selling products. My big gripe is people keep comparing them to dell, which sells thousands of little barebones boxes to businesses.

Also, I don't understand the logic of Apple having to beat Dells sales and market share. With that logic Astin Martin is a POS car since it can never outsell or outprofit GMC or Chevy (Or GM as a whole) :S

[richie]

What *I* don't get is what the hell the market thinks Apple needs to do, what they need to do for their shares to climb again. I mean:

Rumours emerge of Apple buying Universal: Stock Down

Apple denies rumours and posts a profit above market expectations: Stock Down

http://investor.cnet.com/investor/quotes/quote-detail/0-9970-1042-0-AAPL.html?tag=qbox

Take a look at the releases associated with apple in that link - stuff about Apple's profit down. Sure, from last year's quarter it is, but they beat the expectations. Besides, a dip to 11 million from 40 million is hardly company-killing, is it, when we're talking Apple?

*sigh* I just get so sick of the market hating Apple stock.

Edit: Apple's cash reserve: $4.562B
Apple's market cap: $4.642B

[dongmin]

Originally posted by richie
What *I* don't get is what the hell the market thinks Apple needs to do, what they need to do for their shares to climb again.

Apple is a company analysts love to dump on. It doesn't matter that they're financially healthy, consistently turn a profit, have a loyal user base, and really put out great products.

The key is marketshare--that's all the financial people seem to care about. And as is, Apple's marketshare is static, if not slipping. People who invest in stocks want to see signs that the company will grow; stock prices always reflect future earnings potential. And so far, even with all the great products and clever marketing moves like the Switch campaign, Apple hasn't shown much evidence of growth.

[Chad4Mac]

Originally posted by GPTurismo
They have money, and they are selling products. My big gripe is people keep comparing them to dell, which sells thousands of little barebones boxes to businesses.

Also, I don't understand the logic of Apple having to beat Dells sales and market share. With that logic Astin Martin is a POS car since it can never outsell or outprofit GMC or Chevy (Or GM as a whole) :S

GP-

Great comment! I think you are right on track here. How Big do you want Apple to get? As big as a Microsoft? Obviously, not!

Apple is the company we all love because of its small market penetration. If Apple gets too big, there goes the customer support, in comes the software licenses.

I like the fact that Apple only has 5% or less market share; makes be feel like an individual in this ever so similar PC world.

However, if you are a shareholder, growth in market share is quite important...however, I would just like to see the powermacs increase in sales, and that positive outcome would have a large impact on qoq results.

Chad4Mac

[Nemesis]

Originally posted by Abercrombieboy
The only thing keeping them going is two things...
iBooks and Powerbooks.

Software, mate!
Just wait and see. In very short period of time, Apple will make substantial profit selling software.

Especially when Apple buys Adobe in September!!

[Chad4Mac]

Originally posted by richie
What *I* don't get is what the hell the market thinks Apple needs to do, what they need to do for their shares to climb again. I mean:

Rumours emerge of Apple buying Universal: Stock Down

Apple denies rumours and posts a profit above market expectations: Stock Down

http://investor.cnet.com/investor/quotes/quote-detail/0-9970-1042-0-AAPL.html?tag=qbox

Take a look at the releases associated with apple in that link - stuff about Apple's profit down. Sure, from last year's quarter it is, but they beat the expectations. Besides, a dip to 11 million from 40 million is hardly company-killing, is it, when we're talking Apple?

*sigh* I just get so sick of the market hating Apple stock.

Edit: Apple's cash reserve: $4.562B
Apple's market cap: $4.642B

On the stock itself: This is a pretty mellow day on the market because of the long weekend (NYSE is closed tomorrow). Even though Apple beat EPS consensus due to slightly higher revs and gross margin, there still are underlining issues with several things.
First it's the Powermacs (thier most profitable product) and its 40% decrease in shipments over the past two years. Top that off with professionals not buying very many machines and you got a problem.

Then it's the PowerBook disoppointment in shipment delays for 17" PBs, though, there is "considerable" backlog for next quarter. Shipment were not on line.

What else? UMG. Though the purchase is unlikely, very unlikely, the street doesn't know what to do. Even though SJ reports that they never made an offer on UMG, he still left out a lot of detail. Analysts don't know what to think.

I think that it's a good buy, IF you want to stick around for a long time.

Think long term on this stock...

Chad4Mac

[Nemesis]

Originally posted by dongmin
Apple is a company analysts love to dump on. It doesn't matter that they're financially healthy, consistently turn a profit, have a loyal user base, and really put out great products.


Every dumping is based on speculation, rumors, assumptions, psychological factors. Whole bloody Wallstreet is full of funny people 'assuming' and 'thinking' about economy, and what they think that 'will surely happen'.. Bull*hit. :-)

Real world reasons for dumping often come too late, and that inevitably shakes the ground of stock exchange for months. They call that 'tragedy' :)


The key is marketshare--that's all the financial people seem to care about. And as is, Apple's marketshare is static, if not slipping.


The market is dynamic and always increasing. It is not static and sealed in time. So if Apple keeps that 2-3% of marketshare throughout the years, it is actually growing and satisfying more and more customers.

So, clearly, marketshare is not the answer for Apple's better future. The answer is innovation -- making new great things and making them as best as they can be.

Actually, they do their business just fine.



People who invest in stocks want to see signs that the company will grow; stock prices always reflect future earnings potential.



Stock price means almost nothing. It is highy speculative value, based on non-real predictions and assumptions by those funny guys in grey suits in WS. Their prediction charts are based upon their variables, not real world conditions.

People, like you and me, make real world charts. People are unpredictable, as well as innovations. Apple's success is based upon those two untangible variables which make all 'serious' analysis almost funny.

No hard feelings, mates, those are just my thoughts.

[IJ Reilly]

Originally posted by Chad4Mac
First it's the Powermacs (thier most profitable product) and its 40% decrease in shipments over the past two years. Top that off with professionals not buying very many machines and you got a problem.

You said it yourself -- gross margins were up this quarter, on the strength of PowerBooks sales, without PowerMac numbers increases. Apple's been saying for some time that they expected laptop sales to eclipse desktops, so nobody should be too shocked by these results.

I sadly have to agree with the pervious poster -- the market often takes all news from Apple as "bad," including better than expected financial results and even new and unexpected products. For comparison, just look at Sun. On the same day, they announced the smallest of profits -- $.01 per share, after several quarterly losses, and the market didn't beat them down. And what's Sun's strategy going forward? Do the market gurus really understand it so much better, and have that much more confidence in Scott McNealy then they do in Steve Jobs?

[enormo]

The company's earnings for the quarter plunged 65% to $14 million, or 4 cents a share, compared with $40 million, or 11 cents, in the year-earlier period.

Who cares if they beat expectations? This year the Cincinnati Bengals won one more game than people thought they would. That makes them 2-14. They still suck.

I'm not saying that Apple sucks but(repeat after me)... IT... IS... NOT... GOOD.

Don't get me wrong, I'm as in love with Apple's hardware and software as the next guy and I certainly don't think that this is the end of Apple by any means, but you people try to put a positive spin on most everything. And I agree that the economy as a whole is in the toilet and that a lot of good companies are hurting, but a 65% drop in earnings no matter how you look at it(one more time)... IS... NOT... GOOD.

[IJ Reilly]

I don't think anyone is saying these results are "good." At least I'm not saying that. What I'm saying is that one might reasonably anticipate the markets to have already priced in expectations, given that Apple's been forecasting marginal profits for several quarters now, and that is exactly what occurred. One might also reasonably anticipate that the markets would price in something like the consensus of earnings and perhaps even reward the shareholders when the company outperforms these expectations. In the instance of other companies, this generally occurs. My point is, the markets always seem to be prepared to be disappointed in Apple, and to punish the shareholders accordingly -- even when they perform better then expected.

[Chad4Mac]

Originally posted by IJ Reilly
You said it yourself -- gross margins were up this quarter, on the strength of PowerBooks sales, without PowerMac numbers increases. Apple's been saying for some time that they expected laptop sales to eclipse desktops, so nobody should be too shocked by these results.

I sadly have to agree with the pervious poster -- the market often takes all news from Apple as "bad," including better than expected financial results and even new and unexpected products. For comparison, just look at Sun. On the same day, they announced the smallest of profits -- $.01 per share, after several quarterly losses, and the market didn't beat them down. And what's Sun's strategy going forward? Do the market gurus really understand it so much better, and have that much more confidence in Scott McNealy then they do in Steve Jobs?

Your right, Apple had acknowledged the drop in PowerMacs and increase in laptops. On the margin side, it's still not enough without the PowerMac. They increased margins to 28.3% (estimates of 27.8%) thanks to component declines in laptops, a mix shift toward higher margin notebooks (PBs), and an increase on-line sales. But that doesn't negate the fact the that are not selling there most profitable product, which is extremely crucial. They also say that they expect flat sales third quarter, which tells me that nothing will change on the PowerMac side, though, we know (think) that the 970 will be out which should boost sales. They leave no indication of what's to come, though some of us (rumor people) know what to expect.

On Sun. Sun also didn't just get a major rumor saying they will buy an American Steal company for 5 billion, an industry they have no experience in and is hurting at the moment. The point is no one knows were Apple would be going with UMG, and it places extreme uncertainty about Apple valuation in the future.

Also, no is getting beat-down. Apple's down .08 and Sun's down .077.

Chad4Mac

[Chad4Mac]

Originally posted by IJ Reilly
I don't think anyone is saying these results are "good." At least I'm not saying that. What I'm saying is that one might reasonably anticipate the markets to have already priced in expectations, given that Apple's been forecasting marginal profits for several quarters now, and that is exactly what occurred. One might also reasonably anticipate that the markets would price in something like the consensus of earnings and perhaps even reward the shareholders when the company outperforms these expectations. In the instance of other companies, this generally occurs. My point is, the markets always seem to be prepared to be disappointed in Apple, and to punish the shareholders accordingly -- even when they perform better then expected.

IJ-

It's not just Apple, it's everyone! Except for Netflix (NFLX), check it out!

The markets crazy right now and it's effecting everyone.

Chad4Mac

[IJ Reilly]

Originally posted by Chad4Mac
IJ-

It's not just Apple, it's everyone! Except for Netflix (NFLX), check it out!

The markets crazy right now and it's effecting everyone.

No so. Using the example of Sun once again: Sun holds $2.5b in cash and short term assets against a market cap of $10b (25%). Apple has $4.5b in cash and short term assets against a market cap of $4.8b (94%). The market is saying that not only is Apple's entire business virtually worthless, but so is their inventory, plant and equipment, and everything else the company owns, including real estate and intellectual property.

IOW, if somebody bought the company, they could liquidate it lock, stock and barrel, and make a profit. To me, this seems to be an unusual way for the markets to treat a company that still generates nearly $6b a year in revenue.

[minux]

This was good news for Apple. But, no one has faith in Apple right now or the rest of the industry which is a testament to their stock price.

After Apple executives liquidated a **** load of shares, and their stock feel forty points, I do not think anyone with any type of no how would bother wasting one dollar on their stock.

I was one of the millions of other people who were greatly affected by Apple's shady business practices.

With that being said, Apple does not have to worry in any way shape or form about expanding their market share. As long as they continue to hold onto the Mac diehards, and casual users, Apple will be fine (which they have done since 1984).

Mike

[dongmin]

Originally posted by enormo
The company's earnings for the quarter plunged 65% to $14 million, or 4 cents a share, compared with $40 million, or 11 cents, in the year-earlier period.

Who cares if they beat expectations? This year the Cincinnati Bengals won one more game than people thought they would. That makes them 2-14. They still suck.

I'm not saying that Apple sucks but(repeat after me)... IT... IS... NOT... GOOD.

Hello? Do you not read the papers or something? The whole economy, and especially the computer industry, is in the major doldrums right now. A lot of companies are hemmoraging red ink (think cows). Be glad that Apple has been able to keep its head above water AND not made any cuts to its R&D.

Apple has been able to stockpile a lot of engineering talent the past year or two, thanks to so many companies (like Be) going under in this climate. Assuming that this 970 thing pans out, and IBM is really able to keep the 9xx development on track, Apple is in really good shape. If they're able to turn a profit with basically nonexistent desktop sales, it says something about how diverse Apple is as a company and how solid their other offerings are. A lot of reasons to be optimistic...

[Chad4Mac]

Originally posted by IJ Reilly
No so. Using the example of Sun once again: Sun holds $2.5b in cash and short term assets against a market cap of $10b (25%). Apple has $4.5b in cash and short term assets against a market cap of $4.8b (94%). The market is saying that not only is Apple's entire business virtually worthless, but so is their inventory, plant and equipment, and everything else the company owns, including real estate and intellectual property.

IOW, if somebody bought the company, they could liquidate it lock, stock and barrel, and make a profit. To me, this seems to be an unusual way for the markets to treat a company that still generates nearly $6b a year in revenue.

Good point. However, I restate my orig comment. Depressed PowerMac sales, talk of UMG proposal, flat quaterly estimates, uncertainty about Apple's ability to retain its market share, and a bad economy put Apple's stock at 13.12. Cash or no cash.

Chad

[ktlx]

Originally posted by Chad4Mac
Your right, Apple had acknowledged the drop in PowerMacs and increase in laptops.

Even more than that, their only increase was in PowerBooks. The iBook line is tanking according to Apple. I am sure the analysts looked at the summary data and saw everything declining in double digits except PowerBooks and software. Software that only runs on the same hardware that is seeing double digit declines in sales.

Combine all of the rumors floating around with that data and I can see why some are skittish. Plus I am sure the financial statement showing they are loosing money on their business does not help. The interest on cash and investments are what is keeping them in the black.

Apple would actually perform better financially if they stopped everything and just managed their portfolio.

[yzedf]

Dell was #1 in the world last quarter:

approx 5,990,000 PC's sold for 17.3% global market share

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1048313867662

That makes Apple at 2.06% of the global market :(

Overall, PC shipments were slightly ahead of modest predictions. According to Gartner, 34.5 million PCs left factories in the first quarter, an increase of 5.5 percent. Shipments in the U.S. increased 7.7 percent, the firm said.
http://news.com.com/2100-1036-997191.html

[IJ Reilly]

Originally posted by Chad4Mac
Good point. However, I restate my orig comment. Depressed PowerMac sales, talk of UMG proposal, flat quaterly estimates, uncertainty about Apple's ability to retain its market share, and a bad economy put Apple's stock at 13.12. Cash or no cash.

Then maybe I need to restate my original point too: Sun is offering flat quarterly estimates, questions abound about its ability to maintain market share, and is suffering from a bad economy (not to mention the hangover effects of the dot-com bust), but the markets are still not valuing the company's business and non-cash assets at zero dollars.

[MOFS]

Originally posted by NavyIntel007
47% of the revenue is coming from international sales. I wonder if this is the sign of things to come as far as the economy. Remember the Asian markets were way way down 6 months before the Dot-com bubble burst.

You have to remember that international sles don't just mean Asia – I'm a Mac user from England and I know loads of people who use them, and not just at work. In fact, if the papers are right and all this bashing of the French by the Americans is true, maybe if I tell you that Apple's are widely used there then the UN will be able to reunite! See, there is a reason why we buy these little bundles of transluscent plastic/brushed metal!

Anyway, the "Eurozone" economy is supposed to be growing (as is Britain's), albeit slowly, so I think we're almost out of the woods.

PS: what's happenned to the rainbow apple symbol? Is it just on OS 9 now?