Apple's Q1 2009 Earnings Predictions

[MacRumors]

http://www.macrumors.com/images/macrumorsthreadlogo.gif (http://www.macrumors.com/2009/01/20/apples-q1-2009-earnings-predictions/)

Apple will release their earnings (http://www.macrumors.com/2009/01/19/apple-to-release-q1-2009-financial-results-on-january-21st/) for the first quarter of the 2009 fiscal year Wednesday afternoon. A number of reports circulating over the past couple of days lend some insight into what we might be able to expect.

AppleInsider discusses (http://www.appleinsider.com/articles/09/01/20/apples_mac_ipod_sales_see_slight_rebound_in_december.html) a report from Piper Jaffray analyst Gene Munster, who predicts based on data from research firm NPD that Apple sold between 2.45 million and 2.55 million Macs in the quarter for a gain of 6-10% over the year-ago quarter. Munster specifically points to an approximately 4% gain in year-over-year Mac sales for the month of December, rebounding from flat or slightly negative growth during November, as a positive sign. Munster also predicts iPod sales in the range of 19 million to 20 million units, above Wall Street's expectations of approximately 18.6 million units.

Fortune (http://apple20.blogs.fortune.cnn.com/2009/01/20/apple-sales-data-half-empty-half-full/), on the other hand, contrasts Munster's view with that of Bernstein Research analyst Toni Sacconaghi, who views much of the NPD data negatively. The major difference between Munster and Sacconaghi's predictions, however, appears in their iPhone numbers, for which NPD does not provide data. Munster predicts quarterly iPhone sales of 6.4 million, while Sacconaghi predicts sales in the range of 3.5 million to 4 million.

The wild card that may be missed by many investors, as thoroughly described (http://bullcross.blogspot.com/2009/01/how-iphone-and-poor-apple-management.html) by Andy Zaky at Bullish Cross, is Apple's use of subscription-based accounting for iPhone revenue. The practice, which results in Apple recognizing revenue from a particular iPhone sale over the two-year term of the service contract, resulted in significantly lower revenue numbers for last quarter than would have otherwise been seen.

As Zaky points out (and Fortune summarizes (http://apple20.blogs.fortune.cnn.com/2009/01/20/spotlight-on-apples-hidden-revenue-stream/)), this discrepancy has resulted in Apple releasing two sets of earnings number, one "official" one calculated according to Generally Accepted Accounting Principles (GAAP) using subscription-based accounting of iPhone sales and one calculated using non-GAAP revenue recognizing each iPhone purchase entirely within the quarter in which the sale was made. Because most analysts base their reports on GAAP numbers, many are ignoring the impact of fractional revenue being carried over from sales made in earlier quarters. Consequently, while Q1 2009 most likely saw a decline in iPhone sales from the previous quarter, the impact of this decline on Apple's revenue numbers should be mitigated by this subscription-based accounting.

Article Link: Apple's Q1 2009 Earnings Predictions (http://www.macrumors.com/2009/01/20/apples-q1-2009-earnings-predictions/)

[wonderbread57]

I say Apple will do better if Jobs bows out. In the mean time, Sell Sell Sell.


That was the topic right?

[talkingfuture]

It should be interesting to see these results as an indicator for Apple's performance in the downturn and the wider markets. If a company as successful and popular as Apple takes a big hit then others may fare much worse.

[Full of Win]

I predict that they earned a lot, if not a hell of a lot. I still have some regression curves to do, and my bank of MacPros is crunching the numbers as I type, but early indicators are pointing to Apple earning a hell of a lot.

[preservative]

I say Apple will do better if Jobs bows out. In the mean time, Sell Sell Sell.


That was the topic right?

I'm sure Clarence Beeks will be on the case.

[Loge]

We'll just file the Zaky article under "failing to see the bigger picture".

The point behind the subscription model was that updates would be free so as to encourage as many iPhone users as possible to be on the latest firmware and experience the phone as it was intended.

[abrooks]

I say Apple will do better if Jobs bows out. In the mean time, Sell Sell Sell.


That was the topic right?

Are you crazy? Buy, buy, buy! The stock will no doubt go up in the future.

[abrooks]

We'll just file the Zaky article under "failing to see the bigger picture".

Zaky sees the big picture, his article is pointing out that investors or potential investors should I say, are failing to see the big picture.

[lookmark]

I suspect it'll be somewhere between 4-5M iPhones sold this quarter. Down from 7M (which was high due to built-up demand and a better financial situation). With good but not stellar Mac sales, showing slight growth, and strong iPod Touch sales - of which I hope they'll finally break out the #.

One of the most important things for Apple right now is growing its iPhone OS userbase - not just iPhone sale #s - but it'll probably take the Street another year or so to figure that out.

[Firefly2002]

woo steve's gonna die :)

[gnasher729]

We'll just file the Zaky article under "failing to see the bigger picture".

The point behind the subscription model was that updates would be free so as to encourage as many iPhone users as possible to be on the latest firmware and experience the phone as it was intended.

The effect of the subscription model is that only one eighth of Apple's record iPhone sales in the last quarter were actually recorded as sales/profit in that quarter. This has two consequences: The official (GAAP) numbers for the last quarter were more than $2bn lower than they could have been without subscription model, and this quarters official numbers for the iPhone would be the same as last quarters, even if Apple hadn't sold another phone. If iPhone sales stayed the same, the official revenue numbers will be twice the number of last quarter.

[alexbates]

I sure hope they will give us a hint of what to expect this year.

[Tallest Skil]

I sure hope they will give us a hint of what to expect this year.

Uh... it's Apple.

"Great new products." That's all we'll get.

[spyd4r]

well they could of made an extra 2 grand of me if they had of just released the damn new imac... .lol

[bobbleheadbob]

I'm hoping for some positive numbers today to will give the stock price a little bounce.... and counteract the Steve Jobs rumor effect, that's cost us about $10-$12 per share recently!

[numbersyx]

Any profit in today's economy is an achievement...

[kdarling]

The point behind the subscription model was that updates would be free so as to encourage as many iPhone users as possible to be on the latest firmware and experience the phone as it was intended.

Too bad they rip off iPod touch owners for updates. There's no reason the original iPhone apps couldn't be included or given for free.

You can't blame SOX for every instance of greed.

[ImageWrangler]

It doesn't matter if Apple sold a trillion dollars of goods, offered to bail out the entire US and world economy, discovered cures for cancer and AIDS, and will give away the secret to happiness for every man, woman, child, kitty and puppy... the dumbarses on Wall Street will still downgrade APPL stock and their stock will still tank. Reminds me of some of the best appleturns.com (RIP) material Jack Miller would come up with, like "Great news, Apple makes billions, stocks tank!" It wouldn't be so funny, if it wasn't so true.

[JMax1]

I don't know much about stocks and whatnot, but I've recently been toting with the idea of getting some from apple. Do most of you have a couple, or more? What's a decent amount of shares from apple (or do you call them apple slices?)

[spaceballl]

My stocks are all in the tank - hopefully Apple will have some nice upside surprise for us...

[charlituna]

I sure hope they will give us a hint of what to expect this year.

nope. this is not the venue for such announcements.

this is the legally required public reporting of sales per rules of public trading. unlike the very illegal and not required public reporting of the CEO's personal life that some folks have been demanding.

it is not the venue for product announcement details etc. some might slip in there but likely only in reference to products basically already announced (ie Snow Leopard). there wont' be any 'and we'll have all new imacs and a new mac pro plus x, y,z coming out next month. further details forthcoming' type things.

which is good cause the stock would tank $20 just on the fact that STeve isn't there making said announcements. it will probably tank anyway since he's not there, the iphone 3g sales didn't out count the first phone (maybe cause of all the folks that are waiting for the two year mark to replace their phone, hmmmm) etc.

[charlituna]

I don't know much about stocks and whatnot, but I've recently been toting with the idea of getting some from apple. Do most of you have a couple, or more? What's a decent amount of shares from apple (or do you call them apple slices?)


i have 10 shares myself. bought as a gift from the family (i have shares in several companies bought over the years)

[Kar98]

If results are better than expected, Apple shares will fall, because "analysts" will claim Apple couldn't possibly keep this up.
If results are lower than expected, Apple shares will fall, because "analysts" will claim Apple is on the way out.
If results match expectations, Apple shares will fall, because "analysts" will be "disappointed."

Did I forget anything?

[Rot'nApple]

My stocks are all in the tank - hopefully Apple will have some nice upside surprise for us...

I doubt that a good earnings report will have any long term positive effect on Apples stock price. The economy is, what the economy is. Think the government is going to get us out of it? Heck, the government is what got us in this! Affordable housing, Fanny Mae, Freddie Mac, Toxic Asset Relief Program, rules and regulations that are so cumbersome that it allows unscrupulous people in the financial market to play fast and loose with your money. Hello Bernie Madoff. Is your financial advisor at work today or are they "faking" their death and skipping out of the country? Think you'll see $199.00 per share Apple stock price as was seen in December of 2007? Nope! Not for a long, long, long time.

[jayducharme]

Did I forget anything?

These analysts don't seem to be paying much attention to the App Store, an amazingly productive cash generator for Apple. There's very little expense for Apple in running it, yet it brings in revenue day and night -- and is growing more and more popular.

[rdowns]

These analysts don't seem to be paying much attention to the App Store, an amazingly productive cash generator for Apple. There's very little expense for Apple in running it, yet it brings in revenue day and night -- and is growing more and more popular.


I think the App Store will be a cash cow for Apple. There are certainly costs involved in running the store- bandwidth, accounting for paying developers, etc.

We have no idea, nor will Apple tell us, revenue numbers for it. Sure, we get numbers on the number of apps and number of downloads but we have no idea how many of them are free. We hear stories of wildly successful developers but they are few and far between. Personally, I have purchased maybe 5 apps. I just don't find many worthwhile.

[Enuratique]

Are you crazy? Buy, buy, buy! The stock will no doubt go up in the future.

He wants people to sell so he can buy it at a lower price ;)

[Bonte]

These analysts don't seem to be paying much attention to the App Store, an amazingly productive cash generator for Apple. There's very little expense for Apple in running it, yet it brings in revenue day and night -- and is growing more and more popular.

Hm, ok. Apple had about 300 million app downloads last quarter with a probable average selling price of 99 cents per app. i don't think 100 million gross profit won't make big difference that quarter.
It does have the potential to grow tenfold the next 5 years but apparently the big investors need there money elsewhere and only look at the stock performance in short term.

[twoodcc]

looking forward to seeing the results today. let's hope that they are good

[IJ Reilly]

I think the App Store will be a cash cow for Apple. There are certainly costs involved in running the store- bandwidth, accounting for paying developers, etc.

We have no idea, nor will Apple tell us, revenue numbers for it. Sure, we get numbers on the number of apps and number of downloads but we have no idea how many of them are free. We hear stories of wildly successful developers but they are few and far between. Personally, I have purchased maybe 5 apps. I just don't find many worthwhile.

The App Store and the iTMS have essentially the same role for Apple: driving hardware sales. As freestanding businesses they don't bring in much profit.

I've been following Zaky for a while. He's forecasting revenue nearly $1 billion higher and EPS about $0.60 higher than the consensus. It will be interesting to see who comes closer.

EDIT: Even more from Zaky today. He believes some of the analysts are beyond wrong, verging on incompetent.

http://bullcross.blogspot.com/2009/01/halted-will-apple-be-halted-in-ah-when.html

[kdarling]

Hm, ok. Apple had about 300 million app downloads last quarter with a probable average selling price of 99 cents per app. i don't think 100 million gross profit won't make big difference that quarter.

More like 2/3 were downloads of free apps, because let's say 100 million paid downloads over 120 days, which fits more with the original Apple statement that they were selling about $1 million a day when the store first opened.

Someone could do more research into what various authors have announced for sales and try to put together a better picture.

[chatin]

If the SEC is investigating, outlook has probably fallen off a cliff.

[IJ Reilly]

If the SEC is investigating, outlook has probably fallen off a cliff.

The SEC investigates potential rules violations. They don't get involved in the company's financial outlook unless it is possibly being misrepresented somehow.

[Peace]

45 minutes kids.

http://www.apple.com/quicktime/qtv/earningsq109/

[rdowns]

$10.2 billion revenue just reported on CNBC.

Frack, they cut away to a Citigroup announcement on a new CEO (Richard Parsons).

EDIT: $1.78 earnings per share!!!!

2.524 million Macs sold

4.4 million iPhones sold

22.7 million ipods sold

34.7% gross margins