Apple continued to storm ahead in its second fiscal quarter, its strongest non-holiday period ever, with a huge surge in iPhone sales a key factor. However, the Mac maker remained cautious about the current third quarter, predicting revenues in the range of $13 billion to $13.4 billion, about the same as Q2’s $13.5 billion.
That revenue, up almost 50% on the year-ago figure of $9.08 billion, delivered net income up 88% year-on-year to $3.07 billion. This is despite the fact that – unlike some vendors showing huge leaps because their 2009 quarters were so awful – Apple was relatively unscathed by the global recession.
“Looking ahead to the third fiscal quarter of 2010, we expect … diluted earnings per share in the range of about $2.28 to $2.39,” said CFO Peter Oppenheimer.
Apple sold 8.75 million iPhones in the quarter, up 131% on the previous year and justifying its policy of ending exclusives and going for broad distribution (except in the US). It added eight new carriers in the period, including Vodafone UK and several in Asia, and now has 151 operators offering the iPhone in 88 countries.
Its iPod media player was less successful in unit terms, falling by 1% to 10.9 million, but in contrast to the phone, its average selling price rose, leading to a 12% increase in iPod revenue. This reflects rising sales of the high end model, the Wi-Fi enabled iPod Touch, and reinforces the view that consumers are increasingly willing to get their wireless connectivity via Wi-Fi, especially on content focused devices, rather than demanding a cellular connection. This thesis will be fully tested by the iPad, which comes in Wi-Fi only and Wi-Fi/cellular versions like Apple’s more mobile devices. Meanwhile, Mac computers were up 33% to 2.94 million units.
The broader distribution of the iPhone will inevitably squeeze margins and average selling prices, though the latter remains healthy at about $600, producing total iPhone revenue of $5.54 billion, over 40% of Apple’s total. It is also belatedly addressing its over dependence on the north American market, with non-US sales breaking well past the 50% barrier at last, and accounting for 58% of the total. Greater China was a bright spot after a slow start, with Chinese revenues for all products totaling $1.3 billion, up 200% year-on-year, though the iPhone’s contribution to this was not broken out. Apple plans to open 25 retail stores in China by the end of 2011.
One analyst on the earnings call expressed concern that iPad margins would be far lower than Apple’s norm. COO Tim Cook said the firm does not publicize margins on individual products but accepted that the new tablet had been priced “extremely aggressively. We did that because we think there’s a huge market for it and we want to capitalize on our first mover advantage.”