The iPhone has become Apple's core

The iPhone now represents 40% of sales, and Apple's big earnings report on Tuesday shows how important the device has become.

By Charley Blaine Apr 20, 2010 7:30PM

Apple Computers logo © Jeff Chiu/APIn roughly three years, Apple (AAPL) has totally transformed its business from a company that made computers and iPod music players into a company that makes smart phones first and computers and iPods second.

And the iPad will live somewhere in between.

Tuesday's blowout earnings made the point abundantly clear.

About 40% of Apple's sales in its fiscal second quarter -- about $5.45 billion -- was iPhones, up from 35% in the fiscal first quarter. And the iPhone hit the market only in the summer of 2007.

All of those big, gaudy details cheered investors, who bid the stock up 5.7% to $258.72 after hours on Tuesday. The stock had been up as much as 8% to around $264. If the shares close Wednesday at $258, that will be a new high.

The gains should solidify Apple's position as the world's third-most-valuable company (measured by market capitalization) after Exxon Mobil (XOM) and Microsoft (MSFT), the publisher of MSN Money. Apple's market cap at Tuesday's close was $221.8 billion, with Exxon at $325.6 billion and Microsoft at $275 billion.

The iPhone's growth just over the last year was enormous: 131% in terms of units from the 2009 fiscal second quarter to this year. Apple

 

Moreover, iPhone unit sales were unchanged from the first quarter, which included the holiday sales season. Revenue was off only 2%.

The iPhone's performance was the overwhelming driver of Apple's fiscal second quarter. The company reported a 49% increase in revenue to $13.5 billion and a 90% increase in net income to $3.07 billion. Earnings per share jumped 86% to $3.33.

The beat on the Street estimates was almost embarrassing.  Analysts had expected earnings of $2.46 and revenue of $12.1 billion.

And Apple has been growing revenue at roughly a 33% rate annually over the last five years.

The one sop to the worst recession since at least the 1980s: The $42.9 billion in revenue it generated in fiscal 2009 was up only 14%. Google

Apple says it expects revenue  of $13 billion to $13.4 billion in the fiscal third quarter, a touch better than the Street estimate. It sees earnings at $2.28 to $2.39 per share.

But remember: Apple is notorious for low-balling its guidance. Before the report came out, the consensus Wall Street estimate was for $2.67 a share in earnings and $13 billion in revenue.

So, barring problems, it looks like $14 billion may be achievable. There are a couple of problems that may emerge soon: 

  • Does the nation's wireless network have enough bandwidth to handle the flood of iPhones, iPads, Research In Motion's (RIMM) BlackBerrys and other devices?
  • Can Apple get all the parts it needs to meet the big demand (so far) for iPads?

There's more to come, and this is where things could get tricky.

A big problem ahead is now Google (GOOG). Or it may be that Google will argue that Apple's the problem.

These two companies are headed toward a huge battle over the search business. Google wants to get its revenue from the Internet.

 

As Gary Kaminsky said on CNBC on Tuesday, Apple is increasingly going to want to bring all search into its closed universe built around the iPhone and iPad.

Earlier this month, Apple announced its own iAd network for the iPhone.

The move challenges its Silicon Valley rival’s core business model and its plans to expand into mobile devices.

 

The world's most valuable companies
Company Ticker Market cap* 52-wk stock chg.
Exxon Mobil  XOM $325.63 0.8%
Microsoft  MSFT $275.04 55.2%
Apple AAPL $221.79 103.7%
BHP Billiton BHP $220.83 63.6%
PetroChina  PTR $219.17 31.8%
Wal-Mart Stores WMT $204.94 6.6%
China Mobile CHL $203.38 3.8%
General Electric GE $202.78 54.6%
Berkshire Hathaway BRK.A $197.27 29.5%
Petroleo Brasileiro  PBR $193.07 22.0%
(PetroBras)
* In billions of dollars, as of Tuesday

1Comment
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

RECENT QUOTES

WATCHLIST

Symbol
Last
Change
Shares
Quotes delayed at least 15 min
Sponsored by:

MARKET UPDATE

NAMELASTCHANGE% CHANGE
There’s a problem getting this information right now. Please try again later.
NAMELASTCHANGE% CHANGE
There’s a problem getting this information right now. Please try again later.
Market index data delayed by 15 minutes
[BRIEFING.COM] The S&P 500 trades higher by 0.4%.

The Philadelphia Fed Survey for September fell to 22.5 from 28.0. Economists polled by Briefing.com had expected that the Survey would slip to 23.5. Nasdaq +21.91 at 4584.1... NYSE Adv/Dec 1778/1016... Nasdaq Adv/Dec 1621/706.

Currencies

NAMELASTCHANGE% CHANGE
There’s a problem getting this information right now. Please try again later.
Sponsored by:

VIDEO ON MSN MONEY