Apple Earnings: A Huge Winner for Verizon

What's that? A company capitalized at more than $220 billion can't double its earnings? Tell that to Steve Jobs, CEO of Apple (Nasdaq: AAPL  ) . The Mac maker's net income rose 90% to $3.33 per diluted share in its fiscal second quarter. Revenue was up 48% over the same period.

Eat that, skeptics.

The monster known as iPhone -- looking increasingly like the Kraken of the smartphone industry -- drove a big portion of the gains. Apple sold another 8.7 million handsets during Q2, about in line with last quarter's total but up 131% year-over-year. Handset revenue ballooned 124% to $5.4 billion. iPhone growth was everywhere.

"If you look at Asia Pacific as an example, the iPhone units in Asia Pacific grew 474% year-over-year. Japan grew 183%. Europe grew 133%, and so these are some fabulous numbers. We are seeing just incredible demand for iPhones," Chief Operating Officer Tim Cook said in a conference call with analysts, adding eight carriers in key countries helped contribute to growth. Vodafone (NYSE: VOD  ) , China Unicom (NYSE: CHU  ) , and KT Corp. (NYSE: KTC  ) all make that list.

What's interesting about these relationships is that they're all open; Apple won't marry any of them in their home countries the way it has married AT&T (NYSE: T  ) here.

Cook cautioned analysts about reading too much into that.

"Over the past year we have moved a number of markets from exclusive to non-exclusive," Cook said. "In each case as we have done that we have seen our unit growth accelerate and our market share improve. But that doesn't mean we [think] that formula works in every single case."

Really? Please.

Look, I recognize that Cook has to be cautious. Apple is notorious about lowballing guidance and was again last night, estimating just $2.28 to $2.39 in Q3 per-share net income when Wall Street is looking for $2.70. Few investors are selling on that gap because of history: analysts underestimated the iEmpire's earnings by at least 35% last quarter. Earnings estimates are often meaningless when it comes to Apple.

Strategy is a different story. We've seen Apple's strategy work time and again. Why not now, Mr. Cook? This isn't incremental growth we're talking about. These aren't triple-digit hiccups.

What's more, we know there's demand for Verizon (NYSE: VZ  ) to resell an iPhone. We've seen the polls. Baltimore Sun tech reporter Gus Sentementes asked his readers to weigh in on whether they'd buy a Verizon iPhone. More than 80% responded "definitely."

Let Cook continue to act coy. The iPhone's track record overseas points irrefutably toward Apple divorcing AT&T so it can date Verizon, fool around with T-Mobile, and get introduced to Sprint Nextel (NYSE: S  ) , before it makes up with Ma Bell here at home.

Would you buy a Verizon iPhone? Discuss in the comments box below.

Apple is a Motley Fool Stock Advisor selection. Sprint Nextel is a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He had stock and options positions in Apple at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy says you can live in a van down by the river when you're ... living in a van down by the river.


Read/Post Comments (14) | Recommend This Article (31)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 21, 2010, at 10:34 AM, daveshouston wrote:

    I think AT&T probably bought another year of exclusivity by agreeing to Apple's demands for low cost 3G on the iPad. You'll be able to get limited 3G connectivity for just $15 per month and unlimited for $30 per month. The iPad will be sold without a contract. AT&T has agreed the iPad data plan can be upgraded, downgraded, or terminated at any time without penalty.

    That $30 per month is just half what most other carriers charge for a 5 Gigabyte data plan for your laptops or netbook.

    This 3G pricing gives Apple a huge advantage for customers who are on the move. By getting AT&T to offer such attractive terms, Apple has the leverage to ask for similar terms from international carriers.

  • Report this Comment On April 21, 2010, at 10:37 AM, conradsands wrote:

    From the New York Post …

    Verizon charged phone-y fees; suit

    By Chuck Bennett

    Read that bill carefully.

    Verizon Wireless cheated millions of customers with bogus data charges, lawyers allege in a growing class-action lawsuit.

    The cellphone-service provider has been tacking on $1.99 Internet usage fees even when customers' phones were turned off or when they accidentally launched the browser and didn't download a kilobyte of data, according to the suit in Newark federal court.

    Verizon Wireless even rigged phones to make it easy to accidentally launch the browser, said lawyer Peter Cambs, of the firm Parker Waichman Alonso.

    Verizon Wireless declined to comment.

  • Report this Comment On April 21, 2010, at 10:37 AM, conradsands wrote:

    AT&T and Verizon have attempted to confuse the marketplace by lowering their pricing to $69.99, but theirs are for calling only. In today’s economic environment customers are interested in more than just voice pricing. They also want the best value for all the other things they rely on their wireless phone for and Sprint delivers. Sprint's Everything Data plans start at $69.99 per month and include Any Mobile, Anytime for unlimited calling with any U.S. wireless user, plus unlimited text, picture and video messaging, e-mail, Web browsing, social networking and more.

  • Report this Comment On April 21, 2010, at 10:39 AM, conradsands wrote:

    Apple needs to go with 4G. Sprint has 4G now and is the leader in the space. Here's more from news sources:

    4G wireless--which operates at speeds up to 10 times greater than today's 3G networks--could become a reality for many businesses and consumers over the coming year. Sprint, the current 4G leader, says it will introduce its first 4G smartphone before mid-year.

    Sprint’s fourth-generation phone -- the HTC EVO 4G -- will be available this summer and run Google's Android software.

    The phone also will be able to act as a mobile hotspot, allowing customers to connect up to eight Wi-Fi enabled devices. As a result, people could use the phone for their Internet connection for a laptop or desktop computer.

    Where 4G isn't available, the phone will use Sprint's 3G network. It will be available through all the usual Sprint channels and RadioShack, Best Buy and Wal-Mart.

  • Report this Comment On April 21, 2010, at 11:16 AM, PhulishMortal wrote:

    Conrad, is shilling for Sprint your job or just your hobby? You keep posting the same stuff in every column about Verizon and ATT.

  • Report this Comment On April 21, 2010, at 11:46 AM, viyer00 wrote:

    I am currently using an iPhone 3G that is unlocked with T-Mobile prepaid minutes coupled with Clear Wimax that gives me internet anywhere in my city for about $10/mo. I have unlimited calls for $3/mo using skype, but I can still receive calls anywhere using the prepaid SIM card. I know that until AAPL makes it easier for the average consumer to switch carriers, most will use AT&T, but it is certainly quite possible to use the iPhone (3G and later) with T-mobile. It saved me about 95% a year on my phone bill to go to T-mobile and never again do I have to deal with the disgusting multi year contracts of Verizon and AT&T.

  • Report this Comment On April 21, 2010, at 12:46 PM, valari25 wrote:

    I don't understand how it is a huge win for VZ when almost all those phones came with a 2 year contract at T. I get that T is subsidizing the cost of those phones, but they more then make that back over the life of the contract.

  • Report this Comment On April 21, 2010, at 1:31 PM, TMFTypeoh wrote:

    yes, i'd buy a verizon iphone.

    i'd switch from the blackberry storm in a heartbeat.

    come on AAPL, if your not going to pay a dividend, at least let me have an iphone!!!!!

  • Report this Comment On April 21, 2010, at 2:28 PM, Br0oklyn wrote:

    Just Bought Some VZ. S is Next

  • Report this Comment On April 21, 2010, at 3:11 PM, baldheadeddork wrote:

    Is Apple comparing against weak 2009 numbers like a lot of other companies?

  • Report this Comment On April 21, 2010, at 4:12 PM, JostaJTF wrote:

    The iphone would be much better on Sprint than Verizon. Sprints 3G network is much larger, faster, and dependable than Verizons. Sprint has 4G in 30 markets already and will have it in 120 by end of 2010, including NYC, LA, SF, Chicago, Dallas, Denver, Atlanta, Phoenix, Bostom, DC, Seattle....it make much more sense to make 1 4G iphone for Sprint, since Sprint has 4G now. When Verizon has 4G in 2012, they can then use the same iphone

  • Report this Comment On April 21, 2010, at 7:16 PM, rfaramir wrote:

    I would advise Apple to go open with 4G while keeping the 3GS in production and exclusive to AT&T.

    I'd love to have an iPhone, but I'm on Sprint. I'm not about to pay AT&T's high rates, and I'd rather not switch at all, to V or T-Mobile (though vyler00's story makes it tempting).

    A lower price on a 3G-only phone might even help AT&T get more customers, even as all those who have to have the latest go with 4G on other networks. Win-Win.

  • Report this Comment On April 23, 2010, at 5:58 PM, goldilocks52 wrote:

    I have hated AT&T ever since it was deregulated. They are sleezy and don't care about their customers.They hounded me for years over a $40 computer out of area charge that I disputed and wouldn't pay out of principal. I never could get a live person to talk to me on their phone tree, and when I responded in writing to their debt collection notices, I was ignored. I have gradually been able to close all my credit card accounts, computer and home phone services with them. The only contact I still have with them is through my Iphone. I can't wait until I can change my Iphone service to Verizon. I never had any problems with Verizon, their bills were clear and easy to understand. I only left them because we wanted the Iphones.

  • Report this Comment On April 24, 2010, at 11:54 PM, fastsam23 wrote:

    I live in an area where the only reliable cell service is Verizon. P L E A S E , Apple, take Verizon to be your lawfully wedded wife. I would buy Iphone in a heart beat.

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