Apple's Ho-Hum Quarter

How disappointing, Apple (Nasdaq: AAPL  ) .

Once again, you predictably blew past Wall Street's quarterly targets. Even against the backdrop of dramatic news -- shares took a 2% hit yesterday, after Steve Jobs stepped down for another medical leave of absence -- Apple reverted back to yawn-worthy form.

Apple wins. Analysts are dumb. Let's get back together and play this out again in three months.

Truth be told, Apple's quarter was pretty awesome. Revenue soared 71% to $26.7 billion. Earnings grew even faster, despite a slip in gross margins, with profits clocking in at $6.43 a share. Lowballing analysts figured Apple would earn only $5.38 a share on $24.4 billion in revenue. As always, they underestimated Apple's earnings power.

Time Frame Est. EPS Diff.
Q1 2010 $2.09 $3.67 76%
Q2 2010 $2.45 $3.33 36%
Q3 2010 $3.12 $3.51 13%
Q4 2010 $4.08 $4.64 14%

Source: Thomson Reuters.

Apple sold 23% more Macs than it did a year ago, but the real octane is coming from its iOS devices.

The class of Cupertino sold nearly four times as many iPhones as it did Mac laptops and desktops during the quarter. The 7.3 million iPads it sold during the past three months are huge, considering that the trendsetting tablet didn't even exist a year ago. Sure, iPod unit sales dipped, but that's irrelevant; iPhones and iPads do what iPods can -- and more. In the end, Apple sold nearly 43 million iOS devices, a 45% boost over the 29.7 million iPods and iPhones it cleared during the previous holiday quarter.

The only scintillating part of Apple's quarterly report came from a subtle jab at longtime iPhone and iPad partner AT&T (NYSE: T  ) .

"We are firing on all cylinders and we've got some exciting things in the pipeline for this year including iPhone 4 on Verizon which customers can't wait to get their hands on," Jobs said, taking a parting shot on a few different levels.

Verizon Wireless -- the joint venture between Verizon (NYSE: VZ  ) and Vodafone (NYSE: VOD  ) -- hits the market with its version of Apple's iPhone 4 next month.

If there's any drama in last night's numbers, it will have to wait. Research In Motion (Nasdaq: RIMM  ) shipped only 14.2 million BlackBerry devices during its fiscal third quarter, which ended in November. Apple sold 14.1 million iPhones during its September quarter. The quarters never line up exactly, but we should have confirmation in two months of whether the iPhone has truly passed the iconic BlackBerry.

I won't insult you by spending too much time on Apple's guidance for the current quarter. A profit of $4.90 a share on $22 billion in revenue is a trap for suckers, idiots, and analysts. Three months ago, Apple told us that it was looking to earn just $4.80 a share on $23 billion in sales during the holiday quarter. Good luck if you believed any of that.

In this dance, Apple leads, and Wall Street can't keep a beat. Apple's moves may be boring and predictable, but they're nonetheless impressive.

When do you think Apple will become the country's most valuable company? Will it even get there? Share your thoughts in the comment box below.

Vodafone Group is a Motley Fool Inside Value recommendation. Apple is a Motley Fool Stock Advisor choice. The Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz always bets the over when it comes to Apple. He does not own shares in any of the stocks in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy, and it knows better than to talk down to Apple.


Read/Post Comments (17) | Recommend This Article (20)

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 January 19, 2011, at 11:03 AM, rfaramir wrote:

    <i> When do you think Apple will become the country's most valuable company?</i>

    I was astounded when Apple passed Microsoft, long-time rival (often felt like literal enemy). I'll be flabbergasted when it passes Exxon Mobil. It's had to guess when, though.

    Oil's rise is largely due to debasement of our currency by the Federal Reserve, but that affects the stock market as well. So both will continue to rise artificially, perhaps XOM a little more, as it sells a commodity. Take that out of the equation and what's left? AAPL innovates, XOM not so much. AAPL sells to the better-off half of the citizens who can afford their excellent wares, XOM sells to everyone who drives, many of whom have lost jobs. In this economy, Apple has the stronger customers, so I look for them to continue their rise. (I wouldn't call it meteoric, as a meteor that size would be a life-challenging event!)

    If the economy improves, XOM will stand to gain more than AAPL, but I think that is a less likely outcome. I think improvement will come, but only after we tackle government over-spending, which will bring a painful period of austerity, during which AAPL will do better than XOM, probably passing it.

    InfoThatHelp,

    If we don't tackle government spending, the attendant money supply inflation will make XOM the first Trillion dollar company by about 2013. Otherwise, if we do rein it in, then you may be right. I hope you are.

  • Report this Comment On January 19, 2011, at 11:48 AM, ConstableOdo wrote:

    Stop with this first trillion dollar company nonsense. ExxonMobil is leaving Apple in the dust because Steve Jobs needs some rest. A company cannot rely on a sick CEO to give it share value. Any normal stock that had a blowout quarter like Apple did would have had a $30 jump on earnings. All Apple did was drop like a stone when Steve Jobs coughed and investor panic set in. No damn way would ExxonMobil do something like that unless some mega-hurricane takes out a dozen off-shore oil platforms or two full EM oil tankers collide.

    Apple earnings was the main talk of the business and financial media and it still didn't make one bit of difference to investors. The stock appears like it had mediocre earnings to say the least. Share price is less than it was before blowout earnings. Meanwhile ExxonMobil motors along like people are drinking oil and gasoline instead of water. That's how a trillion dollar market cap stock supposed to perform. Please, just settle for Apple being the top tech company and call it a day.

  • Report this Comment On January 19, 2011, at 1:21 PM, infektu wrote:

    @ConstableOdo and rfaramir

    don't bother with the relentless InfoThatHelp -- his copy-scramble-paste arsenal is infatigable ...

  • Report this Comment On January 19, 2011, at 1:37 PM, mikecart1 wrote:

    Many of the people shouting TDC today will look like idiots in 5 years when AAPL is not much more than $300/share or less. On top of that, when people buy these iPads or iPhones they aren't buying it again the week later. People use oil quicker and faster than any other commodity. They use it, buy more, use that, and buy more regardless of price. Oil will be bought at nearly any price. You can't say the same about the iPhone or iPad. AAPL is going to start to fall and then all these shareholders are going to be crying.

  • Report this Comment On January 19, 2011, at 2:03 PM, plange01 wrote:

    jobs will never return to apple...

  • Report this Comment On January 19, 2011, at 2:28 PM, investchief wrote:

    The future is cloudy for Apple at the moment. Will Steve Jobs return? Will the Verizon iPhone live up to the hype? Will Apple still have control of the tablet market after this year?

    These are all serious questions that will really make or break Apple in the next year or beyond. Apple hasnt been this risky in awhile.

    However, on the optimist side, Apple has a huge loyal following that will be beside Apple till the end. As long as Apple keeps up the innovation, they will survive.

    check out my blog: http://investchiefblog.com/

  • Report this Comment On January 19, 2011, at 2:31 PM, hiddenflem wrote:

    Have been hearing the garbage about apple shareholders crying since apple was $10 a share (when we really were crying). No longer. The company just proved that it's bigger than Steve Jobs. It's a culture of innovation, and culture by definition is bigger than one person.

  • Report this Comment On January 19, 2011, at 3:53 PM, PEStudent wrote:

    @hiddenflem - Yes, "It's a culture of innovation, and culture by definition is bigger than one person," but that's what everyone was saying about Intel in 90's when I lost money buying a pricey stock. Considering Apple's success right now, do you expect they'll continue to increase computer sales 23% every year, that high-level mobile apps won't become commodies like computers have, and that future avenues of technology will open up so their future innovations will sell as well as the current ones? The probability is slim and if they don't do all that, the stock isn't cheap. Furthermore, a decade ago when GE and Microsoft were #1 and #2 in market cap and both worth over $400B, wise heads wrote articles spelling out that it's extraordinarily difficult to stay at the top. Microsoft is now #3 and worth $243B and GE is #5 and worth $194B.

  • Report this Comment On January 19, 2011, at 4:23 PM, Mstinterestinman wrote:

    Warren Buffet Once said don't rely on a company that relies on innovation to invest. If they lose Jobs this could be very ugly no thanks plenty of other good place to put my money in small caps.

  • Report this Comment On January 19, 2011, at 9:06 PM, TheDumbMoney wrote:

    I have a mild objection to the original article. I agree with the blogger Pragmatic Capitalist (another site entirely) who said that there is nothing dumb about Wall Street analysts in their relationship with Apple. Rather, they deliberately lowball the estimates because all the firms are selling Apple to their clients, and they have a vested interest in it going up. It's Blodget 2.0. It never ended. And to the extent that's not going on, no single analyist wants to deviate from the crowd. I agree with the ultimate premise that anyone who thinks Apple won't blow past next quarter's estimates is smoking something.

    I don't own Apple. I love it, but I do think Apple is too tied with Jobs, I'm sorry. I remember what happened when he left in the mid-eighties -- stagnation. Apple as we know it is a direct result of Jobs' late-nineties return, and begins with the colored iMacs, which he pushed, on through iPod and today. Apple was dead in the water for the decade that Jobs was gone (after being booted by the board), and recent years' absences, when he was still very much a factor, and was never gone years at a time, are irrelevant. Apple will do great for another year to three years, based on past innovations. But if Jobs never returns, I fear the future after that is quite murky. That is particularly worrisome to me as a potential shareholder since Apple only looks cheap if current earnings growth, which has been spectacular, continues. We have seen this story in late nineties with companies like Cisco. Maybe Apple will be different. Maybe it's "culture" exampts it from the weight of history. Or maybe the shares will be trading at around $350/share a decade from now. I don't know. But it has always seemed just too murky for me to get involved.

  • Report this Comment On January 19, 2011, at 9:11 PM, TheDumbMoney wrote:

    I should add that Apple has never reached the stratosphere of valuation that late nineties tech stocks reached. This is likely in part because markets have always priced in a bit of a "Jobs discount." If in fact Apple turns out not to need Jobs, it may thus outperform even more than some expect.

  • Report this Comment On January 19, 2011, at 9:17 PM, isaquejr wrote:

    Apple is a bubble.

  • Report this Comment On January 19, 2011, at 9:49 PM, arefool2b wrote:

    I've been following the Apple blogs for several years now. The core and starting point of their success is the exceedingly well-designed User Interface, as opposed to focusing first on coding. They have always been the innovators in this sector, far exceeding the competition. Had the courts ruled Microsoft had stolen Windows from Apple, AAPL would already be a trillion dollar company. Instead, they have crawled their way back (and not without a little understandable paranoia) to the top of the heap in almost any venture they set their sights on. What is crucial to watch in its future development is the battle between GOOG and AAPL for TV. We will all need oil, until it runs out or other energy sources are refined, but our appetite for entertainment will never be satiated. GOOG has hired a pantheon of off-the-chart IQs, but AAPL's bench is deep, loyal and street-smart. If they can do for TV what they did for music (no small task given Hollywood, et al., is a much more complicated beast), they will be a trillion dollar company. (Note to AAPL: buy Netflix to propel Apple TV way beyond GOOG's grasp).

  • Report this Comment On January 19, 2011, at 11:18 PM, Superdrol wrote:

    One reason why I do not own Apple and probably will not going forward is due to Steve Jobs health issue. While I understand that his health is a private issue it is important to shareholders because of the value he provides to the company. Same can be said for Warren Buffett.

    On that note Apple has decieved people more than once regarding his health in the past. I'm sure his leave of absence was not decided the day before so some foresight would have been appropriate instead of announcing on a holiday when the markets are closed the day before earnings.

    Unfortunately for me if I do not feel comfortable with the business from the inside out I pass on the stock. You get what you pay for. Same can be said for Johnson and Johnson. A tarnished name at this point.

  • Report this Comment On January 20, 2011, at 9:35 AM, mikecart1 wrote:

    Apple is a bubble and will blow apart and turn to apple sauce.

  • Report this Comment On January 22, 2011, at 8:54 AM, socty wrote:

    Looks like a lot of jealous johnny-come-latelys are trying to bash aapl in order to justify their late arrival or missing the boat entirely. To the brave go the spoils. I once avoided aapl due to the Jobs condition, but fortunately I got in early enough to double my money, as well as make thousands on call options. This company has become a life of it's own, and I'm pretty sure Jobs has hired some very capable people to steer the ship. Once a snowball starts rolling down Everest, it doesn't matter much who pushed it. I'm picking up more aapl on these dips! My wife and kids will thank me, if not next week, then certainly in just a few years.

  • Report this Comment On January 22, 2011, at 2:28 PM, deasystems wrote:

    Jobs' sensibilities and ways of thinking are thoroughly ingrained in Apple's powerful executive group. Apple's success will continue whether or not Jobs is present.

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