Apple Earnings Report Preview: Forget the iPhone 5, Will iPads Miss?

Tomorrow after the close, heavyweight Apple (Nasdaq: AAPL  ) steps up to the earnings plate for its fiscal fourth quarter report. Due to its size, the company's results have a disproportionate effect on both the market and the tech sector. Other tech giants like Intel (Nasdaq: INTC  ) and Microsoft (Nasdaq: MSFT  ) have put up uninspiring figures lately, largely due to the slow PC market.

Analysts are looking for revenue of $36.2 billion and earnings per share of $8.85. Can Apple save tech this earnings season?

Forget the iPhone 5
The iPhone 5 was launched on Sept. 21, meaning the new device was only on sale for nine full days before the fiscal quarter closed. In that time, Apple sold 5 million units on launch weekend, but was promptly plagued by supply constraints that left many consumers wanting more. That figure disappointed investors, as they clearly wanted more, too.

Unit estimates for the iPhone 5 reach as high as 10 million for the quarter, which is something of a stretch but potentially doable when you look at clues from Verizon's (NYSE: VZ  ) iPhone activation figures. Big Red activated 3.1 million iPhones last quarter, including 651,000 iPhone 5 units. AT&T (NYSE: T  ) just said it activated 4.7 million iPhones last quarter, with iPhone 5 constraints leading to most of those units going to existing customers.

While the iPhone 5 was the most important product launched during the quarter, it's effect on overall results will be muted by the fact that it was only on sale for such a limited amount of time as well as the aforementioned shortages. That's why I'm less focused on iPhone 5 unit sales this quarter.

Overall iPhone unit sales of all models will be much more important, and analysts are looking for this figure to come in around 27 million.

An iPad "miss"?
Just like last quarter, I remain more concerned with iPad unit shipments as Apple ramps up from its most recent launch. The fiscal third quarter posted a strong 5.2 million sequential increase to 17 million units in the wake of the third-generation model's release. Google (Nasdaq: GOOG  ) launched its Nexus 7 in July, so investors will be interested to see if that tablet has made any meaningful dent in iPad sales.

Apple just said that it had sold the 100 millionth iPad a couple weeks ago. While that's an incredible milestone for a device that's just 2.5 years young, it also implies that iPad unit sales will be just 16 million -- below the 18 million that the Street is expecting. The Nexus 7 could potentially have stolen some iPad sales and we may have an iPad "miss" on our hands here, folks.

Back to the Mac
Macs probably won't be particularly impressive. The PC market is in the dumps, and Apple's not immune to that sluggishness, either. Gartner estimates that Apple's domestic PC shipments fell 6% in the third quarter. That's just part of the picture, but I wouldn't be surprised if Macs post a year-over-year decline. Last quarter, unit sales grew by a measly 1.8%.

The good news, however, is that the Mac is only 15% of trailing-12-month sales, so weakness there won't drag down overall results. CEO Tim Cook likes to brag about how many consecutive quarters the Mac has outpaced the broader PC market, with the running tally currently up to 25. With the global PC market shrinking 8.3% last quarter, any decline less than that -- which shouldn't be hard for Apple to do -- would continue the streak.

On top of that, much of the Mac lineup was in need of an update (which occurred yesterday), so sales may have been soft leading up to expected upgrades.

Until next time
This is typically a seasonally slow quarter for Apple and other consumer electronics players. Next quarter, however, will be the real test as consumers gear up for the holidays. For what it's worth, next quarter I'll change my tune. Three months from now when Apple reports fiscal first quarter results in January, I'll say, "Forget the iPad, let's talk iPhone." That release will be all about the iPhone 5.

The introduction of the iPhone 5 is an event Apple investors have been looking forward to for months. The stakes are high and the opportunity is huge, so to help investors understand this epic Apple event, we've just released an exclusive update dedicated to the iPhone 5 launch. By picking up a copy of our premium research report on Apple, you'll learn everything you need to know about the launch, and receive ongoing guidance as key news hits. Claim your copy today by clicking here now.

Evan Niu, CFA, owns shares of Apple, AT&T, and Verizon Communications. The Motley Fool owns shares of Apple, Google, Intel, and Microsoft. Motley Fool newsletter services recommend Apple, Google, Intel, Microsoft, and AT&T. 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. The Motley Fool has a disclosure policy.

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