Apple becomes Wall Street superstar after posting record quarterly profits

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Hundreds of customers queue up to purchase a new smartphone iPhone 4S at an Apple Store early Friday, Jan. 13, 2012 in Shanghai, China. Photo - Eugene Hoshiko/AP

Apple posted one of the most profitable quarterly results in the history of US corporations, raking net profit worth $13.1 billion, up 118% from last year’s Q4, thanks to bumper sales of iPhones, iPads and MacBooks. The companys profits are three times what General Electric Co. earned in its most recent quarter.

“We are very happy to have generated over $17.5bn in cash flow from operations during the December quarter,” said Peter Oppenheimer, Apple’s Chief Financial Officer.

The basis of the huge success is the sale of 37 million iPhones and 15.4 million iPads. Apple’s executive said the numbers could have been even higher if the company had been able to manufacture enough iPhones to meet demand. “Demand for iPhones and iPads was off the charts for the quarter,” Wall Street Journal quotedApple CFO Peter Oppenheimer as saying. He added that Apple struggled to meet demand for its iPhones and that the device was on “significant” backlog at the end of the quarter.

“We’re right in the middle of a transition from feature phones to smart phones and Apple is doing an amazing job in generating profits from this,” Colin Gillis at BGC Partners told the BBC.

Carolina Milanesi at Gartner said: “As expected this was a blow out quarter for Apple across businesses.”

“This to me demonstrates that consumers and businesses alike are continuing to see the value of Apple’s end to end offering,” he added.

EXPECTATIONS

The socks were blown off the Wall Street suits, Jamie Olson, a tech analyst from Boston told Arabian Gazette. Wall Street did not know what hit it! Apple has brought the suites down a notch or two.

Apples performance seems to have shocked certain people even despite market’s high expectations.

“They just demolished it,” said analyst Peter Misek of Jefferies & Co. “Everyone thought they were too big andthat they couldn’t pull off a surprise like this, but boy did they ever.”

Back in October, Apple had missed analysts’ expectations for the first time in years and the blame was cast on the release of the new iPhone. Wall Street had expected revenues of $38.8bn with sales of about 30m iPhones, boosted by the launch of the new 4S model in October.

Apples strong guidance beat [the] Street, despite its usual conservatism, illustrating strong anticipated ongoing momentum, possibly including the expected launch of the iPad3, said Mike Abramsky, analyst with RBC Capital Markets.

The performance also raises the bar for both Apple and its peers, setting new highs that may be tough to duplicate or sustain.

Apple is growing strong and its impressive, but it makes me wonder if this growth would be sustained in the next couple of years, Jonathan Muse, an analyst at Jacobs and Sons Asset Management Consultancy in San Francisco told Arabian Gazette. We have to keep in mind the cheap rip offs that are floating in the market. Also, it should be noted that the sales of Apple products has nothing to do with Apple, but everything to do with Steve Jobs, the analyst insisted.

Cook said he did not see cheaper iPad competitors, such as Amazons Kindle Fire, becoming a threat. People really want to do multiple things with a tablet and therefore we dont really see these limited-function tablets being in the same category.

Last year . . . was the year of the iPad for the second year in a row, so we are going to continue to innovate like crazy in this area and we think we can continue to compete with anyone.

Die-hard users of Apple’s iconic iPhones, iPads and MacBooks quite agree with Steve Jobs successor’s statement.

Steve Jobs was an icon. A man, who rose above the rest and obtained the American dream. His loss, at first, was thought to be detrimental for Apple, but grief has a way of blossoming into something more beautiful, Joaanna Manson, an anthropologist from New York, told Arabian Gazette over the phone. Everyone loves Apple and they want to be part of the Steve Jobs dream. Therefore,gifting each other Apple products is not only their way of saying goodbye to a man but also an attempt to retain him forever in their lives. Not only to cherish but to motivate them in their day to day struggle.

CASH FLOW

According to Capital IQ,in terms of cash, Apple seems to be sitting in a very desirable position. The results brought Apple’s cash hoard to $97.6 billion, more than the market capitalisations of all but 52 publicly traded companies.

Strong demand coupled with lower component cost seems to have made cash flowing in over the quarter. Apple’s gross margin widened to 44.7% from 38.5% in the year-ago quarter, as Cook said the company’s component costs had fallen significantly.

Bill Kreher, an analyst with Edward Jones, said falling component costs benefited Apple more than other companies because its cash allows it to buy at a greater scale, as does the fact it uses similar parts across its product lines.

Some investors feel that Apple must tap some big new markets to keep up its record-breaking growth.

“We recognise that the cash is growing for all the right reasons,” Oppenheimer said while responding to analysts’ questions, adding that the company has continued to discuss the issue of what to do with the money internally. “In the meantime, we’re not letting it burn a hole in our pockets,” he said.

Rumor has it that Apple TV, a ‘hobby’ of Steve Jobs, could be given a new lease of life, though there is no official comment from the California-based tech giant.

Apple has entered the lives of millions of people worldwide, with its iPhones, iPads and iPods. James from Livingston Gable Tech Writers Inc. told Arabian Gazette.com. It is only a matter of time they will enter the oh-so-dreamed and dreaded living room. Apple TV was a hobby of the late Steve Jobs, anything and everything he touched turned to gold and Im sure this would not be an exception.

2012: YEAR AHEAD

Wall Street analysts believe 2012 would be even better, with many predicting that Apple will unveil a new iPad in March, a newly redesigned iPhone during the summer and potentially an Apple-branded television set later this year.

“We think that Apple is going to have the biggest product cycle in their history this year,” Misek said.

Apple signaled that it wasn’t concerned its streak would end anytime soon. The company, which has traditionally been conservative with its forecasts, provided an outlook for the current quarter ending in late March that surpassed Wall Street expectations. Apple said it expects Q2 earnings of about $8.50 a share generating a revenue of about $32.5 billion, above analysts’ estimates of profit a of $8.04 a share with $32.1 billion in revenue, as compiled by Thomson Reuters.

“Apple’s momentum is incredibly strong and we have some amazing new products in the pipeline,” Cook said in his statement. He added that 85 million users have signed up for iCloud, Apple’s Internet storage offering. “It’s not just a product, it’s a strategy for the decade,” he claimed.

CHINA APPLE

On a call with analysts, Tim Cook said iPhone sales were particularly strong in the US and Japan. “It turns out we didn’t bet high enough,” he said. iPhone sales in China were also very strong, he added.

Apple entered China, the worlds largest technology market and a country with around 1 billion mobile subscribers, with its iPhone 4S this January. The demand for iPhone in China has been off the charts and it is this nation which would help keep Apple’s profits soaring.

“We made a very bold bet entering the quarter as to what the demand would be, and as it turns out, despite it being a very bold bet, we were short of supply,” Cook said in a conference call with investors.

“Apple is equated to a certain level of high status in China. Anyone owing an iPhone or iPad is considered to be with the ‘in crowd’, which is the young affluent Chinese, trying to carve a name out for themselves, Julie Xin, a technology analyst and researcher working in China, explained. China has an important role to play in the shaping of the future world economy and the young population believes it can be done easier and quicker by having Apple by their side.

SIMPLICITY

Apple seems to win hands down when it comes to simplicity of its products compared to its rival. Thereby, shoppers like Mahmood, a PR Consultant in Dubai, finds the iPad less bulky and cumbersome compared to its Kindle Tablet. I am not a traditional Apple person, but I like the feel of the iPad compared to the Tablet, thus I am a convert. I pledge my alliance to Apple.

Source: FT, BBC, Reuters, Wall Street Journal

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