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Apple's earnings far exceed Wall Street expectations

Apple's quarterly profit more than doubled and revenue surged 74% to a record $46.3 billion as the company sold more iPhones, iPads and Mac computers than in any quarter in its history.

January 25, 2012|By David Sarno, Los Angeles Times
  • Apple's best-selling product in its fourth quarter continued to be the iPhone. The company sold more than 37 million of the devices, eclipsing its iPhone sales record of more than 20 million last June. Above, one of many people wait outside an Apple store in Beijing the night before the release of the iPhone 4s.
Apple's best-selling product in its fourth quarter continued to… (ChinaFotoPress, Getty…)

Apple Inc. is selling a whole lot of just about every product it makes — and investors are loving it.

The company's stock shot up more than $32, or nearly 8%, in after-hours trading after it announced that its first quarter — which ended Dec. 31 and spanned the holiday buying season — was its best ever.

Revenue surged 74% to a record $46.3 billion and profit more than doubled to $13.1 billion, blowing away Wall Street's expectations as Apple sold more iPhones, iPads and Mac computers than in any quarter in its history.

"They just demolished it," said analyst Peter Misek of Jefferies & Co. "Everyone thought they were too big and … that they couldn't pull off a surprise like this, but boy did they ever."

Wall Street analysts believe 2012 could 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 in the year.

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

Apple's bestselling product continued to be its iPhone. The company sold more than 37 million of the devices, eclipsing its iPhone sales record of more than 20 million set last June.

Apple has ramped up sales of its iPhone in the U.S. and abroad, and is now selling the latest version of the device in 90 countries and at more than 110,000 global locations — a jump of 35% over the same quarter last year. This month, the iPhone 4S went on sale in China, the world's largest technology market and a country with about 1 billion mobile subscribers.

Apple's chief executive, Tim Cook, said that demand for iPhones in China is "off the charts" and that, in general, global demand for the iPhone was so strong that Apple was having trouble keeping up.

"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 also took a leap forward with its iPad, selling 15.43 million units — 4 million more than it sold in the previous quarter. Apple sold 5.2 million Mac computers, beating its mark of 4.9 million.

As a result, Apple's revenue and earnings report smashed Wall Street projections and led to an after-hours rally in its shares. Revenue was $7 billion more than what analysts had expected. Profit beat expectations by $3 billion. Apple shares, which fell $7 in regular trading, later rose to $452, an all-time record.

Apple's success wasn't shared by everyone.

Verizon Communications Inc., one of the iPhone's major carriers, reported a disappointing fourth quarter Tuesday, missing analysts' profit expectations largely because of the hefty cost of providing the iPhone to its customers. Carriers such as Verizon buy the devices from Apple and resell them to wireless subscribers at a steep discount, expecting to make the difference back in revenue from monthly contracts.

But that equation hasn't panned out for the iPhone's providers yet, analyst Craig Moffett of Sanford C. Bernstein & Co wrote in a note to investors Tuesday.

Until January of last year, AT&T Inc. was the only carrier to offer the iPhone, and the company found that its profit margins were being squeezed by subsidizing the cost of the device.

As far back as 2008, AT&T told investors that its profit would rebound. "They haven't," Moffett wrote. "Now, it's Verizon's turn, and the same question looms."

Verizon reported revenue of $28.4 billion during the fourth quarter, up 7.7% from $26.4 billion in the same quarter a year earlier. Its net loss of $2 billion in the fourth quarter was primarily the result of a one-time pension-related charge. Excluding the charge, the company earned 52 cents a share, just below the Wall Street consensus of 53 cents.

The company's shares dropped 61 cents, or 2%, to $37.79.

david.sarno@latimes.com

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