Retail and tech companies are held hostage to the seasons: during the back-to-school and Christmas seasons, business builds only to slip away from January to July. Christmas, like the rest of retail and tech, is usually Apple's (AAPL) biggest quarter by far, a time when Dad and Mom put iPods and Macs under the tree, a bonanza for the company.
This quarter Apple came very close to discarding the chains of the calendar. Traditionally a "quiet" period of slowing sales, Q2 EPS nearly matched the previous quarter, making $6.40, a hair under Christmas's $6.43. Apple has been steadily narrowing the earnings gap between its Q2 and Q1 quarters. From 2006 to 2009, Apple netted 23% to 33% less each Q2 than Q1. Q2 closed within 9% of Q1 in 2010. This time, EPS came to within 0.5% of the Q1 quarter, driven by 18.6 million iPhone sales, 2.4 million more than sold in the Christmas season. Revenues have been losing their seasonal pattern as well. From 2006 to 2009, Q2 have come in 20% to 26% lower than Q1; this time around, revenue came within 8% of last quarter's sales.
Apple has become so dynamic in selling its products that the company is overcoming the seasonal nature of retail and tech. If the trend holds, next year will see Q2 profitability greater than the supercharged Christmas Q1 season, as Apple breaks free from the constraints that the calendar imposes on other retail and technology companies. This time Apple missed beating the Christmas season by a mere 4 cents; next time, they'll blow past it.
Graphs below plot the narrowing of EPS and revenues since 2006. The Y axis represents the sequential percentage change from Q1 to Q2 in EPS and revenue. The smaller the negative per cent, the closer Q2 came to Q1.
Disclosure: I am long AAPL.
