Will Ritter

Apple's 'Real' Earnings: Up Almost 125%

Any thoughts on what an adjusted non-GAAP guidance might be for next quarter?

Apple might consider providing that number. Some sort of realistic estimate might go a long way to relieving fears about a slowdown at Apple and put their GAAP based future guidance into perspective.

How can anyone take the forward, conservative GAAP guidance seriously, when this last quarter they guided down and beat by over 100% (when looking at the non-GAAP numbers).

I can see how even my last paragraph is confusing. The term GAAP and the concept of non-GAAP earnings being more accurate is sure to confuse many investors, and it seems to have confused most professional analysts to date, as you mentioned.

Perhaps the analyst community will formalize around the non-GAAP metrics for Apple and attempt to provide comparative P/E's using the non-GAAP numbers. This might improve the understanding of the investment community. It would certainly highlight the disparity in valuations you mentioned.

Apple's Market Share Momentum

Haven't had a chance to read the earnings transcript. Did Apple give non-GAAP guidance for next quarter? Those would be an interesting numbers to have as I'd guess expected earnings are above $1.67/share.

Apple Plays the Conservative Card Despite Record Quarter

Along the lines of my post above, we might want to keep in mind that for every million iphones sold, Apple could be recognizing an additional .19 per share in earnings. How many 3g iphones might they sell this quarter? They don't need to sell many to make up for the .24 reduction in guidance:

The .19 was estimated by the following equation and assumptions:

1 million iphones x 170 profit = 170 million profit / 899 million shares = .19 per share, per million iphones.

Apple Plays the Conservative Card Despite Record Quarter

Reading the transcripts, it seems to me that the analysts were overly focused on margin related items and of course, Jobs' health. Ironically, one of the factors to negatively impact gross margins is the success of the 3g iphone launch. Notice the breakdown of revenue and expense recognition timing in Peter Oppenheimer's answer to Jeff Fidacaro of Merrill Lynch during the quarterly conference call:

"Sure. We incur our OpEx in engineering, sales, and marketing related to the iPhone currently, while recognizing the revenue over -- and product costs over a two-year period of time. And we do have launch expenses for the iPhone 3G that are built into the September quarter and that’s provided for in the $1.27 billion guidance that I gave you."

Transcript is here:

seekingalpha.com/artic...

Apple F3Q08 (Qtr End 6/28/08) Earnings Call Transcript

Obviously Steve's value is impossible to calculate to the company and by extension shareholders. Writing this last sentence and feeling the morbidity of it, and thinking of Steve's friends and family having to possibly endure such public scrutiny of their private health lives makes me realize that Apple's choice to respect Jobs' privacy is in line with their stellar corporate image. Whatever short term trading impact the response might make, the alternative was simply unacceptable.

Apple's 3G iPhone Appears Profitable

@elderlygeek: strange that your website is devoted to selling a plethora of iphone related accessories. Why did you post here?

Apple F3Q08 (Qtr End 6/28/08) Earnings Call Transcript

Is the consensus then that the drop was attributable only to Steve's health? I noticed the stock was off even before the conference call by at least $5. Seems like sentiment was low going into the call. We had been reading about Steve's health for quite a few days now, so I would have thought that to be priced in to the market at close. After the earnings report was distributed, it seemed that the stock immediately sold off by five or so points.

Apple F3Q08 (Qtr End 6/28/08) Earnings Call Transcript

Before I forget, Thanks, Seeking Alpha for publishing the transcripts for us. It is an invaluable tool. Although, next time, I will try to find a way to listen live as JoeLeo points out, realtime comparison of information release and stock price movements is invaluable.

Apple F3Q08 (Qtr End 6/28/08) Earnings Call Transcript

Judging by the comments, it appears few take the time to read these transcripts. Jobs' health aside, I thought it was the job of analysts to differentiate from temporary noise the true value of the ongoing operations. A few items should be obvious - massive sales growth, tremendous product launch, strong competitive position and market opportunity. With regard to margins, profits and guidance, does anyone else see these points as indicative of the real story here?

Point 1:

Peter Oppenheimer

We generated $1.33 billion in cash during the quarter, ending with $20.8 billion. Cash flow from operations was $1.32 billion. In the first three quarters of fiscal 2008, Apple generated over $5.4 billion in cash on $3.7 billion in net income. The primary contributor to the difference between our reported income and our cash growth is the tremendous cash generation from iPhone sales that has not been fully reflected as earnings yet due to subscription accounting...

Point 2:

Jeff Fidacaro - Merrill Lynch

Peter, I was wondering if you could talk a little bit about the operating margin impact, maybe in the September quarter, from the iPhone launch. In other words, what cannot be deferred along with the handset revenues?

Peter Oppenheimer

Sure. We incur our OpEx in engineering, sales, and marketing related to the iPhone currently, while recognizing the revenue over -- and product costs over a two-year period of time. And we do have launch expenses for the iPhone 3G that are built into the September quarter and that’s provided for in the $1.27 billion guidance that I gave you.

Point 3:

Bill Fearnley - FTN Midwest

Thanks. Peter, you mentioned quickly here future product transitions and its effect on gross margins. Is there a corresponding effect on revenue growth here that you are expecting in the September quarter? Because the September quarter revenue growth quite frankly looks conservative. Does the product transition affect revenue growth expectations as well? And then I just have a quick follow-up.

Peter Oppenheimer

Okay. Bill, for the quarter, we are targeting revenue of about $7.8 billion, which is 25% growth over last September. We have included in our revenue guidance the full quarter ASP impact of the back-to-school promotion, a future product transition that I can’t discuss today, and also the elasticity that we’ve seen from the iPod Shuffle price reduction and it’s result on ASP.

I would tell you that we are very happy with our revenue growth and we’ve just reported the best Mac quarter ever and double-digit iPod growth, and are off to a fantastic start with the iPhone 3G.

We expect to sell more iPhones this quarter than we have in any previous quarter, but this will have a limited impact on the September quarter but will build a significant revenue and earnings, which we’ll report in future quarters. If iPhone sales were reported as revenue when sold, the September revenue guidance would be significantly higher.

That last sentence should have been in bold...