Apple’s Q3 Report Wednesday: All Eyes On The iPhone

| About: Apple Inc. (AAPL)

Apple (NASDAQ:AAPL) reports its fiscal third quarter results on Wednesday and all eyes will be on the iPhone and its sales to date. Apple is expected to deliver third quarter earnings of 72 cents a share on revenue of $5.3 billion, but most analysts expect the company to exceed that figure.

The third quarter sales target is $6 billion with earnings of 83 cents a share. But the big milestone will be the number of iPhones sold to date. Only two days of iPhone sales (diary, blog focus, galleries) will be included in the quarter so the financial impact will be minimal.

Instead, folks will be waiting to see how many iPhone units have moved. Mike Abramsky, an analyst at RBC Capital, says that Apple has probably sold 450,000 to 500,000 iPhones in the third quarter. Overall, Apple has likely sold anywhere from 1.1 million to 1.5 million iPhones by July 25, according to Abramsky. JMP Securities analyst Ingrid Ebeling projects iPhone sales of 1 million or so. Inventory levels will also be a hot topic for Apple.

Apple may discuss its revenue split with AT&T (NYSE:T), but it’s doubtful. Most likely we’re left with Piper Jaffray analyst Gene Munster’s analysis. However, is reporting another interesting tidbit. According to Scott Moritz’s sources AT&T is paying Apple a bounty of $150 to $200 per new customer. That sum is on top of revenue sharing.

While it’s tempting to talk about how AT&T is insane for giving Apple that much, there are other businesses at Apple worth watching.

Here’s a look at the key data points:

Component pricing: Apple’s second quarter was strong largely due to component pricing. The big question: Will that hold in the third and fourth quarters? Abramsky notes that NAND pricing has gained recently and could hurt the fourth quarter outlook.

Mac sales: With the iPhone and iPod, folks tend to forget that Apple actually makes computers. Mac sales are still an important revenue driver. Abramsky is projecting $2.4 billion in Mac revenue with 1.6 million units overall. Portables will dominate that mix. That 1.6 million unit figure appears to be the consensus among Apple watchers, but J.P. Morgan analyst Bill Shope predicts 1.68 million Mac units.

Music sales: Apple is expected to ship roughly 9.4 million to 10 million iPods in the third quarter and have revenue of $1.5 billion. Note that revenue may be down slightly from a year ago due to a decline in average selling prices, says Abramsky. Here’s another thought though: Monitor iTunes sales. Apple recently went DRM free and it’ll be interesting to see if that move had any impact on sales. What’s telling: Many analysts have listed iPod sales as almost an afterthought.

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Tagged: , Personal Computers, Earnings
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