Apple outstrips expectations, sells 8.4M iPhones during quarter

Apple (NASDAQ:AAPL) posted revenues and profits surpassing expectations during its fiscal third quarter, while its gross margin remained steady. The company said it shipped a whopping 8,398,000 iPhones during the period--a figured that includes two days of iPhone 4 sales. Apple's quarter ended June 26, and the company's latest iPhone went on sale June 24. Apple has said that it sold more than 3 million iPhone 4s.

Interestingly, Apple shipped more--8,752,000--iPhones during its previous quarter, though it did manage to beat the 5,208,000 iPhone shipments it recorded in the year-ago quarter. Apple commanded roughly 16 percent of the global smartphone market in the first quarter of this year, according to Strategy Analytics, behind market leader Nokia (NYSE:NOK) and No. 2 player Research In Motion (NASDAQ:RIMM).

During its quarter, Apple posted revenue of $15.7 billion (far above Wall Street's expectations of $14.75 billion, according to Reuters) and net quarterly profit of $3.25 billion. The numbers are a significant jump from the $9.73 billion in revenues and net quarterly profit of $1.83 billion Apple recorded in the year-ago quarter. The company's gross margin was 39.1 percent in the quarter, comparable to the 40.9 percent it scored in the year-ago quarter.

Apple's stock rose by around 5 percent in after-hours trading immediately following its earnings report, to around $261 per share.

"It was a phenomenal quarter that exceeded our expectations all around, including the most successful product launch in Apple's history with iPhone 4," said Steve Jobs, Apple's CEO, also noting the company sold a total of 3.27 million iPad tablets during the period.

The news may help Apple move past the black eye it received due to "antennagate," the hoopla surrounding reports of problems with the company's iPhone 4 antenna. Apple held a press conference last week to address the issue, and promised to issue free cases to all iPhone 4 owners. (Apple said it will defer $175 million in revenue on iPhone 4s where it has not yet delivered the free cases, and said it would expense the cases when it ships them, but did not provide a specific figure for the freebies.)

During its quarterly conference call, analysts questioned whether antennagate has slowed iPhone sales. Apple executives said the company is selling every iPhone 4 it can make, but declined to definitively answer the question.

Apple executives also acknowledged the company is seeing unexpectedly high demand for its products--namely its iPhone and iPad devices--but noted Apple doesn't foresee component supply problems. Such issues have hampered sales of other devices such as the Verizon Wireless (NYSE:VZ) HTC Droid Incredible, which the carrier has struggled to keep in stock due to shortages of the gadget's screen, made by Samsung.

Another question centered on the iPhone's momentum among business users. According to a Wall Street Journal live blog of the company's conference call, Apple's Tim Cook said more than 80 percent of Fortune 100 companies are deploying or testing the iPhone.

One analyst asked what the split was between WiFi iPad sales and those sporting 3G connections. Apple executives declined to say how many 3G iPads it sells vs. WiFi iPads. Interestingly, though, Apple executives repeatedly said the company's iPad has already moved from an early adopter to a mass market device, and that the company is selling every iPad it can make.

In addition, Apple executives reiterated their support of AT&T and declined to discuss expanding the iPhone to additional U.S. carriers.

Finally, the question on all investors' lips: Will the good times continue? "Looking ahead to the fourth fiscal quarter of 2010, we expect revenue of about $18 billion and we expect diluted earnings per share of about $3.44," said Peter Oppenheimer, Apple's CFO.

"We are increasing our estimates for Apple after a strong Q3 revenue and margin performance reported last night," wrote Walter Piecyk of BTIG in a research note. "We also increased our price target to $350 from $330 based on our higher EPS estimates."

For more:
- see this release
- see this FierceWireless Q2 earnings page
- see this chart of iPhone sales
- see this Reuters article
- see this WSJ article (sub. req.)
- see this WSJ live blog of the conference call
- see this BTIG post
- see this SeekingAlpha conference call transcript

Related Articles:
Inside Apple and AT&T's 'loveless' marriage
Apple hopes to brush past 'antennagate' with solid earnings
RIM, Samsung, others hit back at Apple over antenna issues
Apple: Free cases for iPhone 4 owners

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