“Apple Inc (AAPL) shares sank as much as 6 percent on Tuesday on disappointing iPad shipments and margins, but most analysts remained bullish on the stock, expecting a buoyant holiday season and sensing a buying opportunity,” Jennifer Robin Raj reports for Reuters. “Apple posted a better-than-expected profit helped by iPhone sales, but margins and iPad shipments came in below expectations during the fiscal fourth quarter.”
MacDailyNews Note: The “problem” with iPad is that Apple’s suppliers can’t make them fast enough to satisfy demand. While that’s a nice problem to have, Apple does need to focus on ramping iPad production. Apple’s gross margins for the quarter were 36.9% which was above Apple’s guidance of 35% for the quarter:
We expect gross margins to be about 35% reflecting approximately $14 million related to stock-based compensation expense. We expect most of the sequential decline to be due to a higher mix of the iPhone 4 and iPad sales, which have higher cost structures and provide great value to customers as well as the revenue deferral impact of the iPhone 4 case offer. To a lesser extent, we expect the sequential decline to be driven by back-to-school promotion and the absence of the favorable adjustment that benefited gross margin in the June quarter. – Apple CFO Peter Oppenheimer, during Apple’s Q3 2010 earnings conference call with analysts, July 20, 2010
Raj continues, “Apple, which typically issues very conservative outlooks, forecast first-quarter earnings of $4.80 a share, below consensus estimates for $5.07 a share. ‘Guidance implies a material drop in iPhone 4 gross margins and likely slightly lower iPad margins due to a more rich feature set,’ UBS said, adding that it views this ‘as largely component related.'”
“With gross margin expectations reset and expectations for strong holiday demand, the pullback is an opportunity, UBS added, echoing several other analysts,” Raj reports. “Analysts expect solid sales of iPhone 4 and iPad this holiday season and noted strong demand for the iPhone in China. ‘This success is playing an important role in bolstering the broader Apple brand internationally, thereby opening the door for the Mac and the iPad, whose geographical footprint has room to expand materially,’ said Oppenheimer.”
Full article here.
[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]