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7/23/2014
09:06 AM
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Apple Profit Healthy: All Eyes On Fall

Sales of iPads proved disappointing, but Apple posted strong iPhone, Mac, and iTunes numbers. The big test comes next quarter.



Apple-IBM Deal: 9 Moves Rivals Should Make
Apple-IBM Deal: 9 Moves Rivals Should Make
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Apple on Tuesday reported $37.4 billion in revenue for its third fiscal quarter 2014, representing 6% year-over-year growth.

The company's quarterly net profit came to $7.7 billion, or $1.28 per diluted share. That's up 20% from $6.9 billion, or $1.07 per diluted share, in the year-ago quarter.

Apple's earnings were largely in line with the expectations of financial analysts, who anticipated slightly higher earnings ($37.99 billion) and slightly lower earnings per share ($1.23).

Apple sold 35.2 million iPhones, 13.3 million iPads, 4.4 million Macs, and 2.9 million iPods during the quarter.

Apple's stock slipped in after-hours trading. Most industry observers are more concerned about the company's next quarter. That's when Apple plans to release new versions of its iOS and OS X operating systems and is expected to release a larger iPhone, and possibly other hardware. During the holiday quarter that follows, Apple is expected to launch a wearable device. An Apple patent describing an electronic wristband was published on Tuesday.

During a conference call for investors, Tim Cook, Apple’s CEO, celebrated the company's record June quarter even as he acknowledged that iPad sales had not meet analysts' expectations. He reviewed announcements the company made at its Worldwide Developer Conference in June about iOS 8 and OS X 10.10 "Yosemite."

CFO Luca Maestri attributed some sales softness to new product rumors that he believes resulted in purchase delays. In the summer months that precede Apple's fall product launch season, this has become a common pattern.

Cook expressed optimism about the revenue potential of Apple's recently announced partnership with IBM, which will help sell Apple mobile hardware to enterprises and will help develop industry-specific iOS apps for businesses.

IBM's assistance should prove useful to boosting iPad sales, which declined 9% year-over-year and 19% from the previous quarter. While iPads have a foothold in almost all Fortune 500 companies, according to Cook, penetration (percentage of employees using the devices) is low (20%) compared to notebooks (about 60%). Cook sees that as a significant sales opportunity.

In response to a question during the conference call, Cook said Apple has no plans to change the way it handles enterprise app sales. Presently, developers in Apple's enterprise app developer program ($299/year) can distribute iOS apps within a company without going through Apple's iTunes App Store and without giving Apple 30% of app revenue.

Cook noted that, excluding Beats, Apple has made 29 acquisition since the beginning of fiscal 2013 (September 30, 2012). Only 18 acquisitions during that period (including Beats) have been publicly reported.

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Thomas Claburn has been writing about business and technology since 1996, for publications such as New Architect, PC Computing, InformationWeek, Salon, Wired, and Ziff Davis Smart Business. Before that, he worked in film and television, having earned a not particularly useful ... View Full Bio

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