Apple Again Wows in Q3 on iPhone, Mac Sales

iPad sales top three million and Mac sales hit a new high.

Apple (NASDAQ: AAPL) once again exceeded all analyst projections to report record sales and earnings on the strength of all of its products except the iPod.

For its third fiscal quarter ended June 26, Apple reported revenue of $15.7 billion and net income of $3.25 billion, or $3.51 per diluted share. The numbers flattened a consensus estimate by analysts surveyed by Thomson Reuters, who had projected per-share earnings of $3.11 on revenue of $14.75 billion.

Apple sold 3.47 million Macs during the quarter, a new quarterly record and a 33 percent increase over the same quarter last year. Yet it also sold 3.27 million iPads -- a seeming indication that the iPad is not cannibalizing Macintosh sales, at least for the present.

The company also sold 8.4 million iPhones in the quarter, an increase of 61 percent year-over-year. A modest portion of those are the iPhone 4, which came out June 22, just four days before the end of the quarter. Apple sold 1.7 million units in the first three days, and as of last Friday, CEO Steve Jobs said that the company had sold three million iPhone 4 units in the first three weeks of its release.

iPod sales totaled 9.41 million, an 8 percent unit decline from the same quarter last year. The popular portable audio player has been in steady decline for a while thanks to reaching market saturation.

Antenna problem? What antenna problem?

iPhone sales slowed considerably after the June 7 announcement of the iPhone 4 as Apple let inventory run out. Prior to the announcement, sales were up 90 percent year-over-year, according to COO Tim Cook.

While questions about the iPhone 4's antenna and spotty reception have been widely reported, the issue apparently hasn't hurt sales. During a conference call with Wall Street analysts, Cook said the company is selling every phone it can make.

"My phone is ringing off the hook for people who want more supply. Right now, it's hard to test the reality [about whether there is an effect on sales or not] because we are selling every one we can make. The returns that we've seen on the iPhone 4 are less than the 3GS. The ones for this specific issue are extremely small," he told analysts.

Apple is also selling as many iPads as it can make. "We believe the iPad is defining the market and we want to take advantage of it. We're investing in capability in getting iPad out to as many people as we can," he said.

But the Mac is in no danger of being overshadowed. Cook said inside Apple, they have a reverse view. "I think most people externally focus on cannibalization as a negative, and internally we focus on the opposite, the synergy between products. We believe the iPod created a halo for the Mac. As iPod volumes took off, you saw a dramatic change in Mac sales in time if you go back and look at sales. Could that happen on iPhone and iPad? We'll see," he said.

He added that if there is any cannibalization by the iPad, it's likely to be PCs. "If it turns out that the iPad cannibalizes PCs, I think it's fantastic for us because there is a lot of PCs to cannibalize," said Cook.

International sales accounted for 52 percent of Apple's business and international is growing rapidly. Mac grew 70 percent year-over-year in Asia-Pacific, including a 144 percent growth in China, 184 percent growth in South Korea and a near doubling in Hong Kong. Even Spain, which has severe economic hardship, grew by 59 percent year-over-year, he said.

Corporate sales

Even though Apple does not actively court corporate customers, it nonetheless has interest. Cook said up to 80 percent of the Fortune 100 are piloting or deploying the iPhone and 60 percent of the Fortune 500 are deploying or piloting it. Around 400 higher education institutions have approved the phone for faculty, staff and students, and 50 percent of the Fortune 100 are deploying or testing the iPad.

Andy Patrizio is a senior editor at, the news service of, the network for technology professionals.

Tags: iPhone, iPad, Apple, earnings, iPhone 4

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