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Four Things We Learned From Apple Earnings

By Tom Kaneshige, CIO
October 19, 2010 01:51 PM ET

CIO - Another booming quarter, Apple products in high gear, and a surprise visit from a fired up Steve Jobs made for one heck of an earnings call Monday. "As most of you know, I don't usually participate in Apple's earnings calls," Jobs says, adding, "But I couldn't help dropping by for our first $20 billion quarter."

Apple posted $20.34 billion in revenue in the fourth quarter, a 67 percent increase from the same quarter a year ago. Profit reached $4.3 billion compared to $2.53 billion last year.

Sure, there were a few low points, such as iPad sales missing analyst expectations, an after-hours dip in Apple stock price likely brought on by lower margins, and heavy competition from Android.

But the good far outweighed the bad for Apple. Here are four things we learned from Apple's really big earnings call:

[ What makes Steve Jobs such a great innovator?'s Tom Kaneshige explores the 7 Innovation Secrets of Steve Jobs. ]

1. Is Apple Eyeing a Big Acquisition?

Apple has $50 billion in cash. So what's Apple going to do with such a massive war chest? Jobs hinted at a potentially big acquisition in the works.

"We strongly believe that one or more strategic opportunities may come along, that we're in a unique position to take advantage of because of our strong cash position," Jobs says. "We don't let it burn a hole in our pocket, we don't allow it to motivate us to do stupid acquisitions. And so I think that we'd like to continue to keep our powder keg dry, because we do feel that there are one or more strategic opportunities in the future."

Only one acquisition would mean it would have to be huge, say, Facebook? Social networking has become a defining piece of consumer tech, and Apple has tried to get into the social networking game with Ping on its latest iTunes version. One of the most used iPhone and iPad apps is Facebook.

Such a deal is purely conjecture, of course, but Apple and Facebook--not to mention Jobs and Mark Zuckerberg--have a lot in common. Both are innovative companies with a rebellious history and, critically, are icons of their respective generations. (The LA Times is reporting that someone saw Jobs and Zuckerberg on a stroll in Palo Alto recently.)

2. iPad Gains Ground in the Enterprise

On the closely watched iPad front, Apple sold 4.19 million iPads in the quarter, about 500,000 short of analyst expectations. All tallied, Apple has sold 7.5 million iPads so far.

Jobs took dead aim at upcoming 7-inch screen tablets (the iPad has a 10-inch screen), saying that a 7-inch screen is too small to compete with the iPad and too big to compete with the iPhone. "Given that all tablet users will already have a smartphone in their pockets, giving up precious display area to fit a tablet in their pockets is clearly the wrong trade-off," Jobs says. "The seven-inch tablets are tweeners."

Jobs also says that 7-inch tablets will likely cost more than the iPad. "These are among the reasons that we think that the current crop of seven-inch tablets are going to be DOA--Dead on Arrival," he says.

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