Apple wows with record iPhone and iPad sales, largest revenues

The company 'knocked it out of the park,' one analyst said

Apple has reported a record number of iPhones and iPad sales in the second quarter of 2011, powering revenues of $28.6 billion, also a record.

Brian White, an analyst with Ticonderoga Securities, simply used the word "wow" in the title of a note to his clients.

"Apple deliver[ed] nothing short of a blowout performance," White said in that note on Tuesday.

Apple 's revenues were the fourth consecutive quarter over the $20 billion mark, and represented an 82% increase over the same period last year.

The $28.6 billion in revenue was significantly higher than Wall Street's average projection of $25 billion, and beat the company's conservative estimate three months ago of just $23 billion by 24%.

Profits were $7.31 billion, yet another record for a quarter, up 125% from the same quarter of 2010.

"They knocked it out of the park," Brian Marshall, an analyst with Gleacher & Co., told Computerworld after Apple's earnings call on Tuesday. "They just crushed it."

Marshall, other analysts and Apple executives all pointed to iPhone and iPad sales as the driving forces for the record quarter .

"The quarter was driven by dramatic growth in iPhone and iPad sales," Peter Oppenheimer, Apple's chief financial officer, said during the conference call.

Apple sold 20.3 million iPhones , up 142% over the same period last year and a 9% increase over the first quarter of 2011, which was the previous record. On a revenue basis, the iPhone's contribution was 46.6% of total revenues, more than two-and-a-half times that of the Mac or over twice that of the iPad .

What impressed Ezra Gottheil, an analyst with Technology Business Research, wasn't simply the strong iPhone sales, but that Apple was able to maintain its high margin on the smartphone and sell more than 20 million during the quarter even though it didn't release a new model last month, as it has done in three out of the last four years.

"The ASP [average sales price] of the iPhone hasn't moved noticeably at all, which surprised me," Gottheil said. "They keep building and building them, but the ASP doesn't move."

Apple's decision to push back the launch of the next iPhone to this fall -- most experts have pegged September as the most likely month -- didn't hurt sales of the current model, Gottheil also noted.

Meanwhile, Apple sold 9.2 million iPads, nearly triple the number it sold in the same quarter last year and almost double the 4.7 million it sold in the first three months of 2011.

Apple launched the iPad 2 in mid-March, just weeks before the start of the second quarter, and only recently has been able to meet demand, and then only in some markets.

"We were still selling every unit we could make [during the quarter]," said Tim Cook, Apple's chief operating officer. Cook runs the company in the absence of CEO Steve Jobs, who remains on medical leave. "But in the early weeks of July, we were able to increase the supply further, and some SKUs in some countries are now in balance."

At one point in the call, Cook called iPad sales a "frenzy."

Apple's U.S. online store currently shows a one-to-three business day delay between ordering an iPad 2 and the tablet being shipped. In April, when Apple last held an earnings call, the delay was between two and three weeks.

The iPhone-iPad combination clearly was the reason Apple seems to be able to make money as fast as it can churn out hardware, Gottheil said.

"They absolutely have a tiger by the tail," Gottheil said. "People love the products, they love the infrastructure that supports them. Everything is working for them, and they're in two of the fastest-growing markets around."

iPhone and iPad sales accounted for more than two-thirds of Apple's revenues for the quarter.

Most of the remainder was generated by the Mac.

Apple sold 3.95 million Mac computers, a record for the quarter that ends in June, said Oppenheimer. Mac sales worldwide were up 14% year-over-year, and up 5% from the previous quarter, with the strongest unit sales growth in Asia/Pacific, where Apple's numbers were up 57% from the same period in 2010.

Last week, Gartner estimated that global computer sales grew by just 2.3% last quarter, while rival research firm IDC pegged the gain slightly higher at 2.6%.

Apple executives cited the difference between Mac and industry sales increases several times during Tuesday's conference call. "To grow at 14% when the market is growing at 2.6% is certainly something to be proud of," Cook argued.

Oppenheimer credited strong sales of the MacBook Pro and MacBook Air for the boost to the Mac numbers. The former was last refreshed in February, while the latter will reportedly sport new models soon, perhaps as early as Wednesday.

Apple sold 2.8 million notebooks, an increase of 13% over than the same quarter of 2010, and sold 1.2 million desktops, up 15% from the year before and 14% from the previous quarter.

The iMac desktop line was refreshed in early May.

Analysts on Tuesday, however, questioned Apple's executives about what appeared to be a slowdown in Mac sales growth.

Cook answered by ticking off a trio of causes, including iPad cannibalization, delayed purchases because of the impending release of Lion and a strong comparative quarter in 2010. "It's clear that some customers are choosing to purchase an iPad [rather] than a Mac," Cook said, Apple's strongest acknowledgment yet that its iconic tablet has shifted some buyers away from the more expensive Mac notebooks.

Analysts were split on how they weighed Cook's three reasons for Mac sales growing just 14% when a year ago the numbers were up 33%.

"It's all cannibalization," Marshall said.

Gottheil disagreed. "I think that waiting for Lion is the most valid," he said. "Lion has generated more interest than other OSes from Apple, especially for those more-sophisticated buyers."

Oppenheimer confirmed that Apple will launch Lion on Wednesday . The $29.99 upgrade will be available only via download from the Mac App Store.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer or subscribe to Gregg's RSS feed . His e-mail address is .

Read more about smartphones in Computerworld's Smartphones Topic Center.

This story, "Apple wows with record iPhone and iPad sales, largest revenues" was originally published by Computerworld.

Copyright © 2011 IDG Communications, Inc.

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