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Tech Check
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CNBC.com Apple Earnings |
For a company normally used to sandbagging guidance, there's lowered expectations, and then there's lowered expectations.
These fourth quarter expectations from Apple Inc. [AAPL
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]tonight might be so low that this once-thought recession immune company may be immune no longer.
The company's fourth quarter earnings numbers were stellar by any stretch: $1.26 a share versus the $1.11 expectation on over $7.9 billion in revenue. The company's business units offer a mixed bag of performance: Mac sales hit a new record of 2.611 million units, but the range on Wall Street was between 2.7 million and 2.8 million. And market research from NPD released yesterday suggested that Apple would hit the high end of that range. It didn't happen. iPods performed surprisingly well, with Apple selling 11.052 million units versus the 10.5 million expected. And iPhones blew through expectations, selling a whopping 6.892 million units. The Street consensus was 4.5 million.
Surprisingly, Apple also posted a 34.7 percent gross margin even as Wall Street worried that it would be unable to translate topline performance to the bottomline. Most analysts anticipated a gross margin number of 30.5 percent.
The trouble for Apple is guidance. Why this company even bothers to offer guidance is beyond me since quarter in and quarter out, the outlook is virtually useless, and everyone knows it. Nonetheless, Apple now anticipates an EPS range of $1.06 to $1.35. The Street consensus was $1.66. And since everyone knows the company underplays guidance, the whisper/sandbag number was down to $1.44 and Apple apparently will be nowhere near that. Same goes for the topline: the company's revenue range for its first fiscal quarter is $9 billion to $10 billion. Analysts were expecting $10.6 billion, and the whisper/sandbag number was $10.1 billion.
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"The revenue guidance is essentially flat year over year," says Gene Munster of Piper Jaffray. "The message they're giving is, 'Expect a major slowdown.' And they didn't have the iPhone last year. Basically what Apple is saying is, 'Christmas ain't coming this year.' I'm very surprised they're this conservative."
Apple's holiday shopping quarter is by far its busiest. Expectations have come down so significantly in recent weeks that some on the Street were anticipating a relief rally of sorts if the company could come even close to consensus on guidance. That didn't happen.
It's a stunning turn of events despite so much anecdotal evidence suggesting that Apple would be able to avoid a serious bite from the economic downturn. That apparently is not the case. Several analysts in recent weeks, most notably RBC's Mike Abramsky, sounded the warning bell by significantly reducing his price target and cutting his earnings expectations for the company. Just this morning, he reiterated those concerns and his advice was rather prescient. Apple shares have lost about 43 percent since January, much of those losses coming in the last three months.
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