MacBook Air sales help Apple earnings

Sales of Mac computers were a bright spot in Apple's fourth quarter, which failed to live up to analyst expectations as the company prepared for the iPhone 4S launch.

Apple's Tim Cook has hailed Apple's fourth-quarter earnings, which saw strong MacBook Air sales, although iPhone sales fell short of expectations. Photo credit: Sarah Tew/CNET News

On Tuesday, Apple reported fiscal fourth-quarter profits of $6.62bn (£4.18bn) on revenue of $28.27bn, compared with $7.31bn and $28.6bn respectively in the previous quarter. Wall Street analysts had expected earnings of $6.94bn and revenue of $29.7bn, according to Reuters.

For the full year, it generated revenue of more than $108bn, ending up with profits of $25.9bn. That represents a 66-percent jump in revenue and an 85-percent increase in profits over the previous year.

Over the year, Apple sold more than 72 million iPhones, 32 million iPads and almost 17 million Macs. In the fourth quarter alone, Mac sales were 4.89 million, beating the previous fourth-quarter 2010 record by 760,000 units, or 26 percent. Three-quarters of those Macs were MacBook portables.

"The increase in Mac sales was fuelled by the very strong growth in MacBook Air, as well as the continued strong performance of MacBook Pro," chief financial officer Peter Oppenheimer said in an earnings call. "While the portables represented 74 percent of the total Mac mix, we also generated record desktop sales."

Oppenheimer linked the growth in MacBook Air sales to the fact that the latest model is the first to put full-strength processing power into a thin-and-light device.

iPhone sales

In the fourth quarter, which ended 24 September, Apple sold 17.1 million iPhones, up 21 percent year-on-year. However, analysts were expecting a total of between 18 million and 20 million, leading some to speculate that buyers had held off for the iPhone 4S, which arrived in stores on 14 October.

However, chief executive Tim Cook noted during the earnings call that Apple sold four million iPhone 4S units in the three days after its launch, whereas the preceding iPhone 4 sold 1.7 million during the equivalent period. "We're thrilled with the start that we have," he said.

Analysts have remained generally positive about Apple's prospects, even though iPhone sales missed Wall Street targets.

"[Apple] suffered from the rumours about the launch of the new iPhone, as shown by the strong uptake of the 4S in the first three days," said Gartner mobile analyst Carolina Milanesi. "Expectations for the December quarter are very, very positive as the 4S rolls out to more countries. It was interesting to hear that markets such as Brazil, Mexico, Russia and China are becoming more important to Apple, as this proves that iPhone has a place in emerging markets, and more so now with the lower-priced 3GS and 4."

On the call, Oppenheimer said Apple had delayed rolling out iPhone models in some locations during the quarter. "Given the October launch of the iPhone 4S, we opted to defer new carrier and country additions from the September quarter until after the launch," he said.

He added that 93 percent of Fortune 500 companies are now deploying or testing the iPhone, up from 91 percent the previous quarter. As for the Global 500 list, 60 percent have taken up the smartphone, up from 57 percent the quarter before.

iPad success

Meanwhile, iPad sales were 11.1 million for the fourth quarter, a 166-percent increase on the 4.2 million shifted the year before. Revenue from iPad and iPad accessories was up 146 percent over the same period, from $2.8bn to $6.9bn.

The Mac has its best quarter ever, which is almost unbelievable. With cannibalisation like this, I hope it continues.

– Tim Cook, Apple

Cook said Apple is seeing "cannibalisation" of Mac sales due to the tablet's success, but he said it was the kind of cannibalisation he could live with.

"Some people are electing to buy an iPad rather than a Mac. However, I believe a materially larger number of people are electing to buy an iPad instead of a Windows-based PC," he said. "Even with having the best quarter on iPad with some cannibalisations in Mac, the Mac has its best quarter ever, which is almost unbelievable. And so with cannibalisation like this, I hope it continues."

Cook, who said he believes the tablet market will outstrip the PC market in time, called out Apple's rivals for their lack of success in the tablet field, where his company has now sold 40 million iPads in total.

"Some had different form factors, different price points, and I think it's reasonable to say that none of these have gained any traction thus far," he said. "In fact, as all of those competitors were coming to market, our share actually went up such that, in the June quarter, according to IDC, we were responsible for three out of every four tablets sold."

Gartner's Milanesi noted a shift in emphasis at the company, with business sales becoming more of a focus.

"On iPad, we continue to see no competition for Apple and this will remain the case," she said. "[It was] interesting to hear once again about rollouts in the enterprise for both iPhone and iPads, as this is clearly becoming an important play for Apple." 

Another area of cannibalisation could be that of the iPhone eating into the market for iPods. In the quarter, Apple sold 6.6 million iPods, down from 9.1 million the year before. Oppenheimer said even this figure was ahead of the company's expectations.

Apple's quarterly and annual results were the first to be announced since the death earlier this month of co-founder and former chief executive Steve Jobs. In the earnings call, Cook expressed Apple's "gratitude for all of the condolences and expressions of support that we have received following Steve's passing".