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Cupertino (CA) – The economy may be crumbling, but Apple steams ahead with 35% revenue growth in the third quarter, supported by strong iPhone sales and what seems to be an unstoppable Mac. Apple CEO Steve Jobs honored listeners to the Q3 (fiscal Q4) conference call with a surprise appearance and mentioned that he does not know “how this economic downturn will affect", but highlighted Apples current product line and its employees to battle a possible recession. He pointed to Apple’s $25 billion cash reserves and dismissed a Mac tablet and cheap $500 netbooks, since Apple won’t build a "piece of junk."
iPhone 3G sales estimates have been making the rounds for several weeks, but know we know that the first full quarter of iPhone 3G sales was a successful one, surpassing most analysts’ estimates and substantially contributing to an overall successful quarter. Due to deferred revenues, however, the handset sales had little impact on the reported $7.9 billion revenue and $1.14 billion in net profit. In accordance with the subscription accounting treatment required by the GAAP, Apple recognizes revenue and cost of goods sold for iPhone and Apple TV over their economic lives currently estimated to be 24 months, unlike revenue and cost of goods for Macs and iPods which are recognized at the time of sale.
This accounting principle results in the deferral of almost all of the iPhone and Apple TV revenue and cost of goods during the quarter in which these products are sold to the customer. The costs to develop future features and software, in addition to engineering, sales, marketing and warranty costs, are expensed as incurred. Eliminating the impact of subscription accounting, the so-called "adjusted sales" and "adjusted income" for the quarter were a stunning $11.68 billion and $2.44 billion, respectively.
iPhone outsells Blackberry
Apple sold 6.89 million iPhone units in the quarter (up from 1.12 million a year ago), which translates to sales of about around half a million per week and exceeds the 6.1 million first-gen iPhone units sold in the prior five quarters combined and 6.1 million RIM Blackberrys sold in the third quarter of this year. Apple is now the #3 mobile phone vendor in terms of revenue, followed by LG and Motorola, with Nokia and Samsung leading the pack. The App Store is now close to 200 million downloads (and should exceed that mark today) and sports more than 5500 applications available in 62 countries. Jobs said that "competitors are scrambling to copy the App Store, but it's not easy."
Apple earned $806 million from the iPhone and Apple TV businesses (Jobs said the AppleTV will remain "just a hobby" in 2009) during we quarter. If we add the 2.4 million first-gen iPhones sold in the first half of 2008, total iPhone sales for 2008 are 9.29 million so far, just shy of Apple’s 10 million unit target for 2008. The deferred iPhone and Apple TV revenue was $5.8 billion, up from $3.8 billion. If we exclude the deferred revenue, the iPhone already represents 39% of Apple's total revenue.
Apple recognizes iPhone sales at the time of purchase in its retail and online stores. Sales to carriers are recognized when the shipment leaves the factory docks. The handset was launched simultaneously on July 11 in 20 international markets, added 22 new countries on August 22, and 986 BestBuy retail stores on September 9, increasing the number of iPhone 3G distribution locations in the U.S. by almost 50%. The company plans to expand the availability of the iPhone to 70 territories by the end of the year.
Read on the next page: The iPhone is the new iPod, Macs have momentum
iPhone 3G sales estimates have been making the rounds for several weeks, but know we know that the first full quarter of iPhone 3G sales was a successful one, surpassing most analysts’ estimates and substantially contributing to an overall successful quarter. Due to deferred revenues, however, the handset sales had little impact on the reported $7.9 billion revenue and $1.14 billion in net profit. In accordance with the subscription accounting treatment required by the GAAP, Apple recognizes revenue and cost of goods sold for iPhone and Apple TV over their economic lives currently estimated to be 24 months, unlike revenue and cost of goods for Macs and iPods which are recognized at the time of sale.
This accounting principle results in the deferral of almost all of the iPhone and Apple TV revenue and cost of goods during the quarter in which these products are sold to the customer. The costs to develop future features and software, in addition to engineering, sales, marketing and warranty costs, are expensed as incurred. Eliminating the impact of subscription accounting, the so-called "adjusted sales" and "adjusted income" for the quarter were a stunning $11.68 billion and $2.44 billion, respectively.
iPhone outsells Blackberry
Apple sold 6.89 million iPhone units in the quarter (up from 1.12 million a year ago), which translates to sales of about around half a million per week and exceeds the 6.1 million first-gen iPhone units sold in the prior five quarters combined and 6.1 million RIM Blackberrys sold in the third quarter of this year. Apple is now the #3 mobile phone vendor in terms of revenue, followed by LG and Motorola, with Nokia and Samsung leading the pack. The App Store is now close to 200 million downloads (and should exceed that mark today) and sports more than 5500 applications available in 62 countries. Jobs said that "competitors are scrambling to copy the App Store, but it's not easy."
Apple earned $806 million from the iPhone and Apple TV businesses (Jobs said the AppleTV will remain "just a hobby" in 2009) during we quarter. If we add the 2.4 million first-gen iPhones sold in the first half of 2008, total iPhone sales for 2008 are 9.29 million so far, just shy of Apple’s 10 million unit target for 2008. The deferred iPhone and Apple TV revenue was $5.8 billion, up from $3.8 billion. If we exclude the deferred revenue, the iPhone already represents 39% of Apple's total revenue.
Apple recognizes iPhone sales at the time of purchase in its retail and online stores. Sales to carriers are recognized when the shipment leaves the factory docks. The handset was launched simultaneously on July 11 in 20 international markets, added 22 new countries on August 22, and 986 BestBuy retail stores on September 9, increasing the number of iPhone 3G distribution locations in the U.S. by almost 50%. The company plans to expand the availability of the iPhone to 70 territories by the end of the year.
Read on the next page: The iPhone is the new iPod, Macs have momentum