Apple Q3'09 results: breaking records, not taking names

In yesterday's earnings announcement and subsequent analysts' call, Apple reported another record-breaking quarter; the company posted its "best non-holiday quarter [in terms of] revenue and earnings." This is pretty impressive given, as Engadget points out, what some consider the "worst recession since the Great Depression." Specifically, Apple's books (not that kind) are reporting revenues of $8.34 billion with a take-away profit of $1.3 billion; the bump from the year-ago quarter in earnings per diluted share takes us from $1.19/share in Q3'08 to $1.35 in Q3'09.

In the midst of these impressive numbers, Apple's CFO Peter Oppenheimer is optimistic. Apple is expecting revenue in the range of $8.7 billion to $8.9 billion for the current quarter, forecasting an increase in Mac sales as we enter the back-to-school shopping season. This is a safe bet, given Apple's "best ever" line of current MacBooks. For Q3'09 Apple sold 2.6 million Macs — 1.75M of them were laptops, per Macworld — representing a 4% increase in units sold over the year-ago quarter. The laptop rush continues to swing the balance of Apple's CPU sales towards the MacBook Pro line; laptop units sold jumped 13% year over year, while desktop sales dropped almost 100K units (849K vs. 943K) against Q3'09.

Ignoring the subscription-based accounting methodologies for both iPhone and Apple TV, Apple's non-GAAP revenue was a staggering $9.74 billion with net income of $1.94 billion. In order to allow for future free updates to the products, Apple uses subscription based accounting for iPhone and Apple TV; revenue from iPod touch & iPod, Macs, software and accessories is fully recognized when the products are sold. This approach "parcels out income from iPhone and Apple TV sales over a 24-month period."

Apple also sold 10.2 million iPods and 5.2 million iPhones, representing a 7% decline and 626% increase over the year-ago quarter. This fact is significant because the decrease in iPod sales indicates that the iPhone is now cannibalizing its older siblings in the "traditional" (shuffle, nano, and classic) family of iPods. Apple is also quick to point out that the entire market for traditional MP3 players is declining.

While the increase in iPhone sales does seem quite impressive, it is worth noting that the iPhone is available in many more countries than it was a year ago (although the 3GS is only in 18 of the 80 markets so far). I would be interested in knowing if iPhone sales increased domestically or if these numbers are completely driven by international success. Another interesting metric will be to compare iPhone sales this quarter to sales in Q3'10. With a similar sampling of countries the numbers should make for a better comparison. Although, I will go ahead and jump the rumor-gun and say I think that next year's iPhone is going to be a bigger improvement vs. the current model, as compared to the 3GS vs. the 3G; for this reason iPhone sales will continue to increase.

Again the question of netbooks was presented and again Apple suggests that the netbook is currently a sub-standard computing platform with a poor user experience. If we consider that Apple had at one time said they were not doing a video iPod, then it is pretty likely that an Apple netbook is in our future.

Apple's third-quarter results are very strong and the stock is up substantially in early trading today. This should be great news for anyone holding any AAPL in their portfolio especially given the close for Q2'09 was a mere $121.51. I think Apple is doing a great job and as an investor myself, I am pleased with the results — as is the rest of Wall Street.