Apple posts stellar earnings, beats expectations by a huge margin

Apple reported moments ago that it had a huge first fiscal quarter, with record revenues and earnings that blew away Wall Street estimates.

The solid report suggests that the company is executing well across all of its PC, phone, and music player markets even as it runs into tougher opposition from supporters of Google’s Android operating system. Today’s report may be one of its most closely watched ever, since Apple said on Monday that CEO Steve Jobs is on medical leave once again. In after-hours trading, Apple’s stock is up 2.08 percent (earlier today it fell 2.25 percent).

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Apple continues to be the biggest player in tablets with the iPad and in smartphones with the iPhone, but it’s getting harder for the company to beat the collective sales of all its rivals.

Revenues were $26.74 billion, up from $15.68 billion a year ago. Net income was $6 billion, up from $3.38 billion a year ago. Earnings per share were $6.43 a share, compared with $3.67 a year ago.

Analysts were expecting revenue to come in at $24.38 billion, up 55 percent from a year ago. Earnings per share were expected to be $5.38 a share, compared to Apple’s own guidance of $4.80 a share and revenue of $23 billion.

Apple reported that it sold 4.13 million Macs, up 23 percent from a year ago. The Mac sales have now grown 19 quarters in a row, although overall market share relative to Windows PCs is still relatively low. Apple sold 16.24 million iPhones, up 86 percent, and it sold 19.45 million iPods, down 7 percent. The company sold 7.33 million iPads in the quarter. Analysts were expecting the number of iPhones sold in the quarter to hit around 15.6 million, with 17.75 million iPods sold, 4.08 Macs sold, and 6.15 iPads sold, according to Fortune magazine. Apple did not disclose how many Apple TV units it sold during the quarter.

“We had a phenomenal holiday quarter with record Mac, iPhone and iPad sales,” said Jobs in a statement. “We are firing on all cylinders and we’ve got some exciting things in the pipeline for this year including iPhone 4 on Verizon which customers can’t wait to get their hands on.”

“We couldn’t be happier with the performance of our business, generating $9.8 billion in cash flow from operations during the December quarter,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the second fiscal quarter of 2011, we expect revenue of about $22 billion and we expect diluted earnings per share of about $4.90.”

In the earnings call, Oppenheimer said the company was “extremely pleased” that each major category of products set sales records. The new MacBook Air (launched in October) fueled sales of the Mac, as did the new MacBook Pro. The company ended the quarter with three to four weeks of inventory. During the quarter, Apple launched its new Mac App Store, which saw 1 million downloads on the first day alone.

iPod share is more than 70 percent in the U.S., according to NPD. During the quarter, the iPhone sales reportedly grew faster than the 70 percent for the overall smartphone market, according to IDC. Enterprise customers are embracing the iPhone, with 88 percent of the top Fortune 100 companies testing or deploying it. Enterprises continue to add the iPhone to the list of approved IT products for their employees, Oppenheimer said. About 2.5 million iPhones are in inventory now.

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iPad sales were sequentially up 3 million units, and the device is available in 46 countries now. Another 15 will come on board in January. Oppenheimer said 80 of the Fortune 100 companies are deploying the iPad, with customers including JP Morgan Chase and Wells Fargo. Channel inventory is up 525,000 units for the iPad, with four to six weeks of sales in inventory now. Apple has now sold 15 million iPads in its first three quarters.

Tim Cook, chief operating officer, said that he is hopeful demand will be strong for the Verizon iPhone. He said Apple has a significant backlog of orders for the iPhone 4 and the company is trying to fill demand as fast as it can. He said the results of the company’s investment in China over the past couple of years have been “staggering.” Revenue from greater China was $2.6 billion for Apple, up four-fold from a year ago.

“We are not sitting still,” Cook said, regarding the company’s various rivals. “We have a first mover advantage. We have an incredible user experience. An enormous number of apps and a huge ecosystem. We are very confident on entering into a fight with anyone.”

Apple retail sales were $3.85 billion, up 95 percent from a year ago. iPad sales were very strong in the stores. The stores sold 851,000 Macs, up 24 percent from a year ago. Half were sold to customers who didn’t have Macs before. Average international store sales are higher than U.S. average store sales, and the four stores in China are among the biggest of all. Retail margin was above $1 billion for the first time. Gross profit margin was 38.5 percent, up 250 basis points above Apple’s estimate.

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Apple said Monday in a statement that Jobs, the iconic chief executive of Apple was leaving the company for an unspecified time for health reasons. Chief operating officer Tim Cook is running the company’s day-to-day operations in the meantime. Jobs has taken leave for health reasons three times in the last several years.

The latest announcement took a small toll on Apple’s stock price this morning, knocking it down about 2 percent. The stock closed at $340.65 a share, down $7.83 (-2.25 percent) compared with $348.48 a share on Friday. As noted above, after-hours trading has the stock at $347.72, up 2.0 percent.

Apple’s market capitalization is still well above $300 billion, and its value is still well above that of companies such as Microsoft ($245 billion), Dell ($27 billion), and Hewlett-Packard ($101 billion).

Apple still has plenty of room to grow. The company is shipping its Verizon iPhone this quarter. Apple’s iPad 2 is expected to ship around April, and the company is expected to field a new iPhone 5 by the summer. The question is whether Android-based rivals such as Motorola, which is launching its Xoom tablet and Atrix 4G smartphone soon, will get to market with cool products in a more timely fashion. Getting to the faster network speeds of 4G, for instance, is crucial not only for Apple but for its rival as well.

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Apple stock was halted in after-hours trading. Apple now has $59.7 billion in cash, up $8.7 billion from the previous quarter. Apple executed long-term supply agreements with three vendors. It will make payments in big chunks for those contracts, including $650 million this quarter.

[money image: Business Insider]