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Apple Sets Quarterly Sales Record Of $57.6 Billion : Enough To Keep Carl Icahn Happy ?

Carl Icahn should be happy enough, even as some after hours traders initially dump the stock.

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2nd Annual "David Moore's Funny Business Show"
Carl Icahn /Getty

Well, the Apple December quarter results are in, covering the all-important Christmas holiday period, the first quarter of the company’s new fiscal year, which runs to September 30th.

The results are pretty good too actually, as Apple managed to sell 51 million iPhones, 26 million iPads and 4.8 million Macintosh computers; iPod sales continued to decline as expected.

Revenues of US$57.6 billion grew 6% over the same quarter in the previous fiscal year, margins were close to the top end of the company’s forecast range at 37.9%. Net earnings wereUS$13.1 billion and earnings per share were up 5% at US$14.50 per share. International sales also increased, now comprising as much as 63% of total consolidated revenues. In a terrible year for technology companies generally, Apple has done very well therefore.

At the end of the quarter, Apple now has cash on hand of US$158 billion, even after giving back cash to shareholders, through dividends and stock buybacks, of over US$43 billion, cumulatively, to date. Apple accordingly has declared another regular quarterly dividend of US$3.05 payable to shareholders in February.

The company is also providing guidance for a fairly decent quarter for the current March quarter as well, its second fiscal quarter, recognizing it is always quieter than the Christmas period. Revenues are expected of between US$42 billion and US$44 billion, and gross margin again hanging in between 37 percent and 38 percent. So previous declines in gross margin are now almost off the company’s back, made up for with revenue growth, and so if the company at least meets their guidance the company’s year ahead should look quite good.

After hours trading after the results were issued failed to impress, however, with the shares being marked down for failing to meet some of the even loftier expectations people always have about the company. We will see later on today, when markets re-open how the numbers are digested more generally.

However, from a business analysis side, the company is now really beginning to fire on all cylinders again, except for market share itself, which continues to worry some financial analysts on Wall Street, in North America in particular where the market may be considered now, at least for the moment, more mature in smart phones.

The new technical foundations the company has been putting in place are solid, however; with new 64 bit chips, rebuilt system software for both Macs and iOS, and advanced security features such as finger print recognition.

This will now allow them to expand the number of product lines moving forward, which can then permit expansion into additional markets. Apple has hinted at some that are coming later in the year, and analysts have long clamored for others, including, for example, televisions and wearables on the hardware side and sophisticated payment systems, on the services side.

There is no point in speculating further, however, until such potential products actually emerge and we know what they are. In broad strategic terms, however, expanding the product range is a normal goal one would expect to see at this point, and the pieces are in place to permit this – in other words, this is still a major growth story if we trust the company will deliver as it has before. This writer personally falls into that group; others may prefer to wait for more evidence, that is human nature.

Carl Icahn has for some time been demanding additional cash be dedicated to buying back the company’s shares as a capital allocation optimization exercise, and to minimize the impact on the P/E ratio compression that the company has gone through. Accordingly he has a resolution to this effect on the agenda for Apple’s Annual General Meeting which will take place at the end of February. These results neither add to, nor subtract from, the logic of the case he may have to make but Apple is clearly not likely to just fold over at this point. Icahn may in any case be too busy with a proxy battle, he is threatening at eBay to want to fight two major battles at once. If Apple shares stay down when the market re-opens today he may even see an opportunity to buy more, if he has the firepower.

For outside observers of shareholder democracy is still an on-going story, therefore, and one we can all see played out essentially public forums.



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