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On October 25th, Apple (
AAPL
) announced earnings for the 13-week period ended September 29,
2012. For the quarter, Apple reported revenue growth of 27.22% to
$35.966 billion and earnings per share growth of 22.98% to $8.67
per share. The earnings per share outcome in the quarter was
negatively impacted by accelerated recognition of foreign
exchange-related losses.
In contrast to the September quarterly results, for the fiscal
year ended the same date, Apple reported revenue growth of 44.58%
to $156.508 billion and earnings per share growth of 59.54% to
$44.16.
View Apple By Seasons, Not By Quarters
The charts below illustrate the quarterly changes in
year-over-year and sequential rates of revenue and earnings growth
for the most recent twelve fiscal quarters. Apple's high annual
growth rates are now concentrated in a six-month season comprised
of the company's December and March quarters. The June and
September quarters have comparatively slower rates of revenue and
earnings growth and represent their own six-month revenue and
earnings season.
Apple's quarterly results are essentially static snapshots of a
fast-moving enterprise. Results are best viewed based on annual
growth rates and the year-over-year growth rates of the company's
two and distinctly different revenue growth seasons.
Apple's quarterly revenue growth rates FQ1 2010 - FQ4 2012:
(click to enlarge)
Apple's quarterly earnings per share growth rates FQ1 2010 - FQ4
2012:
(click to enlarge)
Apple's Annual Revenue and Earnings Growth Rates
The charts below illustrate Apple's dramatic rates of revenue
and earnings growth over the most recent seven fiscal years. The
annual rates of revenue and earnings growth will continue to be far
more uniform than the rates of quarterly growth depicted in the
graphs at the top of the article. The highly seasonal nature of
Apple's revenue activity will continue not only because of the
refresh cycle for the Apple iPhone, which comprised over 50% of the
company's FY2012 revenue, but the influence of changes in the
company's regional revenue mix as well.
Apple's annual revenue FY2005 - FY2012:
(click to enlarge)
Apple's annual EPS FY2005 - FY2012:
(click to enlarge)
The iPhone and the iPad
Combined, the Apple iPhone and iPad represented about 72% of
Apple's reported revenue in the fiscal year ended September 29,
2012. The chart below illustrates the revenue generated by the
iPhone and iPad and the percentage of total reported revenue
generated by the two product lines over the most recent twelve
fiscal quarters. The release of the iPhone 5 late in the September
quarter and without sufficient supplies available to meet initial
demand reduced quarterly revenue growth and pushed unit sales into
the current quarter and the new fiscal year. In the conference call
with analysts following the release of September quarter earnings,
Apple's management stated customer expectations for the release of
the iPad mini diminished iPad unit sales growth in the quarter. The
iPad mini will boost the company's revenue growth performance in
the October through March six-month season.
(click to enlarge)
Apple's Regional Revenue Mix
The charts below illustrate Apple's global revenue mix and the
rates of growth in each of the regional segments in the fiscal year
ended in September. Greater China is Apple's largest revenue source
outside the United States and in the current fiscal year that began
on September, 30, 2012, Asia-Pacific, inclusive of greater China,
will eclipse Europe to become Apple's second-largest revenue
region. Apple now has two major iPhone carriers on China's mainland
and the possible addition of China Mobile as an authorized iPhone
carrier looms large for potential revenue growth over the next two
fiscal years. The annual iPhone refresh cycle and the winter
introduction of the iPhone on China's mainland each year amplify
the pronounced growth performance differences in Apple's two annual
revenue and earnings seasons.
In the recent September quarter, the limited distribution of
the iPhone 5 following initial release boosted the rate of
revenue growth in the Americas region to 43.14%. The rate of
revenue growth in the Europe region during the quarter fell to
8.46% and in the Asia-Pacific region revenue growth in the
quarter was 15.42%. Both the Europe and Asia-Pacific regions will
deliver much higher rates of revenue growth over the next six
months.
(click to enlarge)
Apple's Growth Seasons
Looking forward into FY2013, Apple will experience very high
rates of revenue growth in the December and March quarters.
Absent an earlier than expected release of the next flagship
iPhone handset in July or August of next year, Apple's
six-month revenue and earnings growth patterns will repeat the
past fiscal year's behavior.
The Apple iPad will be Apple's fastest-growing product line
in the current fiscal year. In the fiscal year ended in
September, iPad unit sales rose by 80% versus 73% unit sales
growth for the iPhone. Last week's introduction of the iPad
mini and the refresh of the existing iPad line in time for the
holiday season will contribute to strong revenue growth through
the March quarter.
Investors should be less concerned with the rates of each
quarter's revenue and earnings growth and focus more on the
average rates of growth in each of the two distinctly different
annual growth seasons.
Outlook for FY2013
Although the iPhone 4S delivered extraordinarily high gross
margin for Apple, it commanded the world stage for only four
months. iPhone 4S shipments peaked in January, four months
after introduction. In January, Apple filled iPhone 4S
backorders from the December quarter and introduced the handset
through authorized carriers on China's mainland. I expect the
iPhone 5 and its new form factor to deliver strong sales for
six months following introduction but at lower average gross
margin than its predecessor during its first six months in the
market.
The iPad line of products, inclusive of the new iPad mini,
may deliver the highest rate of revenue growth of Apple's four
major product lines this fiscal year. The timing of the mini's
release in October and the concurrent refresh of the existing
iPad line may exaggerate the difference in the revenue growth
rates between the company's two revenue and earnings growth
seasons.
Apple is on track to deliver average revenue growth in the
current fiscal year close to last fiscal year's nearly 45% rate
of growth. Apple's ability to increase margin on newly released
and refreshed products will determine the fiscal year's overall
rate of growth in earnings per share.
Disclosure:
The author is long Apple shares.
See also
Spreadtrum Communications' CEO Discusses Q3 2012
Results - Earnings Call Transcript
on seekingalpha.com