Processing Apple’s Fantastic June Quarter Numbers

Apple’s June Quarter numbers are nothing short of staggering.

Some quick thoughts from around the blogosphere about these numbers

Apple’s 9.25 million iPads represent 11% of the worldwide PC market. Business Insider put this bombshell together with Apple’s data and the latest data from IDC on the June Quarter. There may not be a one to one reduction, but that’s still $6 billion removed from the PC market.

Apple’s net profit from the quarter of $7.30 billion is 50% higher more than Apple’s total net profit for their entire FY 2008

It’s almost unfair, but when you have quotes like this from Nokia CEO Stephen Elop referenced by BGR  you have to use them, “The challenges we are facing during our strategic transformation manifested in a greater than expected way in Q2 2011.” Talk about the power of understatement. Nokia’s financial numbers only amplify the different directions for Apple and Nokia. Apple sold 20 million iPhones versus Nokia’s 16.7 million smartphones. It took 4 years but Apple is now the largest smartphone vendor in the world.

Apple’s iPad business is twice the size of Dell’s consumer PC business (from Wired)

Apple’s iPhone business is twice the size of Google’s entire operation. (courtesy of Andy Zaky)

The really staggering element about this blowout quarter is that Apple didn’t have:

  • New MacBook Airs that were put on hold due to OS X Lion. Customers have been in a holding pattern waiting on these new Thunderbolt port, Intel Sandy Bridge processor updated laptops.
  • OS X Lion had not launched so Apple didn’t see the system sales that usually accompany a new OS release. In fact, a hardware slowdown may have occurred as customers waiting to buy new hardware with the new OS.
  • NO new iPhone product launch in June (and US iPhone 4 sales seemed to slowed down for both AT&T and Verizon. US customers are waiting en masse for the new device)

So what does it possibly mean for the September quarter?

14 million iPads seems like a reasonable number. Shipping times are down, and production volumes are up.

4.4 million Macs seems like a reasonable number. New MacBook Airs are going to fly off the shelves. MacBook Pros are selling well. iMacs have been updated. Mac Mini is updated. All that remains is to update is the low volume Mac Pro.

It’s hard to imagine iPod numbers increasing with all the cannibalization by Apple’s other products, so 7 million iPods seems reasonable. The iPod refresh for the holiday shopping season should come late in the quarter with the expected sales bump occurring in November/December.

The real mystery for the upcoming quarter is iPhone/iPad 3

For the various amateur analysts like Horace Dediu, Turley Muller,  and Andy Zaky who show up on Fortune’s great tracking of Apple financial estimates  the real mystery will be trying to estimate iPhone 4 sales. Miss the iPhone number and your estimates will be off target.

Dediu who usually does a great job estimating Apple’s financial saw his accuracy score for the June Quarter tumble because per his own excited omission he missed the iPhone sales numbers. Horace thought that iPhone 4 sales would start to slow in advance of the next iPhone and with no new iPhone to drive volume. The exact opposite happened.

So a new iPhone is coming. You don’t let your number one product stay stale for more than 14 months. It’s time. Let’s lay out a couple of scenarios

Scenario 1: Status Quo. New iPhone is available for purchase September 1st. It’s an updated iPhone 4 with improved internal specs and cameras. The previous iPhone 4 is available in the US for $99 dollars with a contract. Only available on Verizon and AT&T.   This scenario depending on the availability of the new device probably leads to a sales number similar to 20 million number from last quarter as US customers realize that the redesign of the iPhone is 6 to 9 months away. This is the most vulnerable scenario for Apple at least in the US smartphone market and begs the question why the “delay” in the launch.

Scenario 2: New Hotness. New iPhone that has a bigger screen, improved specs, and improved cameras. It’s made available only on Verizon and AT&T. iPhone 4 becomes the lower cost option at $99 dollars. Available for purchase September 1st. Apple has both inventory of the new iPhone and continues to maintain inventory of the iPhone 4.  With a compelling new iPhone design and a cheaper iPhone 4, Apple could find itself in iPad 2 backlog territory. Sales of 25 million iPhones would not be out of the realm of possibility.

Scenario 3: iPhone Assault. New iPhone like in scenario 2 but made available on all 4 US carriers. Existing iPhone 4 is reduced in price to $99 and is made available to all US carriers. One additional carrier in China launches in September with the new hardware.  Apple introduces a pre paid $350 iPhone based on the iPhone 3GS (improved specs to allow for full iOS 5 features,  less memory, lower resolution, plastic case), and this device to be made available worldwide. With these options available and a potential 15 million iPhone 5 being readied in August for launch, and in theory 3 production lines operating to fulfill volume, Apple could sell a ridiculous 35 million iPhones with this 3 product lineup. All these moves setup for a massive December Quarter perhaps with an additional Chinese carrier added as well.

So with no clear picture of Apple’s iPhone launch plan, and with Apple apparently plugging the leaks to case manufacturers, financial analysts are looking at a massive range of estimates. Being 3 million iPhone units off, means being 2 billion off on Apple’s earnings.

iPad 3/2.5/HD impact

Apple appears to be on target for production of at least 4 million iPad a month with 5 million being a realistic production target. If the iPad HD is launched in September, it could possibly add another million iPads to the mix pushing Apple over the 15 million iPad mark. Course the retina iPad could cannibalize sales from the iPad 2, so pricing and features will be key. This iPad move would also setup Apple for a huge iPad December Quarter.

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