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Apple Fourth Quarter Estimates

As Philip Elmer-DeWitt is still interested in my estimates I provided the following:

Revenues ($B) 57.8
EPS ($) 14 (908m shares)
iPhone (units) 56.4 million
iPod (units) 7.6 million
Mac (units) 4.14 million
iPad (units) 26.5 million
iTunes/Software/Services ($) 4.2B
Accessories ($) 2.2B
GM% (percentage) 37.1%

I arrived at these estimates without looking at anyone else’s (except for Apple’s own published guidance). Soon after sending them I noticed that Daniel Tello published his own.

In the same format as above, I quote them for comparison. Please visit his post for additional detail.

Revenues ($B) 59.0
EPS ($) 14.92 (895m shares)
iPhone (units) 56 million
iPod (units) 9 million
Mac (units) 4.65 million
iPad (units) 25.5 million
iTunes/Software/Services ($) 4.3B
Accessories ($) 1.8B
GM% (percentage) 37.8%

The graph below shows the history of revenue guidance vs. revenue reported. The last quarter shows my estimate for net sales.

Screen Shot 2014-01-15 at 1-15-4.06.58 PM

Note that the company achieved at or slightly above its upper guidance ever since they started offering a range for guidance (i.e. since Q1 2013). My estimate for sales is therefore very near the top of guidance. The figures for units earnings and margins all result from this assumption.

  • Space Gorilla

    First! :)

    • marcoselmalo

      Here, have another. This is going to start counting against your credit score.

      • Space Gorilla

        Ha! Good one! I miss the show.

  • xynta_man

    I personally would think that iPad sales are bigger (something like 30 million), but than again Horace is probably right.

  • Sacto_Joe

    I’m thinking somewhere around 30 million iPads and 60 million iPhones. I’m basing this on the iPad mimicking the growth pattern of the iPhone and the extreme demand with the upgrade cycle now moved to the Winter quarter. Literally, the only limiter on sales of these two products was production capacity. Quality devices are by their nature tough to grow in production capacity.

  • willo

    Mine are:
    55m iphones
    24m ipads
    7m ipods
    5,5m macs
    4.6b iTunes
    eps 14,74 (872m shares)
    rev 59,2b

  • Alan

    Striking how this chart resembles your logistic function / technology diffusion charts.

    (Looking mainly at the “envelope” described by the peak quarters).

    • marcoselmalo

      Yes, I also noticed how the lines start closer to the lower left corner and end up near the upper right corner. :D

    • macyourday

      Please excuse my ignorance, but isn’t logistic(s) something the army deals with and logarithmic (or log) is the mathematical term? I only did pure and applied mathematics a long time ago, but not economics.

  • Gene Grush

    December quarter is the hardest for Apple to predict. For each quarter, Apple has three weeks of sales when reporting earnings. For the first three quarters, the sales to date can be a strong indicator of the total quarter. For the december quarter, christmas is a little less predicable. I would go with Philip’s numbers. I believe your Mac count is a little low. Something around 58.5 to 59 for total revenue.

    The results of December quarter is not as important as the guidance for this quarter. Are they going to come in at 43-44 or higher.

  • LTMP

    I’m aiming slightly lower for iPhone with 55MM. I suspect that the grey market purchases for China might be lower due to the expectation of China Mobile coming on board.

    I’m very curious to see what the current quarter will end up like. With China Mobile on board we should see a nice bump in iPhone sales, and the release of the Mac Pro should make for an increase to the Mac ARPU if not unit sales.

    • Sacto_Joe

      We need to keep in mind that a lot of those grey market iPhones that went into China Mobile can’t access its high speed internet. They’ll all have to be upgraded to at least the 5C.

      • LTMP

        I hadn’t considered that. It seems likely that those who purchased grey market phones are also the ones who could afford an upgrade.

      • charly

        The people who bought iphones on China Mobile bought them for status, why else use a phone without high speed internet. They would never been seen death with a cheap 5C. 5SG or no upgrade

  • ptmmac

    My take on earnings this time is like Sacto Joe’s because this was the way Apple earnings were before Q1 2013. I am pretty sure that much of the negative attitude towards Apple on Wall Street is due to the change in guidance from always low to much more on target. This change was not good for Wall Street’s ability to look smart with whisper numbers and high dollar clients.

    Greed is really the driver of my guess, not logic. The only really concrete positive that I can imagine for Apple for iPhone volume was the switch to the iPhone 5c which should have removed some of the supply constraints based upon the difficulties involved in ramping up manufacturing for the 5s cases. The iPad mini will have helped hold the line against Android tablets, but I doubt they were a huge driver of growth like in prior quarter’s.

    Looking forward, Apple will be guessing at the effects of China Mobile on their sales during the Chinese New Year. The other big question mark is will there be any new product roll outs this year in later quarters. I am expecting a larger Pro version of the iPad, but again that is just a guess based upon how they have grown their product line in the past.

    The iPad Pro would be quite useful for businesses especially for register systems. I imagine Target is looking for a non PC based solution for their registers. A $600 iPad that has a bigger screen would definitely be worth looking at. PC’s for replacement solutions would be twice that just for the terminal. Adding in the fingerprint scanner for users would make security much tighter and compelling. A smaller footprint, built in power back up, no USB ports, powerful software for building the front end on native code, much lower power requirements, and only needing a standard sized metal case to lock down the terminal would be the supporting reasons for the change. Wireless versions of the iPad mini would make manager support functions something that could be carried around for trouble shooting.

    • dreamfeed

      “I am pretty sure that much of the negative attitude towards Apple on Wall Street is due to the change in guidance from always low to much more on target.”

      Apple took this step in response to the already growing negative attitude, so, no. The problem was analysts making crazy high estimates which Apple started to miss. By making more aggressive – and therefore more accurate – estimates, Apple hoped to regain some control of expectations.

      • macyourday

        I’m pretty sure the negative (or possibly insane) attitude towards apple from “the street” bears no relation to fact or actual logic other than market manipulation for their own profit, just like all actions from the street. Companies with vague or impenetrable reporting like amazon make their scams much easier to hide behind bs and “estimates”. Failing to meet (gu)estimates is always the company’s fault but someone makes big bucks anyway.

    • charly

      As far as i understand they targeted the update server in the Target credit card heist so i don’t see how an arm solution would have been better.

      A fingerprint scanner does not work in a money situation as you are already doing something illegal and fingerprints can be easily faked.

      • ptmmac

        I was not aware of the specifics on the technique used other than memory scraping being used. I was thinking this was based upon physical access to a Target terminal at some point.

        The fingerprint could be used to keep access to employees instead of passwords or in addition to passwords for managers.

      • charly

        But passwords are secrets and fingerprints are not.

  • Avatron Software

    I think your chart means to say “Revenue in $ million,” not “Revenue in $ thousand.”

    • Kizedek
  • John Severson

    Cheap android phones are a great stepping stop for those migrating from traditional feature phones to a smart phone since the entry price to begin using them is relatively cheap. My housekeeper just a received cheap Android phone, but you know in three years – she will be on an iPhone. When the consumer’s appetite for using smartphones grows, the more likely they will migrate to the best of the best – Apple iPhones. The purchasing process here is you need to learn first by buying the cheap stuff and then realizing what you’re missing as you experiment. So growing Android market share is a good thing for Apple. You can see how this has played out in more developed countries such as US and Japan. This will be a big boon for Apple.

    • yummyyummyfly

      Or your housekeeper might get locked into certain features or services or apps that are exclusive to Android (e.g. certain Google features or apps.)

      Or is that an impossibility?

      #NetworkEconomics

      • iObserver

        It’s possible but not as likely, android is less “sticky” than iOS.

        Additionally, there is immense difference between the best high-end android phones and iPhone- you must be new to this whole smartphone thing. Do a bit of reading, this site is wonderful. For some back story, smartphones have been pretty popular since 2007 when Apple introduced the iPhone. Their popularity has continued via the iPhone and accelerated further once android et al. set out an explicit plan to copy the iPhone as closely as possible.

        And once again, to Google’s own admission, certain Google products work BETTER on iPhone than android, including maps.

    • obarthelemy

      didn’t play out that way in almost all other countries though (Germany, France, …) so, no.

    • charly

      There are two local killer apps on the market here. Both are Android only with no good IOS replacement. So why claim that IOS is best

  • RM

    I would like to see the chart on a logarithmic scale when pondering the question can apple still grow.

  • http://info-tran.com/ Info Dave

    Dunno, Alan, from the view here, it looks like Apple’s growth is decelerating. That is, until we get the next “third leg on the stool.”

  • http://aaplmodel.blogspot.com/ Daniel Tello

    Thanks for the plug, Horace. Interesting contrasts in our estimates this time around, except iPhone units.

  • armchair analyst

    Anecdote: early December I went to the big four telcos here (somewhere in a major recession hit European economy) on the hunt for a 32 Gb gold 5s.

    Three shops were sold out and added me to a long list of clients to be called when restocked; the fourth got an order through in a week, which I bought. I paid about $600 with a 2y $70/month contract, which was slightly cheaper than the other providers. The phone was available at the Apple Store for $1100 without contract.

    Two weeks ago I got a call from one of the three who didn’t have it last year to say she finally had one – a 64Gb though.

    Conclusion:
    a) Apple screwed up totally in their supply chain and lost millions of potential sales, which were not only deferred but fulfilled by Samsung. So revenues will be on the low side this quarter, and not improve.
    or b) sales were massively higher than expectations and revenues will blow past estimates this quarter (my preference as an Apple shareholder)
    or c) Apple sold most of what they had, telcos didn’t subsidise much; that created a bunch of people who will buy in 2014. So revenues near the top end of estimates this quarter and not bad next quarter either.

    • Rudolf Charel

      What country would that be? Here any 5s phone is available for delivery in one day, at 30% lower prices than you quote, from Apple direct. I imagine your conclusions are as wrong as the story you tell.

    • smackfu

      Were you locked in to the gold color? It seems like that was definitely produced in lower quantities than the other colors.

      Also, I know that in some of those recession-hit European countries, like Spain, iPhones are not popular at all, which probably affects supply in the country overall.

      • armchair analyst

        Yes I had to have the gold one. There were other sizes and colours available to some extent through the telco outlets, but I got the impression there were shortages across a range of iPhones. I’ve seen quite a few people walking around with the gold 5s here – my guess is that it was very popular (as the previous iPhones were) and was in the shops told that “everyone wants the gold 5s”. You’re right about Spain but not the case here.

      • charly

        You need the goldolored iphone because otherwise wont be able to see at a glance that you have the new iphone .

    • Walt French

      Or perhaps Apple recently diverted most production to start-of-sales stock in China, having believed that there’d be little in the way of lost (vs deferred) sales in your area. Looks like at least the belief was correct.

  • vincent_rice

    I have never understood the point of these estimates. Why not just wait for the actual figures?

    • http://www.asymco.com Horace Dediu

      If you’re asking why I make these estimates the answer is in the first paragraph. Put another way, it’s because there are people who asked them. So your question should be put not to the authors, who are merely obliging, but to those who ask (and sometimes pay) for that opinion. But if you stop and think further about why there is a demand for guesses about the future, the answer might come easily without further inquiry.

      • actualbanker

        It’s fun! Especially after PED shows the results. Though recent, perhaps grudging, estimates/posts suggest that Mr Dediu doesn’t find them that fun anymore.
        Thanks for indulging us! As a long time follower I’m always interested in the Asymco estimates.

      • http://www.asymco.com Horace Dediu

        It was much more fun because Apple’s guidance was so comical. Not any more. There’s no sport in it anymore. I told this to PED but he’s still keen to keep up the tradition, sort of like fox hunting.

      • Sean Jehan

        When Apple stopped their tradition of low balling estimates, I also stopped my tradition of following them.

  • Chiam

    I guess the stock will tank if you are right as the street expects higher. Will sell all tomorrow

  • jambani

    Horace,
    Why are you assuming essentially flat share count vs the Sept Q? Do you think the company stopped their share repurchases?

    • http://www.asymco.com Horace Dediu

      I don’t know and have no way of estimating how many shares they are purchasing.

      • http://aaplmodel.blogspot.com/ Daniel Tello

        Horace, as of the end of the September quarter there were 899 million shares outstanding (see the balance sheet). The 908m used on the income statement is the weighted average of the outstanding shares over the quarter. So already there’s a 9m share benefit for the December quarter without any further buybacks are taken into account.

      • http://www.asymco.com Horace Dediu

        Thanks for this. I was not aware of that.

      • http://aapltree.wordpress.com/ Mav7

        There’s another way as well, if less precise. Apple has a Definitive Proxy Statement, see pg. 4

        http://investor.apple.com/secfiling.cfm?filingID=1193125-14-8074&CIK=320193

        “As of the Record Date, there were 892,553,950 shares of the Company’s common stock issued and outstanding”

        Based on the 2011 and 2012 Definitive Proxy Statements this number appears to be very close to the “Basic” share count reported for fiscal Q1. I believe extrapolation via basic/diluted share differential (which is trackable by quarter) will yield a decent approximate of diluted shares outstanding, and by extension net reduction in diluted shares. That’s how I ended up at 898M diluted shares outstanding for fiscal Q1 (share-weighted basis).

      • Tim Cook

        You, sir, are a douchebag

  • JohnB

    I’m glad PED keeps asking you for these estimates. They’re very useful (as are Tello’s).
    A question: I’m surprised you’re not more optimistic about iPhone sales in the Dec Quarter. Does the NPD survey PED quoted today make you rethink this at all? I realize the NPD survey is restricted to the US, but the increase in Apple’s US penetration (if true) seems higher than generally appreciated.

    • http://www.asymco.com Horace Dediu

      It’s not that I’m not optimistic, it’s that I’m fitting iPhone to guidance. For the past year my estimates have not been driven by market observations. Apple delivered consistently near guidance so as long as they are maintaining this accuracy I will take their cue.

  • Alberto

    Did you take into acount the stronger $?

    • http://www.asymco.com Horace Dediu

      As I said in a previous comment the only thing I took into account was guidance.

    • http://aaplmodel.blogspot.com/ Daniel Tello

      The dollar is weaker for all of Q1 v. Q4, not stronger.

      • marcoselmalo

        Vs. what? Is it possible to talk about the strength of a currency without comparison to another currency?

      • http://aaplmodel.blogspot.com/ Daniel Tello

        The $USD index compares it to a basket of currencies. I don’t know if that’s the right basket for Apple though.

      • marcoselmalo

        Thank you!

        Something amusing I read recently: someone wrote that the steep rise in the price of bitcoins was a sign of all the currencies in the world crashing.

        I’m not sure if they were serious or joking.