Apple Quarter Earnings Expected Higher Than Forecasts

By Jessica Davis  |  Print this article Print

Apple's (NASDAQ:AAPL) third quarter earnings are expected to be higher than previous forecasts driven by sales of iPhone. Similar to Intel's and IBM's better than expected earnings last week, the results could be pointing to early signs of an economic recovery for the technology sector.

Like Intel and IBM last week, Apple (NASDAQ:AAPL) is expected to report better than expected results for its third quarter this week, with one analyst expecting revenues of $8.31 billion.

That’s more good news for a technology marketplace that has held off on purchases as it awaits the end of a long and drastic cut in spending. 

For Q3, Bernstein Research expects earnings per share of $1.24, up from the consensus opinion of $1.16. Several factors are impacting Apple’s earnings results during the quarter, the firm says, including Apple price cuts of between 10 percent and 70 percent on its notebook line, plus updated specifications that make for a higher cost of manufacturing for new products.

Bernstein Research expects Q3 Mac sales of 2.5 million, which is flat year-over-year, a decline of 4.6 percent in sales of iPods at 10.5 million units, and a big increase in sales of iPhones – up 575 percent year-over-year and up 27.6 percent sequentially, including a boost in iPhone channel inventory.

A couple factors will weigh on Apple’s gross margins going forward, the firm says, including those notebook price cuts, a longer and more global back to school promotion, and higher iPhone component pricing which will add to the cost of manufacturing of the smartphones.

Looking ahead, Bernstein Research is expecting a material sequential decline for gross margins in Q4, but a brighter picture in the next fiscal year. The firm is forecasting earnings per share of $6.76 for fiscal year 2010, which it says is 35 cents above consensus.

"We estimate that even with falling Mac margins and materially lower iPhone cash average selling prices (ASPs) we think that overall Apple margins could increase next year due principally to the iPhone’s increased contribution to overall revenues -- 29 percent in fiscal year 2010 versus 18 percent in fiscal year 2009," writes Toni Sacconaghi in his brief report previewing the earnings.  


Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com

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