Apple Fiscal 1Q 2013 Estimate

This time I will definitely take chances and publish my estimates for Apple earnings for the Christmas 2012 Quarter (commonly known in Apple terminology as the 1st fiscal quarter of 2013.

This is definitely a challenging task as this quarter brings a lot of uncertainty and a lot of rumors have been circulating.
But if you ignore the rumors there are still some facts that deserve consideration.

First here come the numbers and I will detail the facts and supporting assumptions that I used.

Mac – the PC market is shrinking, even if Apple share of it is growing. Only laptops were really available during this quarter so I plan lower unit sales than last year by about 7%.

iPhone – this is the wild guess and probably the number with the highest range of estimates. I based my guess (this really end up being a guess really) on the fact that Apple increase his manufacturing capability year over year according to the number of devices they plan on selling. Increasing manufacturing is a very expensive proposition for the company so I’m sure they take this very seriously. I estimated a 50% increase compared to last year number.

iPad – it will all depend on how many iPad mini apple was able to produce. those devices were sold as soon as they were hitting the stores, they could not keep any inventory. So they probably sold as many as they could produce. Let’s assume 10 millions iPads mini and 16 iPads (that’s just 2 millions more than last quarter). Of course the average price goes down accordingly.
This number may actually be a little low.

iPod – down 25%.

Music/Peripherals/Software – I see those growing according to the rest of the devices sales and in line with previous years.
Music 40%
Peripherals 20%
Software 7%

Gross margin at 40% and Tax rate at 25% sound reasonable but those rates may seriously alter the Net income. Getting the revenues right is not enough to be on target with Net income as last quarter demonstrated.

End result:

Revenues a little short of $60B and EPS at $15.5. Those are aggressive numbers but we will know by Wednesday what the reality is.

Apple vs EPEAT – behind the scene

Interesting game of chicken between Apple and EPEAT.
Let’s explain a little. Apple makes computers and computers need to be recycled when we stop using them. But Apple makes innovative products with a design that sometimes goes behind what has been done (and recycled before). The latest MacBookPro Retina display is a good example of that, it features a few things that have not been done before (like a battery glued to the case).
EPEAT is one of those independent companies hired to rate the environment friendliness of computers, they put a label that guaranty a certain level of compliance.
Of course when a government agency want to buy a computer it needs to have that certification otherwise it’s just impossible to get it through the door.

Now let see how things play out.
- Apple cannot get EPEAT to certify their latest MacBookPro with Retina display. Not because that thing is treating the wellbeing of our environment but because it uses some techniques that are simply too new.
- Apple remove all of its product from EPEAT.
- Government agencies start complaining big time (they want their Macs so I can feel their pain).
- Background discussions take place.
- Apple apologize for making a mistake by removing their products from EPEAT and join again.

What you are not told is that in the meantime and without any publicity the MacBook Pro is now gold certified by EPEAT (after being previously rejected).
Interesting way to get what you want through an apology.

iPhone 5: sooner than later

I have a personal theory about the upcoming iPhone 5 release. I see it coming sooner than later.
The rational beyond that is based on a few facts:
- Apple can be worried about their Q3 2012. If the iPhone 4S sales starts to slow down, having a product introduction would be a good way to boost the revenues.
- Every time a new Apple product is released there is a period of approximatively 2 months when this product is under some serious supply constraints. The latest to date that experimented this shortage of supply is the iPad 3. It has been available after a delay for at least 2 months. It was the same for the previous iPhone.
- iPhone 5 is a product that is expected to get a lot of success because of the renewal business. People who already use an iPhone and are waiting for the iPhone 5 to upgrade their old phone.
There are no numbers to estimate that market but a little survey is enough to indicate that it’s a big number of devices.
- The previous years sales number also shows that a lot of iPhones (and smartphones in general) find their ways under the christmas tree. Last year the christmas quarter showed a very large increase in iPhone sales.

So it would not be very smart for Apple to be supply constrained by 2 simultaneous events (renewal and christmas), that’s why I would not be surprised to see an announcement of the new iPhone 5 at the end of August or very beginning of September, instead of end of October.
That way Apple can work their way through the supply constraint due to renewal purchases through September and October. And do it all over again for Christmas in November and December.
That would be smart.