Apple blows past expectations in first post-Steve Jobs report

Everybody was counting on Apple (AAPL) to report record earnings, but nobody — not even the most bullish independent analysts — predicted anything like the blowout the company just reported.

Trading was halted at 4:27 p.m. after Apple’s shares had closed at $420.50, down $6.91 (1.62%) for the day. When trading reopened about 25 minutes later, the stock immediate shot up more than $37 (nearly 9%).

The numbers, from top to bottom, are actually quite stunning:

Sales: $46.33 billion, up 73.3% year over year
EPS: $13.87, up 115.7%
iPhone:  37.04 million units, up 128%, compared with 40% for rest of market
iPad: 15.4 million units, up 111%
Cumulative iOS devices: more than 315 million
Mac: 5.2 million units, up 25.8%, compared with 0% growth for the PC market
Asian Mac sales: up 58%
iPod: 15 million units, down 22.9%, more than half iPod touches
iTunes store revenue: $1.7 billion
Gross margin: 44.7%, up from 40.3% last quarter
Apple store revenues: $6.1 billion
Total stores: 361 stores. $17 million average revenue
Cash and marketable securities: $97.6 billion, up $16 billion
Visitors: 110 million, up 45%
Revenue guidance: $32.5 billion
EPS guidance: $8.50
GM guidance: 42%

“We’re thrilled with our outstanding results and record-breaking sales of iPhones, iPads and Macs,” said Tim Cook, Apple’s CEO. “Apple’s momentum is incredibly strong, and we have some amazing new products in the pipeline.”

RBC’s Mike Abramsky characterized the results as a “massive beat” across the board, and pointed out that iPad sales were “more resilient than expected” against Amazon’s (AMZN) Kindle Fire.

The earnings call just started. Apple is providing live streaming at www.apple.com/quicktime/qtv/earningsq112. Our notes below the fold.

COO Peter Oppenheimer reviews the numbers, adding bits of color here and there.

Q&A:

Q: Describe iPhone momentum at end of quarter? Tim Cook: He was thrilled etc. Attributes to “just breathtaking customer reception” to iPhone 4S. Made a very bold bet as to what the demand would be, it turned out we were still short of supply and ended quarter with a significant backlog. Improved some, but still short in some geographies. Also pent-up demand. Thinks made correct decision to go with a range of iPhones. The quarter’s extra week also helped. U.S. and Japan were particularly strong. Also pleased with greater China, even though didn’t sell into mainland China until January. “It turns out we didn’t bet high enough.” iPhone 4S was the most popular iPhone throughout the quarter.

Q: Was pent-up demand all countries, or just the countries that just got the phone? [Dropped call.]

Q: Q about hard drives. For March quarter, Cook doesn’t expect any problem getting hard drives for Macs, but may have to pay more.

Q: Price declines of RAM and DRAM last quarter. What about next quarter? Cook: Did bet better prices than expected on Flash and displays last quarter and that should continue.

Q: Any impact on iPad sales of Amazon Kindle Fire and other competitors. A: Sales consistent with Cook believes that this is a huge opportunity for Apple and that tablets will eventually overtake PCs. Our iPad ecosystem is “in a class by itself. More than 170,000 apps compared with a few hundred for the competition. We don’t really see these limited function tablets and e-readers being in the same category. We don’t think people who want an iPad will settle. I think most people will agree that it was the year of the iPad, not the tablet, for the second year in a row.

Q: iPhone price elasticity? What about the pre-paid market? Each model were important in getting to 37 million units. But the iPhone 4S was clearly the most popular. It’s too early to tell how the pre-paid market will play out. In every country in the world trying to adjust and do better in the future.

Q: Re Peter’s comment that they are “actively discussing” what to do with the cash. A: We don’t have anything to announce today? Q: Is there a time frame? Will you announce? A: Actively discussing.

Q: Gross margin going down from 44.7% to 42% is a big drop. A: Factors affecting are 3: 1) loss of leverage from revenue with 14th week. 2) Some one-time items that won’t reccur 3) Dollar is much stronger. 44.7% is as high as he’s seen.

Q: Munster asks about TV. A: Tim: Apple TV product actually doing very well. As of September 2.8 million in last fiscal year. Set a new quarterly record of 1.4 million last quarter. Otherwise no comment.

Q: Hows the new job? A: You know I love Apple. Reminded everyday what a privilege it is to work with his incredible team. You can see the results.

Q: About dividends or buybacks. A: Examining all options. “Were not letting it burn a hole in our pockets.”

Q: About iCloud. A: Over 85 million customers have signed up for it in just 3 months. It solved a lot of problems and made their lives much much easier. It was a fundamental shift, recognizing that customers had multiple devices. “It’s not just a product, it’s a strategy for the next decade.”

Q: iPhone distribution. Esp. China. A: Now over 130,000 points of sale, up 35% from last year. We added carriers in Japan and Sprint in U.S. China Unicom still a key partner, nothing to announced today. But China is an extremely important market for us.

Q: Revenue guidance down 25% from last quarter. A: Peter points out that end of gift giving seasons will push sales down sequentially. Five reasons down more this year than last.

1. 14th week.
2. Extra week will not be in March quarter, as they were last year.
3. Last year increased iPhone inventory
4. Pent-up demand from iPhone 4S
5. U.S. dollar has strengthened, esp. compared with Europe.

Q: Acquisition strategy. Peter: We tend to make small ones for talent or IP. We tend to do several each year. Our track record is very strong.

Q: How are they integrated? Tim: We don’t believe in divisions like other countries do. Semiconductor team, for example, does semiconductors for the whole company.

Q: Geographic expansion. When stores in India and Russia? Tim: We’re selling there online, through carriers and retail partners. Singles out Brazil as a huge opportunity, but not Apple retail store in the near term. In India, revenue increased three times in last quarter, but from a small base.  In terms of carriers, you can but we’re looking at the same list you are.

Q: Did iPad benefit from lower-cost tablets? Will the ultrabooks do the same for Macbook Air? Tim: I looked at data on a weekly basis after the Fire launched, but didn’t see an effect. My own view is that there was no obvious change in the data. There is cannibalization of the Mac by the iPad. There thing about the iPad is you can see it starting to appear everywhere. Fortune 500. K-12. Sold twice as many iPads as Macs. Of course consumer has moved in a huge way. It’s winning market by market by market. I think it’s remarkable that we’ve sold 55 million iPads and we’ve only in business since April 2010.

Q: Are you seeing accelerated refresh rate or halo effect. Tim: In enterprise, we’ve seen iPhone being a catalyst, followed by iPad followed by Mac. One pulling the other. We’ve seen that phenomenon before with the halo that the iPod created for the Mac.

Q: Android vs. iPhone. Is it becoming a two-horse race. OEM model vs. integrated. Tim: Not Mac vs. Windows at all. Mac is still single-digit of world market. Where iOS compares favorably with any competitor. Haven’t found a way to get crisp, transparant Android numbers. Cites NPD and Nielsen data showing iPhone catching up to Android. It seems like all the data in the U.S. shows that it’s a very close race. In iPad way ahead. And no product comparable to iPod touch. What we focus on is innovating and making the best product and ignoring how many horses there are.

Q: 4G and larger screen. Has popularity of larger screens and 4G changed your view. Tim: Won’t comment on future road map. We sold 37 million iPhones and could have sold more. There a lot of people who like what we’re doing.

And that’s a wrap.