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By Jeremy Glaser and Brian Colello, CPA | 01-23-2013 05:00 PM

Very Little Good News in Apple's Results

Fiscal first-quarter results were roughly in line with expectations, but disappointing revenue and margin guidance did little to quash fears that Apple can't sustain its streak of outperformance, says Morningstar's Brian Colello.

Jeremy Glaser: For Morningstar, I’m Jeremy Glaser. The market was certainly disappointed by Apple’s fiscal first-quarter results and guidance for the next quarter. I’m here with Brian Colello, our Apple analyst, to get his thoughts.

Brian, thanks for joining me today.

Brian Colello: Thanks for having me.

Glaser: So what’s your overall view of this quarter for Apple?

Colello: Well, I think you have some good news in terms of they did have a revenue beat, they did have an EPS beat in terms of their guidance for the fiscal first quarter, for the December 2012 quarter. However, iPhone units were a little bit disappointing; iPad units were a little bit disappointing. So it wasn’t a great beat on that front. It was actually relatively in line with consensus depending on where you look at.

So it wasn’t the sort of blow-out quarter that you might normally expect and maybe what bullish investors were hoping for in light of all of these new product launches. The bigger issue, I think, was the forecast for the March quarter, their fiscal second quarter. That was much lighter than expected. Again, if you had a blow-out quarter, you could see Apple maybe getting away with a lighter forecast for March, but since the December quarter was in line, that March forecast is especially disappointing.

Glaser: So, maybe not a lot of great news. On the iPhone side, prior to this earnings report, there were some reports of supply chain cuts, some worries about iPhone units. How many did they ship, and was that a number that is in line with a product that might not be doing as well as we had thought?

Colello: Well, they shipped 48 million units. So that’s much better than the 37 million at the height of the iPhone 4S launch a year ago. So, certainly there's some growth there, and even if you looked at that initial weekend, 5 million of sales versus 4 million for the 4S, you kind of saw that you would have a stepped increase in iPhone sales. So, it was good, but investor expectations were for $50 million or within that range. And so it was a little bit on the lower side there, and that’s a little disappointing.

One of the positives thing actually is that ASPs held up pretty well, the price of the phones, because you heard from Verizon that perhaps it was an unfavorable mix that they sold more cheaper 4S and 4s rather than the iPhone 5 this quarter. Apple’s results don’t really point towards that. They still had pretty good pricing there on those iPhones.

So, I think there was good iPhone revenue, but again the forecast for the March quarter is disappointing. When you think about the 4S launch, it not only did have a great December 2011, the first-quarter launch, it also followed it up with a really strong March 2012 when it sold into China and other places. So, the forecast doesn’t really point to that this time around.

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