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I detailed blowout earnings from Apple in the article Easy Money Has Already Been Made in Apple. Out of 45 analysts, who get paid big bucks to follow Apple, not even a single a single analyst had estimates that came close to the actual results.
The two real reasons behind the surprise earnings report are Siri and sales of iPads to corporations.
When Apple released iPhone 4S, Apple stock went down. Investors and analysts were disappointed. Analysts were expecting iPhone 5 that had a form factor different from iPhone 4. Instead Apple introduced iPhone 4S which looked the same as the older model iPhone 4.
I recognize its importance. (See, "Siri Is Apple’s Post-Jobs Ticket To $1,000.")
As Siri's popularity became evident, analysts started ratcheting their estimates and they kept on increasing them all the way to the earnings release. Consensus estimate was for 30 million iPhone sales. At the Arora Report, we estimated the whisper number for iPhone sales to be about 33 million units. Apple sold 37.04 millon iPhones in Q1, up 128% from last year. Google (GOOG) Android, Microsoft (MSFT) Windows phone and RIM (RIMM) Black Berry were no match for Siri.
The second catalyst behind the blowout earnings can be found in sales of iPads to corporations. Apple sold 15.43 million iPads during Q1, up 111% from last year.
When large corporations buy iPads, they buy by the thousand. In October, 2011 Apple had revealed that nearly all Fortune 500 companies were evaluating iPad. Large companies run their businesses using enterprise resource planning, or ERP, from firms such as SAP (SAP) and Oracle (ORCL). SAP has been pushing iPads hard.
Small businesses were also eagerly making iPads part of their routine. I witnessed a lady ask the clerk behind the electronics counter at my neighborhood Wal-Mart ask how many iPads were stock. She bought all of them. This lady worked for a firm with 50 employees, the firm provides surveying services for road projects.
Some analysts were concerned that Kindle from Amazon.com (AMZN) would take a bite of Apple iPad sales. These analysts were wrong because they did not understand that Kindle does not have a good application programming interface and as such does not integrate easily with the information technology systems that run businesses.
Going forward, the iPad juggernaut in corporations will continue. Regarding Sir there is a question, “Will the novelty wear off?” The answer matters to astute investors because Siri drove a very large proportion of sales of Apple in the last quarter.
About Me: I am an engineer and nuclear physicist by background, have founded two Inc. 500 fastest growing companies and have been involved in over 50 entrepreneurial ventures. I am the chief investment officer at The Arora Report which publishes four newsletters to help investors profit from change. Please feel free to write me at Nigam@TheAroraReport.com
Full disclosure: I am long Apple from an average of $131. I took profits on 50% of the position at an average price of $360. Subscribers to ZYX Buy Change Alert may have a similar position and may have taken similar actions.
