Apple’s Fourth Quarter 2013 Results: Revenue up, profit down

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Apple’s fourth quarter 2013 financial results were discussed on their earnings call yesterday, and the numbers were hardly surprising. Analysts closely predicted most everything that was reported. Apple revealed revenue of $37.5 billion – up from $36 billion last year-, and a profit of $7.5 billion – down sharply from $8.2 billion last year. This quarter’s gross margin was 37%, down from 40% in the year-ago quarter. International sales made up 60% of the revenue this quarter.

Unsurprisingly, iPhones and iPads are still selling like crazy. 33.8 million iPhones were sold in the September quarter, a new record, up from 26.9 million in the year-ago quarter. iPad sales were mostly flat at  14.1 million, up from 14 million in the year-ago quarter. Mac sales are continuing their downward slide with just 4.6 million sold, down from 4.9 in the year-ago quarter.

Though iPhone sales are up, the ASP (Average Selling Price) of each unit is down to $577. Customers appear to be buying mostly lower-end iPhones, enough so that iPhone ASP dropped $4 per handset from the third quarter this year. It’s unclear if the iPhone 5C had anything to do with the drop, considering analysts claim that 5C sales are far below Apple’s expectations. Tim Cook addressed this on the call, urging people to look at the bigger picture instead of the change of product flow through one supply chain. Cook also claimed that the 5C was not Apple’s attempt at a entry-level iPhone, instead positioning it between the extremely inexpensive 4S and the new 5s.

Strong iPad sales were likely tapered by the anticipation of a new model this Fall, which Apple did provide. Sales going into 2014 should be robust as we enter the holiday shopping season with two huge iPad upgrades hitting store shelves. iPad ASP rose slightly to $439 compared to this quarter last year, but are down overall on strong sales of the cheaper iPad mini. The new iPad mini with Retina display being priced at $399 should keep ASP relatively flat in the future.

Cook attributed the steady decline in Mac sales to the release of the new iMac last year, with a delayed availability date and constrained supplies after that. Guidance for Mac sales in the next year demonstrate a belief that this fall in sales will be reversed somewhat with better availability of upgraded models.

Apple’s guidance for the first quarter of 2014 are strong, estimating revenues to be between $55 and $58 billion – both above the $54.5 billion of the year-ago quarter –  with a gross margin between 36.5% and 37.5% – both below the 38.6% of the year-ago quarter.

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