Despite concerns about increasing competition from Android devices, Apple managed to exceed expectations for iPhone sales for its second fiscal quarter, reporting a healthy year-over-year jump in both revenue and profit.
For the quarter ending March 31, 2012, Apple posted revenue of $39.2 billion, compared to $24.7 billion for the same period in 2011. The average forecast of 44 analysts polled by Thomson Reuters was for revenue of $36.81 billion. Net profit jumped to $11.6 billion from $6.0 billion.
The company sold 35.1 million iPhones in the quarter, showing 88 percent year-over-year unit growth. Analysts at Piper Jaffray had expected sales of 30.5 million iPhones. Apple also sold 11.8 million iPads during the quarter, a 151 percent year-over-year unit increase, and 4 million Macs during the quarter, a 7 percent unit increase. Sales of iPods were 7.7 million, a 15 percent unit decline.
At the close of trading, before earnings were announced, Apple shares declined $11.42 to close at $560.28, down from its highest-ever closing price of $644.00, reached on April 10. Apple shares have declined in 10 out of the last 11 trading days, as concerns grew that the company, faced with increasing competition from Android-based phones, would reveal sagging iPhone sales. Thirty minutes after the earnings were released, shares jumped $41.81 to $602.09 in after-market trading.
AT&T, reporting earnings, said it activated 4.3 million iPhones in the quarter ending March 31, approximately the same as Verizon reported last week. However, that was a decline from the fourth quarter of calendar 2011, when the introduction of the iPhone 4S fueled 7.6 million activations.
Various patent battles are also hanging over Apple, which is embroiled in lawsuits against Samsung and other manufacturers of mobile devices based on Google's Android OS. On Tuesday, a judge at the U.S. International Trade Commission issued a preliminary decision, ruling that Apple's iPhone and iPad violated one out of four patents in one particular suit -- a wireless communications patent from Motorola Mobility, which Google is acquiring. An ITC panel will review the decision.
Analysts taking the long view, however, still have faith in Apple. In a research note over the weekend, Canaccord Genuity technology analyst Michael Walkley reiterated his "buy" rating on the company and raised his price target to $740 from $710. The company is not without problems, and does have competition, Walkley acknowledged.
"Our recent channel checks indicated iPhone sell-through share has modestly declined in certain developed markets, and we expect this could continue as Android competitors ramp new smartphones during the June and September quarters and consumers start to hold off iPhone purchases in anticipation of the iPhone 5," Walkley wrote. "However, we believe Apple's potential smartphone share losses during the June quarter will prove temporary, as we anticipate very strong demand for an LTE iPhone 5 during the December quarter."
The bottom line, according to Walkley, is that Apple "is well positioned for strong sales and earnings growth driven by new product introductions across its portfolio."