Apple earnings preview: iPad sales to grab the spotlight

What can we expect to hear from Messrs Cook and Oppenheimer

Corporate finance fans have a lot to look forward to on (morning AEST), as Apple plans to unleash its financial results for the company’s second fiscal quarter of 2012. Apple CEO Tim Cook and chief financial officer Peter Oppenheimer will, as always, be our guides, though who can rule out the possibility of surprise guests? (Well, we can. There probably won’t be any surprise guests.)

But what can we expect to hear from Messrs. Cook and Oppenheimer? Let’s take a quick stroll through the past quarter to see what’s wetting the whistle of financial analysts the world over.

The newest iPad

Apple’s latest iPad model—you remember, the one festooned with the fancy Retina display—went on sale last month, providing at least a couple weeks of sales before the quarter drew to a close. Tim Cook already announced that the latest version of the tablet racked up a record opening weekend, with more than 3 million units sold.

But keep in mind that any numbers Apple announces for quarterly sales will be split between the new iPad and the iPad 2, both because of the new iPad’s late-quarter introduction and because Apple has, for the first time, kept the older iPad around as an entry-level option. Don’t expect Cook or Oppenheimer to delineate between sales of the two models; Apple traditionally doesn’t split out sales numbers by specific products.

For comparison’s sake, Apple moved 4.69 million iPads in the year-ago quarter, which saw the launch of the iPad 2 at roughly the same point in the quarter. Given the record-breaking nature of the new iPad’s first weekend, the new iPad’s highly positive reception, and the general upward trend of iPad sales, it seems likely that Apple will beat that mark here.

Not so fine China

While Apple usually uses its financial result calls to talk about its products, I suspect that at least a little time may be devoted to the issue of Apple’s suppliers, especially those in China.

The question of conditions at the factories that assemble Apple products (as well as high-tech devices from other companies) has made plenty of headlines over the past few months. Tim Cook has spoken publicly about the company’s commitment to improving the situation at factories belonging to Foxconn and other suppliers; the company even invited the Fair Labor Association to inspect those facilities. The initial report from the FLA, issued last month, found “significant issues,” but also made suggestions on how those problems could be addressed.

The fervor over the factory conditions has subsided somewhat, but Apple appears to be in this for the long haul, so it wouldn’t be surprising to hear Cook give an update on the situation—or, at the very least, to reiterate the findings of the FLA’s report and discuss what part Apple intends to play in improving conditions.

My little phone-y

Thanks to holiday sales, Apple sold a record number of iPhones last quarter: more than 37 million. While it may be hard to top that staggering quantity this time around, Apple’s iPhone unit sales rose in the second quarter of both 2010 and 2011, so it’s not out of the question.

With the iPhone 4S only about six months old, there’s not too much to talk about at this point. Tim Cook will likely highlight the company’s partners in this sector, especially the regional carriers that the company added this month.

Of course, don’t expect any of this to hold back analysts who will chip away at Cook and Oppenheimer for any table scrap of information about the next-generation iPhone.

That’s why they call it money

In a surprising move, Cook announced last month that Apple would begin both paying a dividend to its shareholders as well as buying back stock—a significant departure from the strategy of his predecessor, Steve Jobs.

While those initiatives don’t kick in until the fourth quarter of 2012 and the 2013 fiscal year, respectively, Cook may spend some time reviewing some of the details of the arrangement. And analysts, some of whom may have been blindsided by the original announcement, may take the opportunity to ask questions about the plans, especially for those who have criticized the dividends for being disproportionately small compared to the company’s sizable cash holdings.

The wild cards

The small tidbits that Tim Cook throws out are often both the most telling and the most interesting part of Apple’s earnings announcements. What kind of topics might merit the attention of the CEO of the world’s biggest tech company this go-round?

During the same investor conference at which he discussed the situation in China, Cook also mentioned that iCloud had already reached 100 million users. As MobileMe’s demise looms closer, it’s possible we might hear an update to that number.

And whither the Apple TV? The set-top box was the only other Apple product to get a significant update in the last quarter. The company hasn’t traditionally broken out sales of the device, instead seeming content to let it remain “a hobby.” In that investor conference appearance, Cook described sales of the device as “clearly ramping.” That doesn’t mean Cook will talk hard numbers, but the Apple TV will probably at least get a shout-out from the CEO.

Finally, there’s the quarter’s only other big product news: Mountain Lion. Apple dropped a bomb in February when it previewed the next version of the Mac operating system, due this summer. While a conference call probably isn’t the venue in which to expect substantive updates, Cook may drop a detail or two, such as the number of downloads the company’s seen for the preview version.

By the numbers

Lest we forget, these results are really all about the money. Last quarter, Oppenheimer forecasted revenue of $32.5 billion for the second quarter, with diluted earnings per share of $8.50. Analysts have clearly taken into account Apple’s customary conservative bent for its estimates, with the current consensus, as of this writing, guiding to revenue of around $36.6 billion with earnings of $10.00 per share.

By comparison, Apple posted revenue of $24.67 billion and earnings per share of $6.40 in the second quarter of 2011, so Apple’s blockbuster performance shows no signs of slowing in the immediate future.

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