AAPL Summary: Apple Shines for Now

Apple (AAPL - commentary - Cramer's Take) reported its fiscal fourth-quarter results that were a little light on revenue but well above consensus EPS. However, the guidance was a clear disappointment, despite the acknowledgement that there's plenty of prudence built in it.

Revenue in the quarter was $7.90 billion (+27% year over year; +6% quarter to quarter) with EPS of $1.26. Gross margin was 34.7%, up 110 bps from last year and essentially flat sequentially. This was well above guidance largely due to lower component pricing. Operating margin was 18.3%, an increase of 120 bps year over year and a decrease of 30 bps on a quarter-to-quarter basis.

Cash from operations was quite strong at $4.3 billion, with the cash account up a similar amount to $24.5 billion. Accounts receivable was up about $800 million with DSO up 9 days at 28 days. Inventory decreased about $35 million, pushing DOI down 1 day to 9 days. Channel inventories for Macs are below target and essentially in-line with targets on iPods and iPhones.

Unit Growth

Macintosh units hit record levels (2.6 million) with 21% growth vs. last year and 5% sequentially. The company continues to gain market share. Macbook unit growth slowed to about 24% in the period but the company believes that the anticipation of the recent Macbook introductions may have had a limiting impact on demand.

iPods also posted unit growth of 8% from last year and revenue up 3% over that period. Music remained quite strong, with 38% year-over-year growth, with the help of the new Apps Store. Peripherals increased 24% from last year; and Software revenue gained 28%.

The iPhone 3G had a huge quarter, with approximately 6.9 million units sold making it the No. 3 handset company in the September quarter. iPhone 3G customers will download their 200 millionth application from the App Store today, demonstrating clear differentiation from the competition. There are now 30,000 distribution points for the iPhone 3G worldwide. Deferred revenue related to the iPhone jumped more than $3.8 billion from June to $5.8 billion.

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At time of publication, Faulkner's Telecom Connection model portfolio was long AAPL.

Bob Faulkner has been in the investment business for 18 years with an exclusive focus on technology stocks. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Faulkner appreciates your feedback; click here to send him an email.

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