Apple Catalyst: Record iPhone, iPad Sales

Tedra is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

In case you haven’t heard by now (or you’ve been under a rock), Apple (NASDAQ: AAPL) releases its first quarterly earnings report for its fiscal 2013 after the closing bell on Wednesday.

The importance of this report is extreme. Consider this. Apple’s shares have dropped almost 30% since September, ridding the most valuable company of roughly $190 billion of its market cap. The decline is largely due to concerns that the people are gravitating to other smartphone and tablet makers, instead of iPhones and iPads.

So, to say a lot is riding on the success of the products Apple rolled out in the second half of 2012, is an understatement. The Q1 2013 report will shed light on how many of them were sold during the first quarter of its debut. It will also show how well Apple’s devices sold during the crucial holiday shopping season.

From this data, we’ll see how well Apple’s devices fared against the stiff competition it now faces. I’m extremely curious to know what plans the company has to extend its pipeline beyond the gadgets it now offers so that it can compete with rivals that are doing a heck of a job attracting customers with their devices.

Expectations? Depends on who you ask

If Apple had a blow out first quarter to start this year, it will be a delight because it would inevitably boost its shares. Remember when it hit $700 last fall? Hard to believe it was that high considering it closed Friday at $500. Now consider this. If it does not report a year-over-year increase in earnings, it would be the first time that’s happened since 2003!

I can feel the pressure rising just from typing such an anomalous situation!

The street is expecting Apple to have earned $54.58 billion during the last quarter, which equates to $13.34 a share. Expected sales of 50 million iPhones, the largest seller in terms of units shipped, in the company’s product line would be a main contributor. However, those estimates are lower than the guidance Apple released in October. It said its revenue would be $52 billion, and that its EPS would $11.75.

Next Step, thwarting or keeping up with competition

Regardless of how Apple’s results for the recent quarter turn out, it’s clear that pressures on the stock will not cease. It has to compete in a market where anything powered by Google’s Android operating system is gaining more market share.

Take the tablet market, for example. Apple’s share of the global tablet market dropped to 53.8% from 56.3% in 2011, according to research firm IDC. At the same time, Android-powered devices increased their market share to 42.7% from 39.8%.

A highlight from IDC’s findings is that the demand for the iPad mini will continue to be strong this year. Also, look out for Microsoft (NASDAQ: MSFT). IDC sees Mr. Softy's Windows operating systems, such as Windows 8 and Windows RT, increasingly taking market share from both Apple’s iOS and Android in the operating system space. IDC said Microsoft’s share grew to almost 3% last year, and it could reach 10% by 2016.

Conclusion

If Apple disappoints on earnings, and gives lackluster guidance as it did when it presented Q4 2012 results, I’d take it as yet another sign that increased competition is taking a toll on the world’s most valuable company. I think Apple has some work to do in introducing more products to, dare I say, keep up with its competition. New product launches will take time to pan out and show meaningful results.


TwillyD has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus