The 5 Key Takeaways From Apple's Earnings Call

The 5 Key Takeaways From Apple’s Earnings Call:

Yesterday Apple released its results for its fiscal fourth quarter. Apple beat expectations on the top and bottom line posting $8.26 EPS compared to projections of $7.93. They posted quarterly revenue of $37.5B compared to a projection of $36.8B. iPhone and iPad sales at 33.8M and 14.1M units respectively barely met expectations. Regardless of how Apple beat expectations, the stock is down about 3.5% since it released earnings after close on Monday. Here are five things that may explain investor’s lack of faith:

Apple’s margins are down. Essentially, they aren’t making as much money on each product as they used to. This may be a function of increased R&D spending.

CEO Tim Cook will not rapidly give in to activist investor Carl Icahn’s strong push for Apple to buy back $150B in stock, but he is considering it. He also said Apple has given $36B back to shareholders in the form of dividends and repurchases over the last five quarters.

The tablet market is viewed as an opportunity. Apple wants to create the best product and cement customer loyalty. Considering Apple is losing market share to other tech companies in all its sectors, a shareholder would hope they are going to try and recapture some market share and not just defend what they currently have.

Many believe the iPhone 5c was priced too high at $549 dollars. So many believed this Apple’s stock dropped 5.4% that day. Tim Cook suggested that the 5c wasn’t priced to high, but that people had misbranded it as an entry level phone, which he stated is a role filed by the iPhone 4s. Blame the customer for misunderstanding the purpose of a product, that is the first new thing Apple has done since they created the iPad!

Many, including this blog, have called for Apple to engage in radical innovation rather than just incremental. People want to see a new to world or new to market product and not just the next version of the iPhone or iPad. In addressing this assertion, Cook was vague and wouldn’t commit to putting out a new product. I guess that is why investors are backing off from Apple. They have enough cash on hand to fund a small government, but eventually that will all go away if they can’t innovate.