The Ever-Changing World Of Apple

On Saturday, December 27th, Apple’s first quarter of FY2015 drew to a close. While management has guided to revenue of between $63.5 billion and $66.5 billion in the period, the current Wall Street revenue consensus estimate of $66.46 billion is already pushing against the upper threshold of management’s revenue guidance range. 

Apple’s Global Expansion

Apple manages its business on a geographic basis. The graph below illustrates the regional revenue mix for the fiscal year ended in late September. 

Although in aggregate revenue rose a fairly modest 6.95% in the fiscal year, revenue growth by region varied widely with Greater China and Japan again delivering the fastest rates of growth. The graph below illustrates Apple’s revenue growth rates by region for the fiscal year.

Both Greater China and Japan delivered double-digit revenue growth rates in the period while Europe delivered revenue growth at a rate greater than the aggregate rate of growth for the company as a whole. The Americas region, Apple's largest revenue region, realized revenue growth of 3.95% in the fiscal year with negative growth in the Rest of Asia Pacific region.

Changes In Regional Revenue Reporting

Concurrent with the start of the December quarter (FQ1 2015), Apple is eliminating Retail as an independent revenue region. Results for the retail stores will be incorporated in the revenue totals for the geographic region in which the stores are located. For the year, Apple reported 437 retail stores of which 40% were located outside the United States. On a national basis with retail store revenue geographically assigned, the United States represented 37.7% of revenue and China represented 16.8% of revenue in FY2014. Japan may become a third national region to contribute 10% or more of Apple’s reported revenue. 

Apple’s Think Different Approach To Quarterly Math

On October 28, 2013, Apple announced quarterly results for the period ended September 28, 2013. For the quarter, Apple announced revenue of $37.472 billion and earnings per share of $8.26 on 909.131 million fully diluted shares in the count. Net income was precisely 20% of reported revenue in the period. 

What surprised the market was Apple’s very conservative guidance for the December quarter. Although the quarter will most likely represent the highest revenue, net income and earning per share quarter in the company’s history, management has guided to revenue of between $55 billion and $58 billion and gross between 36.5% and 37.5%. The top end of revenue guidance suggests a 6.4% year-over-year revenue gain and the gross margin guidance range suggests a deterioration in the company’s year-over-year gross margin performance. In the year-ago quarter, Apple reported gross margin of 38.63%.

In the challenging fiscal year ended in late September, Apple reported revenue growth of 9.2% to nearly $171 billion. iPhone unit sales in the fiscal year rose 20.16% to 150.257 million units and iPad unit sales rose 21.82% to 71.033 million units. At this time, there’s little reason to expect the unit sales growth performance from the company’s two most popular product lines to fall below the FY2013 rates of growth. But with all things Apple, there’s much more to the story.

iPhone and iPad Unit Sales

The graph below illustrates the combined unit sales of the iPhone and iPad lines over the most recent sixteen fiscal quarters, including iPhone unit sales in the quarters immediately preceding the original iPad’s release in the spring of 2010.

In each quarter of the sixteen quarters there has been year-over-year unit sales growth of no less than the recent September quarter’s 6.47% rate of growth. In the December quarter one year ago, combined iPhone and iPad unit sales rose 34.63% to 70.649 million units. 

The graph below illustrates combined iPhone and iPad unit sales by fiscal year. 

In the fiscal year ended in September, combined iPhone and iPad unit sales reached 221.29 million units on a 20.90% rate of unit sales growth. Still, Apple has guided to no more than 6.4% revenue growth in the current December quarter. 

Apple's March Quarter Madness

Saturday, March 30th will mark the end of Apple's second quarter of FY2013. With near certainty, the March quarter will represent the first quarter of negative net income growth in the company's recent history. It may also represent the low point in a multi-quarter cycle of reduced rates of revenue and earnings growth. 

In this article I will analyze Apple's growth performance since the first quarter of FY2011, why earnings growth will most likely turn negative in the current quarter and the ways in which Apple will begin to return to stronger rates of revenue and earnings growth as early as the June quarter of the current fiscal year. Apple's "March Quarter Madness" is the beginning of the end of a cycle of lowered rates of growth.

Apple's Revenue and EPS Growth Rates
The graph below illustrates Apple's rates of revenue and earning per share growth since  FQ1 2010.

Since FQ3 2012, Apple's rate of year-over-year earnings per share growth has fallen below the rate of revenue growth. This trend will continue through the March quarter due to the extraordinary high gross margin achieved in the first half of last fiscal year. 

Apple's Gross Margin Performance

The Graph below illustrates Apple's gross margin performance since FQ1 2010. 

It's not a coincidence Apple's gross margin reached extraordinary high levels in the first six months following the release of the iPhone 4S. The iPhone 4S is the second handset in the iPhone 4 series and delivered record gross margin due in part to Apple's ability to apply the fixed costs of iPhone 4 series production over a much larger number of units sold. 

In the recent December quarter (FQ1 2013), the first full quarter of iPhone 5 sales, Apple's gross margin outcome was nearly identical to the outcome in FQ1 2011, the first holiday quarter of sales for the iPhone 4 handset. Looking forward, Apple's gross margin performance will improve following the release of the second iPhone 5 series handset. Economies of scale on iPhone 5 series handset production will improve dramatically as the next iPhone 5 series handset finds its way to market. The trend is vividly displayed in the graph above. The first full quarter of release of the iPhone 4 handset (FQ4 2010) represents the low point for gross margin over a more than three-year period.

The Apple June Quarter Halftime Report

On Friday, May 18th, AAPL ended the week's trading at $530.38 per share, down 17.5% from the all-time high of $644 per share set on April 10th in intra-day trading. Although at Friday's closing price the shares are up 31% on the calendar year, the current price-earnings multiple of less than 13 times trailing 12-month earnings of $41.04 is at the low end of the trading range established over the most recent six calendar quarters.

The current low valuation is remarkable considering Apple's 63% revenue growth over the most recent four fiscal quarters and corresponding eps growth of 95.5%. Additionally, there is over $116 in cash and marketable securities standing behind each outstanding share.

For long-term investors, Friday's closing price represents an unreal acquisition opportunity ahead of the pending Mac line refresh, the release of the successor to the iPhone 4S and the eventual addition of China Mobile as an authorized iPhone carrier. Each of these events will have a stimulative effect on the share price as Apple journeys through the next twelve months.

The Apple June Quarter Halftime Report

This past week we passed the halfway point in Apple's June quarter that ends on Saturday, June 30th. Today, I'd like to share my early expectations for each of Apple's major product lines in the quarter.

The Apple iPhone

In the March quarter Apple reported an impressive 88% iPhone units growth rate for the period. But the 35.064 million iPhones reported sold included an increase of about 2.6 million units in channel supply to 8.6 million. Management reported residual demand for the iPhone 4S in the Asia-Pacific region during the March quarter conference call with analysts, but the channel supply number will need to be reduced as Apple prepares for the launch of the successor handset.

The iPhone 4S is the most popular iPhone handset Apple has ever produced. But the product may have peaked during its introductory quarter and I have doubts the product can hold the world stage for a full 12 months as Apple's flagship handset. I expect a dramatic decline from the March quarter's iPhone unit sales growth rate of 88% in the June quarter as the drawdown of channel supply will impact reported unit sales and as public attention begins to turn to expectations for the next iPhone handset. 

In the first two quarters of FY2012, Apple sold more than 72 million iPhones. Apple successfully met global demand over this period while realizing an almost 107% increase in unit sales. Apple's next challenges are acquiring component supplies and ramping manufacturing capacity for the successor to the iPhone 4S. The new model will most likely sport a new form with other major hardware advancements making the manufacturing transition more challenging than the transition to the iPhone 4S.

Although the pace of global smartphone adoption has reportedly slowed, the addition of new carriers and Apple's increasing product presence in developing markets will support continuing strong growth for the iPhone line through the release of the successor flagship handset. The next flagship handset will sell on a scale not seen before even by iPhone standards. But the next quarter for "blow out" iPhone sales numbers may be the holiday quarter or first fiscal quarter of FY2013.

Apple's March Quarter Results: The Good, The Bad and The Irrelevant

On April 24th, Apple announced results for the company's 2nd fiscal quarter ended March 31, 2012. For the quarter Apple reported revenue of $39.186 billion and earnings of $12.30 per fully diluted share. These results represent year-over-year revenue growth of 58.9% and eps growth of 92.2%. 

Apple's results for the March quarter exceeded Wall Street estimates by a country mile and in after hours trading the shares retraced recently lost ground and closed the session above $600.

Apple has transformed from being the maker of individual product lines to a purveyor of an integrated device and services eco-system. The March quarter results demonstrate the company's growing global dominance of the both the smartphone and emerging tablet device markets while extending Apple's leadership in offering a broadening array of content for these devices. 

I've titled this article Apple's March Quarter Results: The Good, The Bad and The Irrelevant. I'd like to take each of these qualifiers in turn.

The Good

In the March quarter Apple sold 35.064 million iPhones, representing an 88% year-over-year increase in units sold. The iPhone gained market share among subscribers at  Verizon and AT&T despite the sequential decline in domestic iPhone sales. 

In the March quarter, Apple shipped 11.798 million iPads, representing 151% year-over-year unit sales growth. 

Apple's Asia-Pacific Region delivered 114% revenue growth based on strong demand for the popular iPhone 4S handset with ongoing product demand.

The revenue segment inclusive of iTunes delivered 32% revenue growth to $2.151 billion and the revenue total exceeded revenue from iPod sales by 78%, signaling while the iPod line continues its decline, Apple's revenue generated from content sales and services for iOS-based devices continues to rise. 

Apple: March Quarter Expectations After Record FQ1 Results

On Tuesday Apple announced record quarterly revenue of $46.333 billion and record eps of $13.87 in the December quarter. The 73.2% rise in revenue and 115.7% rise in earnings per share were fueled by strong domestic demand for iPhones, iPads and Macintosh personal computers and by gross margin in the quarter of 44.7%.

In announcing the company's FQ1 results for the 14-week period, Apple offered revenue guidance of $32.5 billion for the 13-week quarter ending March 31, 2012 and earnings guidance of $8.50 per share. Management's guidance suggests revenue growth of 31.75% and eps growth of 32.8%. Once again, Apple's guidance will be proven decidedly conservative. 

December Quarter Revenue Growth Recap

Apple's 73.2% revenue growth in the December quarter was aided by a 14-week fiscal period encompassing the immediate post-Christmas shopping week and extraordinary revenue growth in Apple's Americas region, exclusive of the company's retail stores. The Americas delivered 92% revenue growth to $17.714 billion, representing 38.2% of total reported revenue on strong sales of the Apple iPhone 4S. 

Despite the well publicized economic problems in Europe, the region turned in a strong revenue growth rate of 55% for the quarter. Apple's Asia-Pacific region, absent the release of the iPhone 4S through an authorized carrier on China's mainland, turned in a respectable 54% revenue growth rate. The Asia-Pacific region will be the catalyst for robust revenue and earnings growth in the March quarter.

On To The March Quarter

In a recent article titled Where Apple Makes Its Money, I suggested the Asia-Pacific region will surpass Europe as Apple's second biggest revenue region this fiscal year. In FY2011, China was the only country outside the US to deliver more than 10% of Apple's reported revenue total. The release of the iPhone 4S on China's mainland in the March quarter will generate greater than 100% revenue growth in the Asia-Pacific region in this three-month period. 

The Apple iPhone

In the December quarter Apple defied skeptics who questioned the company's ability to ramp iPhone supply to meet demand. In the holiday quarter iPhone unit sales rose 128% to 37.044 million units and handset sales revenue, inclusive of accessories and related products, rose 133% to $24.417 billion or 52.7% of the company's total reported revenue. In the March quarter, the rate of iPhone unit sales growth may again reach triple digits due to the China iPhone 4S rollout and the company's proven ability to meet demand for product. At the end of the December quarter, the iPhone's global channel supply of about 6 million units represented less than three weeks of December quarter sales and was well below the targeted range of 4 to 6 weeks of supply. 

In addition to the expected strong iPhone sell-through in the March quarter, Apple can add millions of units to channel supply before the end of the period and in support of the continuing global roll out of the iPhone 4S handset. For the March quarter, I'm targeting iPhone unit sales of 36 million units. 

The Apple iPad

In FQ1, Apple sold 15.434 million iPad units and sell-through was slightly higher than reported sales. This represented 111% unit sales growth even as consumer expectations for a product line refresh to occur in the March quarter continue to grow. During the conference call with analysts following Tuesday's earnings release, management mentioned the iPad's fast adoption in the education market. With the prospect of the iPad 3's release in the March quarter and the chance the iPad 2 will remain a shipping product, Apple could deliver in the area of 200% iPad unit sales growth in this fiscal period. Education channel sales will be an iPad unit sales growth catalyst in the upcoming June quarter.

The Macintosh

The Mac's unit sales performance exemplifies the "Apple product mutual halo effect." Record Apple retail store traffic following the release of the iPhone 4S in October assisted in boosting December quarter Mac unit sales 26% to 5.198 million units. In the Asia-Pacific region Mac unit sales rose 58%. I expect March quarter Mac unit sales of about 4.7 million. Both the Asia-Pacific region and the Apple retail segment will be unit sales growth leaders in this three-month period. 

For The March Quarter

My preliminary March quarter revenue estimate stands at $41 billion, representing anticipated revenue growth of 66% and an earnings per share growth rate of about 80% to $11.50. Apple's guidance for the quarter of $32.5 billion in revenue and eps of $8.50 is consistently conservative. I currently expect Apple to beat guidance by $3 per share.

On The Fiscal Year

For the fiscal year ending in late September, I now expect revenue exceeding $175 billion and earnings per exceeding $50. FY2013 is on track to be a more than one-quarter trillion dollar revenue year. Over the next two weeks I will be updating my current 12-month price target of $640. I expect the updated price target to land in the vicinity of $700 per share. 

Apple's Earnings Quality

Apple's gross margin in the December quarter reached 44.7% and net income reached nearly 28.2% of revenue.  I expect gross margin and the percentage of revenue that flows to the net income line to remain high through the March and June fiscal quarters due to the continuing global roll out of the iPhone 4S handset. For as long as revenue growth rates remain greater than 50%, the percentage of revenue consumed by operating expenses will continue to decline. In the December quarter operating expenses came in at $3.363 billion or just above 7.25% of reported revenue. The declining percentage of revenue consumed by operating expenses contributed to the very strong net income growth in the quarter and will contribute to extraordinarily high net income growth rates this fiscal year. 

Robert Paul Leitao

Disclosure: The author is long Apple shares

Apple's Unrelenting Mac Attack On The PC Market

In Apple's most recent fiscal year ended in September, the company's Macintosh line of personal computers generated revenue of $21.783 billion, representing 20.12% of Apple's $108.249 billion in reported revenue. The Mac's $4.304 billion gain in revenue during the fiscal year represented 10% of Apple's $43 billion in revenue growth. 

Although the $21.783 billion in revenue generated from Mac sales in FY 2011 represented only 20.12% of the company's revenue total, it exceeded Apple's total reported revenue of $19.315 billion in FY 2006, just five years before. In FY 2011, revenue generated from Mac sales exceeded the revenue generated from iPad sales by $1.425 billion. 

Apple's Unrelenting Mac Attack On The PC Market

The graphs and table data in this article illustrate and delineate Apple's unrelenting Mac attack on the PC market. For over five consecutive years the rate of growth in Mac unit sales has exceeded the rate of unit sales growth for the PC industry as a whole. In only one quarter of the most recent twelve fiscal quarters has Apple experienced a year-over-year unit sales decline. In FY 2011 Macintosh unit sales rose about 22.5% to 16.735 million units following a 31% rise in unit sales in FY 2010. 

In the current quarter ending in December, Macintosh unit sales may reach 5 million units for the first time in the company's history, breaking the unit sales record of 4.894 million units sold in the recent September quarter. 

Apple Price Target: $640 Per Share

Today I am posting my 12-month price target for Apple of $640 per share. This target price forecasts a 63% advance in the share price within twelve months and tracks slightly below my anticipated 66% growth in earnings per share in Apple's current fiscal year. 

Apple's Share Price Today

Apple closed trading on Friday, October 21st, at $392.87. At that price the shares traded at 14.19 times trailing 12-month earnings of $27.68 per share. The lowly price-earnings multiple stands in stark contrast to the company's 66% revenue growth in the fiscal year ended last month and the corresponding 82.7% growth in earnings per share. At the end of the fiscal year, Apple had cash and marketable securities of $81.57 billion or almost $87 in cash standing behind each outstanding share. The company's cash per share provides a strong foundation for share price appreciation at a rate in tandem with the anticipated rate of growth in earnings per share.

Apple's languid September quarter revenue growth of 39% and eps growth of 52% reversed the recent upward momentum in the share price.  While the quarter's outcome was indicative of Apple's revenue growth challenges in fiscal quarters immediately preceding the annual iPhone product refresh, it was not indicative of anticipated average rates of revenue and earnings growth in the four fiscal quarters immediately ahead.

The Cyclical Nature of Apple's Revenue and Earnings Growth

Each of Apple's four fiscal quarters have strong seasonal or product cycle influences on their respective revenue and earnings growth outcomes. For example, the current fiscal quarter (FQ1 2012) includes a fourteenth shipping week that occurs once every six years and encompasses the immediate post-Christmas shopping week. The quarter will also realize above average rates of revenue and earnings growth due to the release of the iPhone 4S early in the quarter. While FQ4 2011 was negatively impacted by the pending iPhone model refresh, the current quarter will benefit from the release of the new iPhone handset. 

Apple 12-Month Price Target

There were a number of challenges revealed in Apple's September quarter results I will address later in this column. Those challenges are amplified by a slow-growth global economy and increasing competition in the smartphone device market. Based on Apple's FY 2011 performance, anticipated global growth in iPad sales and the successful launch of the iPhone 4S, I've established a 12-month price target of $640 per share. 

This 12-month price target of $640 anticipates FY 2012 revenue growth of 55% and eps growth of 66%. It also anticipates a price-earnings multiple of no more than 14 times forecast FY 2012 earnings of $46 per share. 

Apple's Share Price Performance

The chart and table data below illustrate and detail Apple's share price performance over the most recent twenty months. It includes the share price as of Friday, October 21, 2011 and the closing share price on the first trading day of the month following the release of earnings dating back to February 1, 2010.

Spaceship Apple Comes Down To Earth

Apple's September results were below most expectations. The $28.27 billion in revenue represented a $300 million sequential decline and a comparatively languid 39% year-over-year gain. On earnings per share, the 52% year-over-year rise to $7.05 was far below the 96.2% rate of eps growth realized over the first nine months of the fiscal year.

The Good News In The September Quarter

Mac Unit Sales: If there's good news to be found in the September quarter results it's the 26% growth in Mac unit sales against a global PC market with diminished prospects for continuing growth. In addition to strong unit sales growth, revenue from Mac sales rose 29%. 

Asia-Pacific: The Asia-Pacific region (exclusive of Japan) turned in a 139% increase in revenue. Although the September quarter's pace of revenue growth was below the rates of growth in the region realized in the previous two fiscal quarters (down from 247% growth in the June quarter), China is Apple's most important growth market at this point in time. Asia-Pacific's $6.53 billion revenue contribution represented 23.1% of Apple's total revenue in the period.

Apple's December Quarter Guidance: Management has guided to revenue of $37 billion or 38.4% revenue growth and eps of $9.30 or growth of 44.6% over the December quarter one year before. But keep in mind December quarter 2011 (FQ1 2012) includes an additional shipping week that occurs once ever six years to better align fiscal quarters with calendar quarters. The unusual 14th week is the week immediately after Christmas. Absent the additional shipping week, guidance would have been more conservative and it moves a high revenue week away from the following quarter. 

The Not-So-Good News In The September Quarter

Retail Stores: Despite a 25% increase in Mac unit sales at the stores in the September quarter and the first fiscal quarter in which the retail stores sold over 1 million Macs, overall store revenue rose only 1%. Apple ended the quarter with 357 stores open for business and new stores were opened in the fiscal period. This 1% revenue rise includes the revenue activity of new stores opened within the past year. Retail store traffic and revenue growth remain heavily influenced by seasonal factors and Apple product refresh cycles. 

iPhone Sales: Management stated during the conference call with analysts that September unit sales were materially impacted by a drop-off in demand ahead of the release of  the new iPhone 4S handset. iPhone unit sales growth remains heavily dependent on the company's product refresh cycle. The 16% sequential drop in unit sales is in light of surging global smartphone demand and the meager 21% year-over-year gain in unit sales is against a prior-year period in which Apple ended the quarter with constrained supplies of the then latest handset. Although Apple reported outsized unit sales growth for the iPhone of 142% in the June quarter, both Asia-Pacific and the Verizon agreement were big factors in that gain. 

Unit Sales In The Apple Industrial Era

Introduction
Apple is at the threshold of becoming the largest US-based technology company and may soon become the largest technology company in the world. This post details the unit sales for the Apple iPhone, iPod and Macintosh personal computers over the most recent eleven fiscal quarters and iPad unit sales for the five fiscal quarters the product has been in commercial release. Apple's dynamic growth is fueled by three major product lines while the Apple iPod, once Apple's flagship product line, slowly fades into history as the product that sparked the company's renaissance and set the stage for what is now the Apple industrial era.

Over the past five years Apple's frenetic rates of growth have been derived from a changing mix of products leading to global leadership in the personal technology markets. This changing mix of products provides for years of dynamic growth as the company expands its global reach, expands the global presence of Apple's retail stores and expands product distribution into previously under served regions of the world.

In Apple's current fiscal year (FY 2011) ending in September and the fiscal year beginning at the end of that month, unit sales of the iPhone and iPad will generate more than two-thirds of the company's reported revenue. Both of these products were introduced to the market within the past five years. The popularity of Apple's iOS-based devices, including the Apple iPod touch, has masked the fact that the Macintosh line of personal computers has become a more than $20 billion global business and in FY 2012 close to 20 million Macintosh computers may be sold.

The Apple iPhone

There's no disputing the fact the iPhone is Apple's biggest revenue product. In the recent June quarter, sales of iPhones and related products and services generated about 46.6% of Apple's $28.571 billion in reported revenue. Over the most recent four fiscal quarters the Apple iPhone generated 44.75% of Apple's $100.322 billion revenue total. The June quarter's 142% unit sales growth and 150% revenue growth for the popular iPhone were well above analyst expectations. 

The chart below illustrates the consistent unit sales growth of the Apple iPhone with the June quarter (FQ3) of FY 2010 the obvious exception due to the unique issues surrounding the illicit publication of iPhone 4 photos prior to the product's release and Apple's aggressive pull back on shipments of the iPhone 3GS ahead of the iPhone 4's commercial debut in June of that year. In that quarter more iPhones were sold to customers than Apple shipped into the market for sale, reducing channel inventory in preparation for the iPhone 4's debut. 

I expect the release of the iPhone 5 to spark sales of over 30 million units (all iPhone models combined) within the 90 days of the iPhone 5's release date. A pending deal with China Mobile will propel unit sales to levels not seen before even by iPhone standards.

The AFB AAPL FQ3 Unit Sales Estimate Index

The Apple Finance Board (AFB) is home to many AAPL traders, investors and Apple product enthusiasts. Among the members of the AFB are well know independent analysts Daniel Tello (deagol), Horace Dediu (aysmco), Turley Muller and Andy Zaky. I serve as the moderator of the AFB under the DawnTreader moniker. 

The AFB AAPL FQ3 Unit Sales Estimates

Each fiscal quarter active members of the AFB are polled for their estimates of Apple's quarterly performance based on product unit sales and financial outcome. Yesterday I posted the revenue and earnings estimates of AFB members participating in the index for the three-month period ended in late June (Apple's FQ3 2011). Today I am posting the unit sales estimates that underpin the anticipated financial results. 

On average the 30 active AFB members participating in the June quarter index estimate Apple will report the following unit sales results by product line. Unit sales numbers are in thousands:

AFB Member AAPL FQ3 Unit Sales Estimate Averages:

Macs	4,330		(24.7% Unit Sales Rise)
iPods	8,335		(11.4% Unit Sales Decline)
iPhones	17,602		(110% Unit Sales Rise)
iPads	8,325		(155% Unit Sales Rise)

Notes On The Numbers:

Macintosh Unit Sales: In the first six months of the current fiscal year (September and March quarters) Macintosh unit sales have risen 25.2%. The AFB member average estimate for Mac unit sales in the June quarter is consistent with the recent unit sales growth trend. 

iPod Unit Sales: iPod unit sales have continued to decline. In the first six months of the current fiscal year iPod unit sales fell more than 10%. The mass adoption of smartphones such as the Apple iPhone with iPod functionality have reduced demand for single-use digital music players. The iPod touch, an iOS-based device, is now the largest unit sales component of the Apple iPod line. 

iPhone Unit Sales: In the March quarter iPhone unit sales rose 113% inclusive of the 155% domestic unit sales growth rate influenced by the release of the Apple iPhone on the Verizon network. In the first six months of the current fiscal year iPhone unit sales rose 99.5%. The average estimate of AFB members suggests the March quarter unit sales growth trend will continue in the June quarter.

Last year Apple significantly reduced iPhone unit shipments in the June quarter ahead of the  release of the iPhone 4, leading to favorable conditions for year-over-year unit sales gains in the June quarter this year. 

iPad Unit Sales: The June quarter is the first quarter in which prior-year iPad unit sales are available. Apple's ability to have met demand for the iPad 2 in the June quarter will have a significant impact of the quarter's unit sales results that will be released later this month.

For more information on Apple product unit sales results please see my article published on May 8th titled Apple: Ten Quarters of Product Unit Sales.

Robert Paul Leitao

Disclosure: The author is long AAPL shares

Apple Retail Stores: Revenue Growth Exceeds 90%, Catalyst For Mac Sales

There's no disputing Apple's success since the release of the iPhone four years ago. Last week I published a forecast that suggests Apple's revenue for the fiscal year ending in September will reach $112 billion, up from $65.225 billion in FY 2010. In the recent March quarter the Apple iPhone represented roughly 50% of the company's revenue. The release of the Apple iPad has accelerated the company's revenue growth and contributed significantly to the 83% revenue gain in the same March quarter. Sales of the Apple iPad may create as much as 25% of the more than $40 billion in revenue I expect the company to generate in the upcoming holiday quarter.

Apple Retail Stores As A Source of Success

But for all of the attention lavished on the iPhone and the iPad, there is a component of Apple's continuing success that is often overlooked. It's the success of Apple's retail stores and in particular the positive impact Apple's global chain of over 300 retail stores is having on Apple's oldest and most enduring product, the Macintosh line of personal computers. 

The graph and table data below illustrate the continuing rise in Apple retail store revenue and the corresponding percentage of total revenue generated by retail store activity. For the first six months of FY 2011 (the December and March quarters) retail store revenue rose 92.6% and represented 13.7% of the reported revenue for the company. In the same six-month period Apple's total revenue rose 76.2%. Over the most recent four fiscal quarters the pace of revenue growth at the retail stores has outstripped the pace of revenue growth for the company as a whole.

The rate of growth in retail store revenue is due in part to the opening of new stores and in part to the mutual halo effect among Apple's hardware device lines. The debut of the Apple iPad just over one year ago has had a positive impact on retail store foot traffic and the resulting sales activity.

	Apple Store	% of	Apple Store	% of	Retail Mac	Overall Mac
Quarter	Revenue	Total Revenue	Mac Units	Mac Units	YOY Gain	YOY Gain
FQ1 ’09	1,746,000,000	14.70%	515,000	20.40%	2.18%	8.84%
FQ2 ’09	1,377,000,000	15.16%	438,000	19.77%	-4.37%	-3.19%
FQ3 ’09	1,492,000,000	15.33%	492,000	18.90%	3.36%	4.29%
FQ4 ’09	2,041,000,000	16.72%	670,000	21.95%	12.42%	16.93%
FQ1 ’10	1,971,000,000	12.57%	689,000	20.49%	33.79%	33.20%
FQ2 ’10	1,683,000,000	12.47%	606,000	20.59%	38.36%	32.81%
FQ3 ’10	2,578,000,000	16.42%	677,000	19.50%	37.60%	33.38%
FQ4 ’10	3,566,000,000	17.53%	874,000	22.50%	30.45%	27.25%
FQ1 '11	3,847,000,000	14.39%	851,000	20.59%	23.51%	22.96%
FQ2 ’11	3,191,000,000	12.94%	797,000	21.20%	31.52%	27.76%