Apple: Management Needs To Vision Tomorrow More Than Explain Today

On Monday, January 27th, Apple announced results for the company’s December quarter (FQ1 2014). The company reported year-over-year revenue growth of $5.65% to $57.594 billion and earnings per share of $14.50 versus $13.81 in the prior-year quarter. Net income at $13.072 billion was lower than the results in FQ1 2013 by $6 million. Earnings per share rose 5.0% due to 45.765 million fewer shares in the fully diluted share count. 

The Demise of the iPod Line

Contributing to Apple’s unimpressive revenue growth rate in the December quarter was a 54.60% year-over-year decline in iPod revenue on a 52.29% decline in unit sales. The iPod touch, which represents greater than 50% of the product line’s revenue, was last updated in September 2012. iPod sales have been subsumed by the popular iPhone line with iPod capabilities and there is declining consumer demand for specific-use digital music players. Year-over-year, iPod revenue fell by $1.17 billion dollars.

The Resurgent Macintosh

In the midst of Apple’s 30th anniversary Macintosh celebration, the product line turned in a strong 19.11% unit growth rate against a soft prior-year comparison. The 4.837 million units sold was the fourth highest quarterly unit sales total in the product line’s history and the highest unit sales performance in two years. For the quarter, the Macintosh delivered 11.10% of Apple’s reported revenue. 

Apple’s Reliance on the iPhone and iPad

No matter the strong Macintosh unit sales numbers for the quarter, Apple’s reliance on the iPhone and iPad lines for growth continued to rise in the December quarter. The graph below illustrates the fact that 76.34% of reported revenue in the quarter was sourced from iPhone and iPad sales.

iPhone and iPad Unit Sales Growth

On a combined basis, iPhone and iPad unit sales rose 9.07% in the December quarter and combined revenue rose 6.37% net of the impact of the increase in deferred revenue per unit sold.The graph below illustrates the combined unit sales for the iPhone and iPad lines over the most recent seventeen fiscal quarters. Among the challenges for Apple is the fact iPhone and iPad unit sales growth rates have begun to slow dramatically.

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: Where From Here?

On Tuesday, July 23rd, Apple announced results for the company's third fiscal quarter of  2013. The company surprised Wall Street with year-over-year iPhone unit sales growth of 20% to 31.241 million units despite a 600,000 unit reduction in global channel supply to 11.0 million units. iPhone unit sell-through in the quarter was about 31.84 million units. 

iPad unit sales were a disappointment in the period, falling year-over-year by 14.23% to 14.617 million units. Management emphasized during the quarterly conference call that reported iPad unit sales were negatively impacted by a 1.9 million unit swing in channel supply year-over-year. Meanwhile, Mac unit sales fell 6.62% to 3.754 million units. In the June quarter Apple did not refresh its MacBook Pro line, but refreshed the MacBook Air line only. One year ago both the MacBook Air and the MacBook Pro received a June quarter update. 

For the quarter, revenue rose a scant 0.86% to $35.323 billion and net income fell from $8.824 billion in the June quarter last year to $6.90 billion in the quarter ended June 29th. 

Despite the stronger than expected iPhone unit sales numbers and the fact Verizon and AT&T activated more iPhones in the June quarter than all other makes of smartphones combined, the quarter's results highlight Apple's many challenges moving forward. While revenue in the Americas region rose 12% in the June quarter, Greater China delivered a 14% decline in revenue and Apple's Retail revenue segment had a $10 million year-over-year revenue setback despite more stores open for business. 

Apple: Where From Here?

In today's article I will detail changes that are occurring in Apple's revenue flow and why the company's road to earnings recovery may take some long and winding turns.   

Apple As An Eco-System 

Apple has moved beyond the scope of being primarily a device maker. In the June quarter revenue from the company's iTunes/Software/Services revenue segment rose nearly 25% to $3.99 billion and represented 11.3% of reported revenue. The graph below illustrates the growth in what was the company's fastest growing revenue segment in the period. The fairly consistent revenue growth in the iTunes/Software/Services segment is contrasted in the graph with the seasonal revenue performance of Apple's Accessories segment that experienced a 4% revenue decline in the recent quarterly period.

Of the $3.99 billion in segment revenue, $2.4 billion was sourced from iTunes alone. Since the opening of the Apple app store, $11 billion has been paid through to developers. According to management, half of the $11 billion was earned by developers within the past 12 months. iTunes billings, separate from recognized iTunes revenue, reached $4.3 billion in the June 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.

View Apple By Seasons, Not By Quarters

On October 25th, Apple announced earnings for the 13-week period ended September 29, 2012. For the quarter, Apple reported revenue growth of 27.22% to $35.966 billion and earnings per share growth of 22.98% to $8.67 per share. The earnings per share outcome in the quarter was negatively impacted by accelerated recognition of foreign exchange-related losses. 

In contrast to the September quarterly results, for the fiscal year ended the same date, Apple reported revenue growth of 44.58% to $156.508 billion and earnings per share growth of 59.54% to $44.16. 

View Apple By Seasons, Not By Quarters

The charts below illustrate the quarterly changes in year-over-year and sequential rates of revenue and earnings growth for the most recent twelve fiscal quarters. Apple's high annual growth rates are now concentrated in a six-month season comprised of the company's December and March quarters. The June and September quarters have comparatively slower rates of revenue and earnings growth and represent their own six-month revenue and earnings season. 

Apple's quarterly results are essentially static snapshots of a fast-moving enterprise. Results are best viewed based on annual growth rates and the year-over-year growth rates of the company's two and distinctly different revenue growth seasons.  

Apple's quarterly revenue growth rates FQ1 2010 - FQ4 2012:

Apple's quarterly earnings per share growth rates FQ1 2010 - FQ4 2012:

Apple's Annual Revenue and Earnings Growth Rates

The charts below illustrate Apple's dramatic rates of revenue and earnings growth over the most recent seven fiscal years. The annual rates of revenue and earnings growth will continue to be far more uniform than the rates of quarterly growth depicted in the graphs at the top of the article. The highly seasonal nature of Apple's revenue activity will continue not only because of the refresh cycle for the Apple iPhone, which comprised over 50% of the company's FY2012 revenue, but the influence of changes in the company's regional revenue mix as well.

Apple's annual revenue FY2005 - FY2012:

Apple's annual EPS FY2005 - FY2012:

Apple, iOS Devices and the Precipice of Success

On August 11th, I published my updated AAPL 12-month price target of $950 per share. Since that date, AAPL has moved from $620.73 to $700.09 per share. On Friday the shares set an all-time intraday high of $705.07 as the rollout of the iPhone 5 began in the US and select markets around the globe. Apple's newest iPhone handset is an early and unqualified success. 

I've mentioned several times in prior articles I expect the iPhone 5 to sell on a scale not seen before even by iPhone standards. Apple's early September announcement of a September 12th iPhone event essentially froze the domestic smartphone market while competitors scrambled to ship product to carriers before the iPhone 5's release on September 21st. Through at least the holiday quarter, there isn't a competing handset on the market that will generate anywhere near the iPhone 5's global appeal. 

In addition to the release of the iPhone 5, the iPhone 4 is now available on AT&T, Sprint and Verizon at a post-subsidy price of $0. This is the first time all three major domestic carriers have an iPhone available at that pre-tax price. The iPhone 4 at its new price will deliver a boost to unit sales over the next four fiscal quarters. 

Just prior to the iPhone 5's retail availability, Apple released iOS 6, the company's latest iteration of its operating system for the iPhone, iPad and iPod touch. No matter the early complaints about Apple's first major effort at mapping services, iOS 6 downloads and installations can be counted by the tens of millions. With all of the attention lavished on the iPhone 5, it's the iPhone and iPad combined that is driving the company's share price and market cap significantly higher.

iOS Devices As A Global Franchise

At my Posts At Eventide web presence I provide graphs and table data illustrating and detailing unit sales by quarter for each of Apple's major product lines. Today I am publishing a chart-based overview of iPhone and iPad sales to illustrate Apple's high rates of revenue and earnings growth depend on more than the iPhone alone. iOS devices have become a global franchise. Because Apple does not break out the unit sales of the iOS-based iPod touch, I am including only the iPhone and iPad product lines in today's analysis. 

The graph below illustrates the growth in iPhone and iPad sales over an eleven-quarter period beginning with the first quarter of FY2010 (fourth calendar quarter of 2009):

From a low of 8.737 million iPhone units sold in FQ1 2010 prior to the original iPad's release, to a high of 52.478 million iPhone and iPad units sold two years later in FQ1 2012, in seven of the eleven quarters covered, year-over-year unit sales growth reached or exceeded 100%. The accompanying table data is available at Posts At Eventide through the link posted above.

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. 

Why The Apple iPad Stands Alone

HP's recent announcement the company is extinguishing its webOS-based product lines and jettisoning its PC division highlight the ongoing transformation of the personal technology markets. Market share alone accomplishes nothing. Integrated product lines and content to support product sales mean everything in our fast-changing world. 

Although HP is currently the world's largest PC maker, HP doesn't own the operating system on which the company's consumer PC products run. Developing a strong content distribution system to support product sales for the mobile OS the company does own would have taken years and billions of dollars to accomplish. HP's global PC market share delivered no advantages in efforts to develop a market for handheld digital devices. Content sells devices. Without content and the means to sell and distribute content quickly and inexpensively, device sales will languish.

The Apple iPad now stands alone in the global market for tablets. The iPad is first and foremost an expansion of Apple's multi-device iOS product paradigm. Outside of the Apple iPad, a robust consumer market for tablet devices does not currently exist. At this time there isn't consumer demand for a tablet other than the iOS-based product Apple has released in tablet form. 

The Foundation of the iPad's Success

Underpinning the Apple iPad's success are the same factors underpinning the success of the iPhone and the iPod touch. Through the end of the June quarter, cumulative iOS-based product sales have reached 222 million units.  However, the more impressive statistic is the more than 225 million iTunes accounts backed by credit cards. The Apple iPad is building on the customer and content sales relationships the company began establishing in 2003 with the opening of the iTunes store. There isn't a competing product manufacturer that has a direct sales relationship with almost one-quarter billion customers with active accounts for content purchases. The chart below illustrates the Apple iPad's unit sales performance since the product's initial release. 

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

Why I'm Bullish on Apple

Over the past several weeks I've focused much of my analysis work on the performance elements that underpin Apple's extraordinary rates of revenue and earnings growth. Meanwhile, Apple's share price (AAPL) has been trapped in a comparatively narrow and underwhelming trading range since the all-time high of $364.90 was set in intraday activity on February 16th of this year.  

There's much speculation why Apple is currently trading, even after today's strong advance, almost 5% off the all time high at Tuesday's closing price of $347.83 per share. From index rebalancing to hedge fund ploys, most active AAPL traders have their own views as to the factors impacting the share price. But none of these factors in any way impact the company's fundamental strengths nor limit the long-term potential of the share price. I consider AAPL's current trading price to represent a short-term dip below an established trading range prior to a strong, bullish advance. 

The Factors Supporting AAPL Share Price Appreciation

Rising Revenue, Rising Earnings Per Share: Apple remains in an era of extraordinary revenue and earnings growth. During the first six months of FY 2011 Apple's revenue and earnings growth rates have accelerated due to the popularity of the Apple iPad and the continuing success of the Apple iPhone. In the first six months of FY 2011 Apple's revenue rose 76.2% and eps moved higher by 83.2%. Constraints on iPad 2 supplies in the March quarter limited the revenue and earnings growth rate from moving even higher. 

For FY2011 (ending in late September) I forecast Apple's revenue will reach or exceed $112 billion and eps will reach at least $27.50 per share. Based on my forecasts Apple is currently trading at a multiple of only 12.65 times the current fiscal year eps estimate. The revenue growth chart, including my FY 2011 revenue estimate, illustrates the pace of Apple's revenue growth over a six-year period. Over 60% of Apple's revenue in FY 2011 will be sourced from products that did not exist in the marketplace as recently as four years ago today. The markets for the Apple iPhone and especially the Apple iPad have yet to be fully realized and the markets for both products will continue to expand. 

Even more dramatic than the pace of revenue growth is the pace of growth in earnings per share. Form eps of $1.55 in FY 2005 to estimated eps of $27.50 in FY 2011.

Apple: Ten Quarters of Product Unit Sales

The objective of the Posts At Eventide web presence is to benefit readers seeking to understand Apple's financial performance and to serve as a repository of information and analysis for other independent AAPL analysts preparing quarterly estimates and share price forecasts. 

This is one of a series of posts designed to provide data and historical context for the development of quarterly unit sales estimates for Apple's major hardware device product lines.  This post details the unit sales for the Apple iPhone, iPod and Macintosh personal computers over the most recent ten fiscal quarters and iPad unit sales for the four fiscal quarters since the product has been in commercial release. 

The Apple iPhone

There's no disputing the fact the iPhone is Apple's biggest revenue product. In the recent March quarter the sales of iPhones and related products and services generated almost 50% of Apple's $24.667 billion in reported revenue. Led by a 155% increase in domestic unit sales, the popular smartphone performed better than most analysts expects with a 113% increase in global unit shipments to 18.647 million. 

While there is seasonality in the iPhone's unit sales performance, the outcome is more often determined by product supply rather than seasonal variations in demand. Apple's inability to produce sufficient quantities of iPhones to meet global demand following the product's annual refresh cycle has hampered unit sales in the third and fourth fiscal quarters of the year.  

The chart below illustrates the consistent unit sales growth of the Apple iPhone with the June quarter (June quarter) 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. Apple pulled back on shipments of the iPhone 3GS ahead of the iPhone 4's commercial debut. 

		Unit Sales	iPhone	Sequential	YOY
		FQ1 ’09	4,363	-36.69%	88.47%
		FQ2 ’09	3,793	-13.06%	122.72%
		FQ3 ’09	5,208	37.31%	626.36%
		FQ4 ’09	7,367	41.46%	6.89%
		FQ1 ’10	8,737	18.60%	100.25%
		FQ2 '10	8,752	0.17%	130.74%
		FQ3 ’10	8,398	-4.04%	61.25%
		FQ4 '10	14,102	67.92%	91.42%
		FQ1 ’11	16,235	15.13%	85.82%
		FQ2 '11	18,647	14.86%	113.06%