In my previous posting as the news of Apple’s (News - Alert) 4Q (first post Steve Jobs) earnings broke, I provided the basics on their performance, and wondered why Wall Street thought the results were a “miss,” which has resulted in the stock continuing to be punished in afterhours trading.   I also promised some of the highlights of what turned out to be an, if nothing else, entertaining call featuring Apple CEO Tim Cook and CFO Peter Oppenheimer.

The wind up

It started as expected with Cook noting that this was the first earnings call since the passing of Steve Jobs and that: “The world has lost a visionary, a genius. His spirit will forever be the foundation of Apple.” He continued that, “Only Apple brings together software, hardware in an integrated experience for consumers,” and that we had Steve to thank.

I guess the reason I have always been either an industry analyst or a reporter is that I don’t have the ego involved to say that when a company misses my overly zealous view of their performance that they should be tarred and feather for disappointing me and my colleagues who following a herd mentality to say “my number was bigger and better than yours and they hit mine,” shoot the messenger instead of focusing on the message.

I like Apple’s message. I also like the fact that they were basically unrepentant about both their performance this quarter as well as their prospects.    In other words, financial analysts take heed.

The pitch

So here are some of the notable statements that came out of what was a spirited defense of the quarter:

·         Peter Oppenheimer re-iterated that there were record iPad and Mac sales which were beating the overall PC market, and that there were record desktop sales thanks to iMac. He further stated that, “iPod sales were  ahead of our expectations. iPod Touch were half of sales.” He added that iPod is 75 percent of the market and that 180 million iBook downloads was nothing to sneeze at

·         iPhone (News - Alert) sales set a new September quarter record. He and Cook later said that they were extremely pleased with iPhone sales growth especially the peerformance over the weekend of the 4S. In fact, they later said there was no telling how strong sales might have been if the whisper campaign of a new iPhone 5 had not been widely circulated after the WWDC event. Plus,  iPhone ranked highest in customer satisfaction., and it will be rolled out in 22 more countries by end of this month.

·         In regard to the iPad he said, “We're thrilled with the momentum. We said from beginning that tablets are huge opportunity for Apple”. They accounted for $6.9 billion in recognized revenue for the quarter with 2.5 million ipads in channel, and adoption is unbelievable with 92 percent of Fortune 500 companies using it. And, there were 250 million iOS device sales.

·         Oppenheimer also was proud of the Apple retail stores $3.6 billion in sales, but again mentioned that the iPhone rumors may have dampened them a bit. That said, there were 77.5 million visitors in the September quarter to Apple stores.

·         The numbers look good as well. Cash was 81.6 billion, up $5.4 billion on a quarter by quarter basis and cash flow from operations was $10+ billion, up 80 percent. Guidance for the next quarter was given as revenue of 37 billion, gross margin of 40 percent, opex $3.25 billion, EPS $9.30. All nicely robust, especially given difficult economic conditions and IBM’s (News - Alert) view that things may be softening, although IBM because of its product miz does not get a boost from the holiday buying season.

·         Finally, in a last product rundown before questions, he pointed out that revenue over the year was $108 billion, 72 million iPhones were sold, 32 million iPads in fiscal 2011 which generated $26 billion in net income and faster than revenue growth.

The plot thickens

It was time for the Q&A. 

·         Cook answered a question about iPhone 4S sales and possible holiday shortages, saying, “ We're thrilled with the start that we have. Confident we'll have a large supply. Dont want to predict when demand and supply balance. But, I'm confident we're going to sell an all time record this quarter.” 

·         In response to questions about gross margin looking relatively weak next quarter, Oppenheimer said, “We expect offset of higher cost structures and price points and the stronger US dollar.”

What followed were some country specific questions and the executives strutted their stuff highlighting phenomenal growth and opportunity in China and Brazil. China for example, was 2 percent of revenue in FY09, this year, it's 12 percent and was $4.5 billion for quarter and over $13 billion for full FY11.There are 200 mono-branded stores and up to over 7,000 point of sales on the IPhone in Greater China. Brazil was up 118 percent and Russia is looking promising as are other regions.

On the competitive front Cook was emphatic: “We had a great quarter with iPads, at the same time set a Mac record. We've seen competitors come to market. Diff form factors, diff price points. None have gained traction. As competitors came to market, our share went up. We're responsible for 3 out of 4 tablets sold, says IDC (News - Alert). When you look this thing, the ecosystem, the bookstore, iTunes, 140,000 apps. I feel very very confident about our ability to compete and extremely confident in our product pipeline.”

Oppenheimer chimed in by saying Apple has new company records for iPad and iPhone in the quarter, and Macs are expected to outgrow the market.

Following some questions on supply chain and share buy backs which Oppenheimer said should never be construed as meaning, “we are waving a white flag on innovation,” the session closed with Cook getting the last word. He said, “Let me just go back to tablet market, we see it as a huge market. We have some fantastic things in the pipeline. 40 million in 18 months which is more than our wildest dreams were.”What was not said or even asked during the call were questions regarding all of the intellectual property suits now in progress around the world which could greatly impact revenues, and possibly even margins depending on how things shape out and who are left standing and at what price points.

Like I said at the top, I am not a financial analyst and have no skin in the numbers game. I look at product sales and prospects, and margins. Hence, while there were just a few very minor hiccups in the results, to term this a near miss on the consensus view (is it really as the saying goes, “as good as a mile”?) seems to be more than a bit of an over-reaction. 

As I finish this piece at roughly 6:30 PM EDT, the stock is now trading below $400 per share or approximately down 6.45%. This is below one of the artificial floors analysts established at around $410 per share. All I can say is that the Wall Street guys are tough task masters when you don’t feed the beast, after all they need a good story to sell so that they can push the stock. 

Tomorrow of course is another day. As were saw with the early reviews of the iPhone 4S which analyst said was no big deal, turns out that it is and people like Siri which portends a transformation in user interfaces that could have profound impacts going forward and which only generated 4 million sales over the past weekend.   Who knows, at some point the financial analysts will actually listen to main street when it comes to what is hot and what is not.

After the world has time to digest all of this, the opening bell in New York should be very interesting. I for one was pleased to see Cook and Oppenheimer stand their ground. Apple looks from here as continuing to shine.

Peter Bernstein is a technology industry veteran, having worked in multiple capacities with several of the industry's biggest brands, including Avaya, Alcatel-Lucent (News - Alert), Telcordia, HP, Siemens, Nortel, France Telecom, and others, and having served on the Advisory Boards of 15 technology startups. To read more of Peter's work, please visit his columnist page.