AAPL Earnings Out; Huge Beat; Stock Surges 8% After Hours

Huge beat.

Surges after-hours. Spikes 8%.

The Street.com reports:

Apple shares jumped after the tech giant posted fiscal second-quarter earnings that beat Wall Street estimates, and announced a 7 for 1 stock split.

Apple reported second-quarter earnings of $11.62 a share, generating $45.6 billion in revenue. The company shipped 43.7 million iPhones, 16.4 million iPads, and shipped 4.1 million Macs during the quarter. Gross margin, a highly watched level for Apple, came in at 39.3%.

For the fiscal third quarter, Apple said it expects revenue between $36 billion and $38 billion, with gross margins between 37% and 38%. Operating expenses will be between $4.4 billion and $4.5 billion, and it will have a tax rate of 26.1%.

Forecast: $10.19. Actual: $11.62. H.U.G.E

Here's an example of a reporter who doesn't get it. The headline: "Apple Reports a Big Miss on iPad Sales."

I saw that headline and said, "oh, boy, Apple is in trouble."

Then I saw the story. Here's the story to that headline:

iPhones: 43.7 million units vs. 37.7 million units expected by analysts.

iPads: 16.35 million units vs. 19.7 million units expected by analysts.

That's a huge miss on iPad sales, and just another demonstration of how growth in Apple's tablet business has stalled.

But it was a beat on iPhones. Analyst expected Apple to sell fewer iPhones last quarter because we were coming off the holiday quarter.

The iPad business is in big trouble though with negative growth. (See chart below.) The theory is that people aren't buying iPads because they don't upgrade them as often as they do iPhones. There are also a lot of competing tablets from companies like Amazon, Samsung, and Google that are much cheaper and do most of the same stuff.

The reporter doesn't get it. There are so many story lines, but this is the big story line: folks use their iPads to surf; they use they iPhones to generate cash for ATT with all those expensive data plans.

If you have both, a smart phone and a tablet, which one has the more expensive data / voice plan? Ha. Trick question, of course. The tablet probably doesn't have a voice plan.

My data plan from ATT for my iPad is $5.00/month. Yes, $5.00/month.

Folks use their tablets almost exclusively where free wi-fi is available or at home where they have bundled wi-fi. But on the road, mobile, folks with both a smartphone and a tablet use their smartphone with an expensive data/voice plan.

Second story line: add up total units, iPhones and iPads. Actual, 60, vs expected, 57. Not too shabby. Big miss? Hardly. Tim Cook has to be smiling.

The big worry for ATT/Apple was folks switching from ATT/Apple. Earlier today we learned that ATT had a great quarter, adding more subscribers at a time when "everyone" was concerned ATT would lose subscribers.

By the way, that competition from "cheap" Samsung, Amazon, Google tablets. Volume (sales) are important; margins are more important. Let Samsung, Amazon, Google sell "cheap" tablets; Apple will sell at the high end AND the high margins. 

So many more story lines (including the one about the concern about the holiday season -- wow, that's when everybody buys these toys). But the analyst was right about one thing: unlike Microsoft which is dinging users every six months, it seems, with an upgrade, iPads last "forever."

Expands buyback; 7-1 split.

On top of that: will raise dividend 8% and will do that annually.

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