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Apple's Making Record Quarters Par for the Course

By Richard Adhikari MacNewsWorld ECT News Network
Jul 20, 2011 5:00 AM PT

Apple on Tuesday announced yet another record quarter, as widely expected.

Apple's Making Record Quarters Par for the Course

Revenues for its fiscal 2011 third quarter totaled nearly US$28.6 billion, and quarterly net profits hit a new high of just over $7.3 billion.

International sales accounted for 62 percent of revenue in this quarter.

Sales of iPhones and iPads were strong, as were sales of Macs.

Elsewhere within the reaches of 1 Infinite Loop, Apple won a preliminary ruling in its favor from the U.S. International Trade Commission regarding two of the four patents it's battling HTC over, opening the door to its possibly crushing the U.S. market for Android devices.

If that happens, it will cap Apple's possible continued dominance over Android in the mobile device market. Developers are increasingly opting to create apps for iOS rather than Android, Flurry Analytics reports.

Apple shares closed at a record high of $376.85 Tuesday, up $3.05. They continued to climb in after-hours trading, directly after Cupertino disclosed details of its Q3 earnings report.

"It's hard not to have a record-breaking quarter when every quarter is bigger than the last," Michael Morgan, a senior analyst at ABI Research, told MacNewsWorld.

"That's an amazing company because they think different," Morgan added.

Apple did not respond to requests for comment by press time.

Raking in the Cash

Apple sold 20.34 million iPhones this past quarter, 142 percent up year over year. Sales of iPads this quarter totaled 9.25 million. This was 183 percent more than the same quarter last year.

Apple also sold 3.95 million Macs during the quarter. This was 14 percent more than in the same period in 2010. However, iPod sales fell 20 percent year over year, to 7.54 million units this quarter.

Revenues this quarter are up 82 percent and profits up 125 percent, Apple CEO Steve Jobs announced.

Quarterly cash flow from operations totaled $11.1 billion, 131 percent up from the same quarter last year.

Apple expects revenues of about $25 billion and diluted earnings per share of about $5.50 for the next quarter, company Chief Financial Officer Peter Oppenheimer said.

The Muscle Behind Apple's Success

Strong iPad sales are one of the factors behind Apple's record quarter, and Cupertino is likely to continue ruling the tablet market, ABI's Morgan forecast.

"There have been some 100-odd tablets announced since the iPad came out, and Apple still has 80 percent of the market," Morgan pointed out.

"Nobody's making the tablets right, and everybody else is trying to figure out what Steve Jobs already knows -- that tablets are made to do one thing, not do everything like everybody else is trying to make them do," Morgan added.

Priming the Patent Pump

While it's generating record revenues, Apple keeps swinging its patent club at the Android competition.

Cupertino made some headway this past week in this respect when an administrative judge at the ITC handed down a preliminary ruling in favor of Apple over two of the four patents over which it's battling with handset maker HTC.

Those patents are among those in dispute between Apple and Motorola in another court case.

Apple has yet another patent suit in front of the ITC, this time with Samsung.

The ITC's ruling may pave the way for Apple to demand high royalties from Android device makers if the entire ITC Commission ratifies the preliminary ruling.

That might possibly impact the U.S. market as a whole.

"If Apple wins and ends up getting the ITC to ban the imports of HTC and possibly Samsung handsets, I don't think that's best for the country," ABI's Morgan warned. "It may be good for Apple, but it won't be good for the U.S. market."

However, it's not yet clear whether Apple will win its suit against HTC in the ITC. An ITC staff attorney who independently examined the case found HTC didn't violate the two patents governed by the preliminary ruling.

HTC has vowed to battle on and file an appeal.

Apps Are the Key

Another bit of good news for Apple is that developers are increasingly opting to create apps for iOS rather than Android, Flurry Analytics reports.

"There's an installed base with Android and daily activations are climbing, but the installed base is just step one in attracting the developer community," Peter Farago, Flurry's vice president of marketing, told MacNewsWorld.

"The development community is also interested in building a viable business," Farago said.

The Android sector has several flaws that are holding it back.

One is the billing infrastructure. Payment is just easier and faster on iOS devices because "every single iTunes account has the customer's credit card associated with it" so making a purchase takes only a couple of steps, Farago said.

Billing is "a lot clunkier" in the Android market, where customers either have to go through Google checkout or PayPal, Farago stated.

Further, devs can make five or six times more money from an iOS app than an Android app because Android customers are less likely to get paid apps or make micropurchases in a social game such as "Farmville."

To put things into context, however, it's not that iOS is taking market share away from Android; it's that iOS is getting more of the new market share as the market grows, Farago pointed out.

Since apps are the life-blood of mobile devices, it could turn out that Android's growth may begin to slow down. Look for Apple to remain strong.

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