Apple to Boldly Go into Earnings Guidance

In a break with tradition, Apple plans to move away from a more conservative financial-reporting style and offer broader guidance.
Kathy HoffelderJanuary 24, 2013

In a change from its traditional way of reporting earnings guidance, Apple plans to revise its approach to include a range of numbers rather than just a single figure: an approach its CFO believes could more accurately forecast what the company’s actual profits will be.

On its earnings call after the market close yesterday, Apple said it expects to report guidance on items such as its earnings per share (EPS) within a range. In the past, Apple gave a single data estimate for its guidance. Apple CFO Peter Oppenheimer admitted that giving a single number was “conservative” and was one in which it had merely “reasonable confidence” it would achieve.

The change is a big one for Apple, according to one analyst on the call, who noted the company’s actual EPS would often far exceed its previous guidance. Companies tend to report a lower number if they want a more positive reaction in their share-price movement following earnings news. Apple did not address the claim on its call and in its response to a CFO e-mail query.

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Oppenheimer said, “We believe that we will report within that range.” But he cautioned that “forecasting is difficult.”

Apple reported $54.5 billion in revenue and net income of $13.1 billion, or $13.81 per diluted share, for its fiscal first quarter ending December 29, 2012. That compares with $46.3 billion in revenue and $13.1 billion in net income in the year-ago quarter.

Those numbers could have been higher if Apple had been able to produce enough iPad minis to satisfy demand. “We could not make enough in the quarter. We were constrained every week,” said Oppenheimer, who noted the firm has a significant backlog. “Customers love the mini, and we wish that we could have made more.”

Boasting new quarterly records for sales of its iPhones and iPads in general, Oppenheimer said the firm generated more than $23 billion in cash flow from operations during the quarter.

Apple, however, plans to put some of that cash to work. It expects to spend about $10 billion in capex this fiscal year, which marks an increase by just under $2 billion year-over-year, said Oppenheimer.

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