Apple Inc. (NASDAQ:AAPL) had reported better than expected performance in the fourth quarter for the financial year 2014. EPS was $1.42 which was 11 cents above the market estimate of $1.31. The company also reported phenomenal growth in its iPhone and Mac sales although iPad sales continued to fall. Robert W. Baird Analyst Will Power discussed the reasons behind Apple’s numbers on CNBC’s Earnings Central.
Mr. Baird observed that Apple Inc. (NASDAQ:AAPL) iPad sales have been on the decline over the past quarters and is expected to continue in the same trend or slightly flatten out in the coming quarters. While iPad sales were down by close to two million units compared to last year Mac sales were up by almost a million units in the same period.
Mr. Baird stated that though iPad had a better margin differential compared to the Mac, the numbers looked good in the big picture. “The iPad margins have been stronger than Macs […] Overall the gross margins look pretty encouraging in the light of all the issues and the competitor challenges,” he said.
Tim Cook said on the call that the iWatch sales figure will not get a section of its own but will be grouped with other items. The Apple Inc. (NASDAQ:AAPL) chief said that they were doing so for competitive reasons but this approach did raise questions about Apple’s doubt over its wearable device and if it will succumb to competition from rivals such as Samsung Electronics Co Ltd and Google Inc (NASDAQ:GOOGL).
Power said that he did not read much into that statement from Cook. He believed that the iWatch is too small right now to warrant a category of its own but if things starts growing; Apple might consider giving it out separately in future. “If it starts to succeed as we expect it will, then at some point [Apple Inc. (NASDAQ:AAPL)] will start to break that separately,” he said.
Philippe Laffont’s Coatue Management holds 10.1 million shares of Apple Inc. (NASDAQ:AAPL) at the end of second quarter of2014.