Analysis: Five things to look for in Apple’s earnings announcement

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In the midst of a gloomy outlook for the overall economy, Apple will announce its fourth-quarter earnings Tuesday. The announcement, which will cover Apple’s performance for the three-month period ended Sept. 30 and close the books on the company’s 2008 fiscal year, will not only offer a view of how Apple fared the last three months—it could also provide a glimpse of how the company is positioned to weather an increasingly turbulent economy.

Apple releases its earnings after the stock market closes Tuesday afternoon. A 2 p.m. PT conference call will follow in which Apple executives—typically chief financial officer Peter Oppenheimer and chief operating officer Tim Cook—field questions from Wall Street analysts. will have live coverage of the quarterly analysts call along with reports on Apple’s fourth-quarter performance on Tuesday afternoon.

But in advance of that earnings announcement, here are five things to look for when Apple opens its books on Tuesday.

1. Can Apple beat the Street?

Analysts are looking for Apple to report earnings of $1.11 per share for the fourth quarter on $8.05 billion in revenue, according to online collections of analyst estimates. Those numbers would improve upon the 2007 fourth-quarter tallies of $1.01 earnings per share and $6.22 billion in revenue by 10 percent and 29 percent, respectively. It would also top Apple’s own projections—in July, Oppenheimer said the company expected to earn $1 per share on sales of $7.8 billion for the fourth quarter.

But even beating analysts’ fourth-quarter forecasts may not be enough to satisfy Wall Street. What investors will be paying attention to is what Apple will do next quarter. You may recall that the fourth-quarter guidance offered by Oppenheimer during July’s conference call was well below analysts’ expectations. Apple stock took a tumble, despite a strong third-quarter performance. What Apple executives say about the first quarter of the company’s 2009 fiscal year during Tuesday’s briefing will be the biggest factor in how the market responds to any earnings announcements.

2. Can Apple thrive in a grim economy?

You may have read something in the newspapers about the global economy hitting a bit of snag. Investors have read the same thing, and they’ll spend Tuesday poring over Apple’s numbers for any sign of how a company that specializes in high-end consumer goods plans to meet the current economic challenges.

As recently as August, market-research firms saw signs of optimism for Apple. Back then, ChangeWave Research found that more American consumers planned to buy a computer from Apple in the next 90 days than any other brand. The picture has darkened since then—earlier this month, ChangeWave forecast that future Mac sales could be impacted by tightening consumer spending.

Regardless of how much weight you place on planned purchase forecasts, Apple’s own guidance will take on extra significance Tuesday. Note, however, that company executives like Oppenheimer typically decline to comment on the overall health of the economy in their responses to analyst questions.

3. How many iPhones has Apple sold?

By now it’s a familiar figure to Apple observers—the company’s stated goal of selling 10 million iPhones before the end of 2008. The just-completed quarter will provide the most definitive view yet on whether Apple will reach its goal. The iPhone 3G went on sale in July in 21 countries; it’s now available in more than 50 countries around the globe.

How has the worldwide availability of a new phone affectrd iPhone sales numbers? During his Worldwide Developers Conference keynote in June, Steve Jobs said Apple had already sold 6 million iPhones. While the company hasn’t released an updated total since then, it did confirm that it sold 1 million iPhone 3Gs during the opening weekend of its July 11 release. That puts Apple 3 million phones short of its goal with the full fourth-quarter figures to come out Tuesday.

4. Is Apple still expanding its retail presence?

Apple has been pretty aggressive about opening new brick-and-mortar retail stores throughout 2008, and for good reason—the company’s retail arm saw $1.44 billion in revenue during the third quarter, with half of the 476,000 Macs sold through the Apple Store going to new Mac users.

The company ended the third-quarter with 216 stores, with plans to have 242 open by the end of the September quarter. It will be interesting to see if Apple met that goal; it will be even more interesting to see what its retail plans are for the 2009 fiscal year, as that could be influenced by Apple’s outlook on consumer spending in the next year.

5. How are the new products doing?

Tuesday’s call won’t offer much insight on the new laptops Apple unveiled last week, as those models hit the shelves during the company’s fiscal first quarter of 2009. But the fourth quarter numbers will include some sales figures for the new iPods introduced in September.

Apple’s December quarter is by far the big month for iPod sales, as consumers snap up the handheld music players as holiday gifts, so don’t look for a big impact from the latest nanos, classics, and touches, especially since Tuesday’s numbers will include only a few weeks of sales. Still, it might be illustrative to see if Apple can match the 10.2 million iPods it sold during last year’s fourth quarter and what kind of momentum Apple has from the 11 million iPods it sold during the June quarter.

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