By any measure, Apple's supercharged 2012 is making this year pretty tough. So much so that CEO Tim Cook in effect cautioned Wall Street analysts against making comparisons.
"Fiscal 2012 results were incredibly strong, and that's making it difficult," Cook said on Apple's second-quarter earnings conference call, rattling off all that made last year so good: high growth, high demand, fatter gross margins, and historically low costs for components.
And yet that's what investors do: They make comparisons to prior years and make a bet on the stock based on what the future looks like. While the company posted solid second-quarter results -- at least when it comes to the estimate-beating game with Wall Street -- it also warned that business in the current quarter is far weaker than Wall Street analysts had been expecting.
Perhaps that's why it chose today to announce a major share buyback and a 15 percent boost to its dividend. But there's little Apple can do about the outlook for the quarter we're in now, which is anything but bright. And that's likely to take up much of the postearnings chitchat among pundits as people try to figure out the direction of the world's most valuable tech company.
Apple said it expects revenue from the current quarter to come in between $33.5 billion and $35.5 billion. Even if the company hits the high end of its forecast, that's still more than $3 billion shy of the $38.6 billion expected by analysts polled by FactSet Research. (Apple posted sales of $35 billion in the third-quarter of 2012, meaning even a strong quarter this year will be roughly flat with the year-ago period).
The company doesn't provide explicit profit guidance, a figure that analysts calculate on their own.
More problematic is that the margins are getting hit. Apple expects its gross margins -- a key number, and one that has been shrinking in recent quarters -- for the third quarter to come in between 36 percent and 37 percent, far lower than the 38.6 percent analysts had until today been looking for.
And it looks even worse when compared with the year Cook wants you to ignore. In the third quarter of 2012, Apple's gross margins were 42.8 percent, and Wall Street likes to see this number above 40. So even if Apple posts sales that are roughly flat with the year-ago period, the margins are narrowing and that puts pressure on the business.
What's driving this slowdown? Major competition, along with stronger sales of devices, such as the iPad Mini, that cost more to make and earn Apple less. When asked on the conference call about the narrowing margins, CFO Peter Oppenheimer pointed to falling overall revenue and the product mix. In the March quarter, he pointed out, margins were hurt as Apple sold more "iPads than planned" and amped up production of the iPad Mini.
So, the hotter that iPad Mini sales are -- and the company doesn't break them out -- the more Apple's margins will be squeezed. In the latest quarter, Apple sold 19.5 million iPads compared with 11.8 million in the year-ago quarter. Those are strong numbers, but Apple needs to find more than that -- meaning a new line of products -- before Wall Street decides the company is again a hot, growth stock.