Analysis of my quarterly Apple miss

Apple reported its fourth quarter FY06 earnings after the close today, citing basic earnings of $0.64 on revenue of $4.6 billion. Another blow-out quarter. Wow. Of course, I have to sheepishly admit, I predicted only $0.53 in earnings. What did I get wrong?

Well, as it turns out, not much. I was within $10 million on the gross margin number, and the iPod units and computers were also nearly on the money. So where did another $0.11 in income come from?

A quick spin through the income statement shows that Apple grew its "Other income and expense" line by about $50 million over last year (undoubtedly because I forgot to factor in growing interest on the $11 billion it has in cash), and it also did a great job of holding down operating expenses. In other words, they just managed the business well.

And then, just to make me feel bad, Apple issued guidance for next quarter that was $0.73, or just a penny shy of what I'd predicted. You know what that means. That means that barring some catastrophe, I'm undershooting earnings next quarter too, despite predicting shipments of 18 million iPods. All I can say is, "Wow". But it also says that there may be a "November surprise" in the pipeline that Apple believes will put their results over the top. And somehow, I don't think it is the Mac Pro Octo using Intel's Quad core Xeon.

Full disclosure: I own some Apple stock.

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