With earnings call, Apple heads back to business

After a week spent worrying about the health of CEO Steve Jobs, Apple will look forward to getting back to business Wednesday when it reports its fiscal first-quarter earnings.

The last three months were not kind to computer and consumer electronics companies, but Apple is expected to have weathered the storm better than others. Analysts are predicting the company will report revenue and earnings per share at the high end of the guidance it provided in October, with expectations of $9.76 billion in revenue and earnings per share of $1.38.

The three-month period between October and December is usually one of Apple's best quarters of the calendar year, but this was anything but a typical holiday season. Overall retail sales fell 2.7 percent in December as compared with November, as the full emotional impact of the late-2008 stock market swoon took hold.

We got a bit of an earnings preview last week, when IDC and Gartner reported their PC market share estimates for the fourth calendar quarter. Apple's Mac shipment growth slowed from the strong pace it set throughout 2008, but the company is still growing faster than the market itself.

Measured against a U.S. PC market that fell 3.5 percent compared with last year, Apple's shipments grew 7.5 percent. That suggests that Apple is still enjoying momentum in its Mac division, which no doubt got a boost from the introduction of new notebooks in October.

Still, the economic climate is having some sort of impact on the Mac, which is almost exactly what analysts felt would happen going into this quarter. Most analysts seem to be expecting Apple to have sold around 2.6 million Macs during the quarter, representing decent year-over-year growth at around 13 percent but slower than Apple had been reporting over the last several quarters.

When it comes to the other two legs of Apple's business, however, the prognosis is less clear. iPod shipments, usually the crown jewel of Apple's first fiscal quarter, are expected to decline from last year's 22 million shipments to around 19 million. But there could be a silver lining for Apple if the momentum toward higher-priced iPods like the iPod Touch continues, allowing the company to offset a volume decline in sales with an increase in revenue obtained per iPod.

Predicting the iPhone shipment totals is even less of a science, since Apple's history in this market is too short to have established seasonal patterns. The company sold way more iPhones last quarter than anyone had expected, shipping 6.9 million units. That has dampened expectations for the current quarter, since many of those sales were used by Apple's carrier partners to build inventory ahead of the pent-up demand for the July iPhone 3G launch.

Financial analysts seem to expect around 5 million iPhones to have been sold during the quarter, which would be a steep decline from the company's fourth quarter but a 116 percent increase over last year's first-fiscal quarter iPhone sales.

And going forward into an uncertain economic climate, Apple is expected to provide its usual conservative guidance. In past quarters, the guidance number has been one of the most anticipated aspects of the earnings reports, but this year it seems investors and analysts are more interested in Apple's performance during a holiday season that has caused no small degree of problems for its competition.

With lots of cash in the bank and strong profit margins, Apple is in excellent shape to weather a couple of disappointing quarters that could cause far more problems for the rest of the industry. But after the numbers are revealed, expect the financial community to ask Apple executives Tim Cook and Peter Oppenheimer--the usual conference call participants--to comment on Jobs' health and the company's long-term plans around succession.

Apple's first official response to rumors about Jobs' health came on an earnings call in July, when the company declared his health was a private matter. Things have changed quite a bit since then, with Apple revealing last week that its CEO is taking a six-month medical leave of absence to recuperate from health problems that have caused him to lose a great deal of weight.

Cook, who is running the company during Jobs' absence, is unlikely to say too much more about Jobs than the company did in last week's media advisory. But analysts could use this opportunity to focus on calling for Apple to make its long-term succession plan clear to the public, something the company has resisted doing until this point.