Apple later today will reveal its second-quarter revenue and device sales during a conference call with Wall Street, but there are more important things to listen for than the numbers, industry analysts argued today.
"I expect them to talk more about the IBM deal," said Carolina Milanesi, chief of research and head of U.S. business for Kantar WorldPanel Comtech, referring to the partnership Apple and IBM announced a week ago. "In the previous quarters, Apple has talked about the inroads of the iPhone and the iPad in the enterprise. But I'm hoping they'll go into it a little bit more today.... We need to understand how they're going to leverage IBM."
Ezra Gottheil, an analyst with Technology Business Research, agreed.
"I'd pay more attention to their answers to the questions that the Wall Street analysts will ask about the deal," Gottheil said. "I think [Apple] will just say lots of nice things about IBM and the partnership [in their prepared remarks]. But in the end, I think they'll weasel out of answering those questions."
That's not unusual for Apple -- or any other company -- during quarterly earnings calls with sell-side analysts. While the experts can ask questions, the answers are only rarely revealing. Apple's executives -- and typically only CEO Tim Cook and the chief financial officer, now Luca Maestri, speak -- stay on message with a vengeance during these calls.
On an associated note, Milanesi said it would be worthwhile to listen for the iPad sales numbers, and thus their trends, in the context of the alliance with IBM. "I expect sales will be flat [year-over-year] or possibly down, but if they are, it will be another indication that Apple knew they needed to do more, like the IBM deal, [to maintain sales growth] by expanding into the enterprise."
Not surprisingly, Wall Street's expectations for the second quarter are all over the map. But according to Fortune, the average bet for iPhone sales was 35.8 million, an increase of 14.5% compared to the same period in 2013; the average iPad sales number for the 34 analysts was 14.4 million, a 1.3% decline.
Wall Street anticipates a stellar quarter, revenue-wise, in large part because it expects solid iPhone sales. The rationale: A continuation of the unexpected strong performance of the smartphone in the first quarter, and the developing expansion into China fueled by the seven-month-old partnership with China Mobile.
Both Milanesi and Gottheil recommended paying attention to the iPhone number, but not for the financials alone.
"Listen for what data they share on the iPhone," suggested Milanesi. "This is the quarter leading up to the launch quarter for the iPhone 6, and maybe they'll talk about the start of leading up to that. Do they cite loyalty figures because sales have tapered off? Those are important to watch for."
Historically, Apple has seen a drop-off in iPhone sales -- less so for the iPad -- in the quarter preceding the one in which everyone expects new models to debut. People, especially the most committed Apple customers, know that Apple launches new iPhones once a year, and as that date approaches -- both analysts anticipate a September introduction again this year -- they postpone purchases, even after their carrier contracts have expired.
"We definitely see it in our data," said Milanesi of the consumer polls that Kantar regularly conducts. "We start to see that users are ready for something new, no matter what device they own."
In 2013, Apple unveiled the iPhone 5S and iPhone 5C on Sept. 10, and began selling the new smartphones on Sept. 20. The corresponding dates this year would be Sept. 9 -- a Tuesday -- and Sept. 19, a Friday.
Gottheil foresaw a larger-than-usual postponement of iPhone purchases this year than last, and not only because Apple usually makes changes to the handset's exterior in even-numbered years.
"The iPhone 6 has bigger expectations than the previous models," said Gottheil about the drumbeat of rumors and leaks that point to at least one, perhaps two, models with larger-sized screens. "The level of the fall-off will show what kind of resilience the iPhone has."
Gottheil also predicted that Apple would dissemble if the iPhone number came in lower than expected by again trotting out the purchase delay argument. "It will be interesting to see whether they make those excuses or just come clean and say, 'Well, now we're in a slow growth part of the year.'"
Apple will start today's earnings call at 2 p.m. PT, 5 p.m. ET. Anyone can listen to the audio-only webcast from an iPhone or iPad, a Mac running OS X Snow Leopard or later, or a Windows PC equipped with QuickTime 7 or above.
Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is [email protected].
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