With Apple set to report earnings for its fiscal third quarter Tuesday, will Antennagate or the iPad be the more dominant discussion topic? And on what will CEO Steve Jobs and CFO Peter Oppenheimer spend most of their time?
Any Apple earnings release these days is a major event, but in the past three months includes two of Apple's biggest product releases in its history -- the iPad and iPhone 4 -- and also one of its messiest public relations snafus, including the fallout from so-called Antennagate and the near-constant criticism of a reported design flaw in its iPhone 4 smartphone.
Apple's certainly set financial expectations high. In its last earnings report, on April 20, Apple reported sales of $13.5 billion and earnings of $3.07 billion for its second fiscal quarter, which were up 49 percent and 90 percent, respectively, from the year-ago quarter.
This quarter, analysts are predicting $14.74 billion in sales on earnings per share of $3.10, according to an analysts' average provided by Thomson Reuters -- significantly higher than the $13.0 billion to $13.4 billion on earnings of $2.28 to $2.39 a share range projected by Apple CFO Peter Oppenheimer in April.
The most closely scrutinized numbers will be iPad sales. The iPad went on sale on April 3, just a few days after the third quarter began, and sales took off right out of the gate; Apple said it sold 3 million iPads within the tablet's first 80 days on the market. Sales of iPhone 4 won't be nearly as much of a factor -- iPhone 4 arrived the last week of the quarter, on June 24 -- but Apple last week said it had sold 3 million iPhone 4s already.
Provided all goes according to plan, then, how much will Antennagate rain on Apple's earnings parade? Don't look for Apple to indulge the idea that the iPhone 4's antenna issues -- and Apple's much-criticized response to them -- have had any material effect on sales. Apple CEO Jobs told attendees at Apple's iPhone 4 press conference last week that 0.55 percent of all iPhone 4 users have called AppleCare with antenna issues, and that the return rate for iPhone 4s so far had been less than one-third the return rate for iPhone 3GS phones.
How much Antennagate's done, real or perceived, to take the shine off Apple might be best observed in the markets themselves. By the middle of last week, Apple's stock had declined about 8 percent from where it had been on the iPhone 4's April 24 release date, and on Monday of this week, Apple briefly lost its market capitalization lead over Microsoft before regaining it again in the afternoon. Will Apple see a bounce from blowout quarterly earnings?