Live notes from Apple’s conference call discussing Q4 – 2008 financial results in reverse-chronological order:
• End of conference call.
• Jobs: “Babe Ruth had only one home run. He just kept hitting it over and over again.” As software starts to become the differentiating technology of the [smartphone] product category. Hundreds of different hardware configurations are not going to be attractive to developers. MDN Note: Think Google Android, Windows Mobile, etc.
• Cook on supply: Still filling channel with iPods; iPhone at right level of channel inventory; Macs show significant backlog of new products: Apple confident that Apple can produce “a lot,” but if it’s enough he does not know.
• Jobs: “Apple TV is still a hobby with us. I continue to believe it will be a hobby in 2009.”
• Peter Oppenheimer and Tim Cook virtually ignored due to Jobs’ surprise presence on call.
• Jobs: “We want to deliver an increasing level of value to our customers. We choose not to serve some customers. We don’t know how to make a $500 computer that’s not a piece of junk and our DNA will not allow us to ship products like that.”
• Jobs asked about acquiring companies: “I think there are going to be some significant opportunities.”
• Oppenheimer: “We are delivering state-of-the-art products at prices points that our competitors cannot match.”
• Oppenheimer: We will expand into over 70 total countries by the end of the year. “We are confident that year-over-year our sales will be up significantly.”
• Jobs: “We’re just happy to beat them [RIM] on a number to number basis.”
• Apple expanded iPhone sales from 6 to 51 countries.
• Jobs on iPhone wannabes: “We are way out ahead of everybody and, with the most talented people in the world, we’ll stay that way. We are committed to making iPhone the best value for customers.”
• Jobs: “Not likely” that I’ll be special guest regularly on these conference calls.
• Apple saw slowing of notebooks ahead of new MacBook family; saw “considerable rebound with release of new MacBook family.
• U.S. K-12 education sales down about 7% due to budget constraints.
• Oppenheimer: 3-4 weeks Mac channel inventory, 4-6 weeks iPod, less than 6 weeks for 44 iPhone countries; about 2 million iPhones in total channel inventory. Oppenheimer: “We feel this amount of inventory is about right.”
• Jobs: Netbooks are a nascent category. iPhone is a pretty good solution for that category “and it fits in your pocket.” We have some pretty good ideas if that category takes off.
• Jobs on Mac pricing: The downturn is not creatign a market of cheaper computers. There are parts of that market that we choose not to play in. We are actually price competitive in the parts of the market in which we choose to participate. I think there are a tremendous amount of customers who would like and can afford to buy Apple products. We are not tremendously worried.
• Oppenheimer: Aluminum unibody enclosures for MacBook family will initially have higher costs; volume will bring down the cost to Apple over time
• Jobs: This economic downturn may present wonderful opportunities to companies with cash.
• October and April are Apple’s slowest in the year: Foggy months for us to predict.
• Jobs: We may get buffeted around in the waves a little bit, but will emerge in good shape when the water’s calm.
• Jobs: We have $25 billion in the bank, the best customers, the best products, and the best employees in the world.
• Apple employees make some of the best products int he world: Macs, iPods, iPhones… None of our competitors can deliver products in this class.
• Jobs: “I feel very good about our product lineup as we head into the holiday season and beyond.”
• Economy. Jobs, “We are not economists.” “We have the best customers in the world.” “They are more likely to delay purchases than switch.”
• Level of quality of new MacBooks, MacBook Pros: unique features, advanced products, greenest products APple has ever offered
• 200 millionth app will be download from App Store tomorrow (5,500 apps on store in 62 countries around the world)
• Jobs also reported that, measured by revenue, Apple has become the world’s 3rd largest mobile phone supplier:
1. Nokia, $12.7b
2. Samsung ,$5.9b
3. Apple, $4.6b
4. Sony/Ericsson , $4.2b
5. LG, $3.4b
6. Moto, $3.2b
7. RIM, $2.1b
• Jobs” “Apple beat RIM.” 6.9m iPhones vs. 6.1m RIM phones. RIM is a good company that makes good products. Beating them is remarkable.
• Now that iPhone business has grown to 39% of Apple’s entire business. That is why Non-GAAP financial results are offered.
• Jobs: Non-GAAP financial result eliminate the impact of subscription accounting (spread impact of iPhone’s contribution to income over 2 years)
• Special Guest: Apple CEO Steve Jobs: Remarkable things happening at Apple.
• Oppenheimer: “Apple headed in holiday season with best product mix ever.”
• Apple sold more phones in the quarter than RIM (bloodbath).
• Apple is a debt-free company with $25 billion in cash on hand
• Higher than anticipated mix of foreign (non-U.S.) earnings
• Apple Retail Stores: 31 new stores; 247 stores total. Over 50% of Macs sold in stores were to customers new to Mac.
• iTunes Store: Over 65 million customer accounts, 8.5 million song library.
• Apple share of U.S. market over 70% in September (NPD). Apple continues to gain share abroad.
• 3-4 weeks of Mac channel inventory at quarter end (9/27/08).
• Apple very enthusiastic about MacBook, MacBook Pro models released last week
• 30,000 iPhone distribution points worldwide, 3,100 in U.S.
• Apple has already surpassed 10 million iPhones sold in calendar 2008 goal with a full (holiday) quarter remaining
• “We are providing a wide range for our guidance, targeting revenue of $9.0 to $10.0 billion and earnings per diluted share between $1.06 and $1.35.”
• 13 million total iPhones sold as of September 27, 2008: Quarterly iPhone units sold were 6,892,000 – more than all other quarters since iPhone’s release combined: 6.9 million units were sold, exceeding the 6.1 million first-generation iPhone units sold in the prior five quarters combined
• Apple sold 11,052,000 iPods during the quarter – the most of any non-holiday quarter – representing eight percent unit growth and three percent revenue growth over the year-ago quarter
• Apple shipped a record 2,611,000 Macs during the quarter, representing 21 percent unit growth and 17 percent revenue growth over the year-ago quarter
• Gross margin was 34.7 percent, up from 33.6 percent in the year-ago quarter
• These results compare to revenue of $6.22 billion and net quarterly profit of $904 million, or $1.01 per diluted share, in the year-ago quarter
• Apple posted revenue of $7.9 billion and net quarterly profit of $1.14 billion, or $1.26 per diluted share
• CFO Peter Oppenheimer: Record breaking results on a number of fronts
• 5pm EDT: Conference Call has begun
So why was their ability to predict gross margin so poor last quarter?
deliberate underplaying of their part. Buy Buy Buy!
OK MDN. Time to dust off the bookmarks you made for those iPhone detractors last year. Not just Monkey Boy but all of them. Their crow is ready–prepared to perfection and waiting to be served.
Oh W…Joe, don’t go and get all “mavricky” on us.
wait until it hits 150…then buy like a good timer!
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well, it is evident that Macs & iPods keeps selling… Apple will put RIMM out of business in the U.S. in the future if they start building iPhones that work on different carriers. No doubt…
don’t know what I’d do without you minime
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Not bad for a company that essentially only sells one phone on one carrier.
@Quad Core
That’s a great point. They only have one phone on one carrier, and that makes all the other manufacturers looks really bad in that light.
WJ, I’m here for you!
Lets make some money!
If this is a recession, my heart couldn’t handle a boom.
Yo Yanker MobileAdmin, the iPhone is cleaning the Slackberrys clock.
“Babe Ruth had only one home run. He just kept hitting it over and over again.”
Well..we all know that’s heading to the top of the Steve Jobs quote list
Adobe released Adobe CS4, FYI.
SJ: “We don’t know how to make a $500 computer that’s not a piece of junk. Our DNA will not let us ship that.”
Steve, don’t tell fibs… it is called an iPhone!
“[Our customers] are more likely to delay purchases than switch.”
A thought occurs. Macs are priced very competitively in the middle and high-end markets. Apple makes more profit per unit in those markets than its competitors because the competitors use sales in those segments to partly subsidize their low-end offerings. So, some scenarios.
1) People postpone high-end purchases but don’t go low-end. Everyone loses revenue.
2) The high-end market contracts and people switch to low-end. Apple looses sales. Apple’s competitors sell more subsidized units and fewer profit units.
With large cash reserves and no debt, Apple is in a much better position to weather a contraction of the high-end market whether by a slowed purchase cycle or a switch to cheaper units. Dell in particular doesn’t want a larger portion of its sales to be cheaper units. They can’t afford it. They’d much rather customers waited an extra year or two and replaced high-end with high-end. But do Dells last that long? Macs do.
On balance I’d say Dell is more likely to be destroyed by a recession than Apple. But what do I know? I’m not an analyst.
@ KillBill take the IPhone non subsidized price or the subsidized price plus the cost of contract life your pick. Either way still above $500.
Good god, MDN, you missed the most important part of the conference call. The stress on non-GAAP numbers. That’s why Steve was on the conference call, to point out how the analysts were not understanding deferred revenues. Look at the REAL numbers:
http://www.apple.com/pr/library/2008/10/21results.html
And don’t you remember the Opinion piece I wrote for you guys, back in April?!?
http://macdailynews.com/index.php/weblog/comments/17105/opinion/
I pointed out that the analysts were confused. Apparently Steve agrees and set the record straight.
Apple REALLY sold $11.7B this quarter, not $7.9B.
Apple REALLY made $2.4B in profits, not $1.1B.
Apple REALLY earned $2.69 per share, and not $1.26 a share if you DON’T DEFER REVENUES.
i love apple.
…but using the cash to buy some good companies at rock bottom prices is an excellent idea. Now let the speculations begin: who should/could Apple buy….
Great quarter, and one that I hope will comfort Wall Street somewhat. I mention this because this call was more than about Apple alone. Over time, Apple has become something of a bellweather stock, and in times like these, when investors are afraid of their own shadow, any good news is welcome.
Today’s market close shows that Wall Street is worried about the upcoming holiday retail season, so the sales of the iPhone and iPod are useful indicators to them. Mac sales are a useful barometer on how computer and technology purchases are doing. So my hope is that this might relax some of the fears somewhat.
That said, Wall Street does not care a bit about the past, especially the past quarter. It’s all about expectations, in this case, my least favorite word: guidance. I’m not sure yet how this call compares with what Wall Street expects for the next one or two quarters. Apple appears to have been more vague about the future, especially the next two months. And for good reason. It’s very hard to fathom how consumers will react in the short term, given all the paranoia in the marketplace.
Personally, if I were a CEO, I’d do what Warren Buffet does and refuse to give out guidance. Period. I think analysts are lazy, and should do their own homework. Guidance is a damned if you do, damned if you don’t scenario: if Apple guided too conservatively, Wall Street would have a heart attack and slam the stock. If Apple is too optimistic with its guidance, and misses its numbers in the next one or two quarters, the stock could get crushed. To me, it’s a no-win scenario. Telling the analysts to go pound sand makes sense to me, especially when some punk analyst who can’t add gets their projections way off (are you listening, Katie Huberty?). When that happens, who pays the price? Not the analyst, but the company they cover.
If there was a job for incompetent frigtards, it has to be either a TV weatherman in LA (“tomorrow will be sunny!” – no shit, Shirlock) or a Wall Street analyst. They both can be completely wrong, utterly incompetent twits, but if they look good, they’ll have a job forever. Oh, and they’ll get paid an obscene amount too.
There is no justice in this world.
So cross your fingers and hope that Wall Street liked what it heard. Or at least that the damage is minimal.
If it’s any indication, the after hours trading price has AAPL up by 13.25% to a new price of 103.61 since the 4 PM close!
@Crossing my fingers
“Telling the analysts to go pound sand makes sense to me, especially when some punk analyst who can’t add gets their projections way off (are you listening, Katie Huberty?). When that happens, who pays the price? Not the analyst, but the company they cover.”
I agree and I suggest analysts must be banned from giving estimates/grades for a year or be very high fined when they are way off with their estimates.
Why? Because who knows who they are serving/benefiting to with their grades?
I am crossing my fingers too.
“We want to deliver an increasing level of value to our customers. We choose not to serve some customers. We don’t know how to make a $500 computer that’s not a piece of junk and our DNA will not allow us to ship products like that.”
You read that, headless Mac and midtower whiners? IT’S NEVER GONNA HAPPEN, PERIOD.
Buy a PC if you want a POS midtower.
This is classic Jobsian misdirection. Right now, Apple is hard at work figuring out exactly “how to make a $500 computer that’s not a piece of junk” (and it’s not an iPhone or an iPod touch).
Next September or October (or the year after), Jobs will say that Apple has finally figured it out. Isn’t it beautiful?