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
