During yesterday’s Apple Inc. fiscal first quarter 2013 earnings conference call, which MacDailyNews covered with live notes here, Apple CEO Tim Cook made some interesting comments, including:
• We are incredibly pleased to report an extraordinary quarter with $54.5 billion in revenue and new records for iPhone and the iPad sales. No technology company has ever reported these kinds of results.
• You’re going to hear a lot of impressive numbers during this call, but they’re not the only way that we measure success at Apple. The most important thing to us is that our customers love our product, not just buy them, but love them. Everyone here is laser focused on creating an unprecedented customer experience. We have now sold well over half a billion iOS devices, including a staggering 10 per second last quarter alone. We couldn’t have achieved these milestones without the very best products in the world and unmatched execution by our engineering operations and sales teams to deliver so many innovative and beautifully designed products. It’s simply phenomenal.
• Sequentially we increased [iPhone sales] over 70% from the September quarter, which was 3.5 times market. And so we could not be happier with that. In terms of the geographic distribution, we saw our highest growth in China and it was into the triple digits, which was higher than the market there. And so, I would characterize it as we are extremely pleased.
• The iPhone 5 offers as you know a new 4-inch Retina display, which is the most advanced display in the industry and no one comes close to matching the level of quality as the Retina display. It also provides a larger screen size for iPhone customers without sacrificing the one headed ease-of-use that our customers love. So, we put a lot of thinking into screen size and believe we’ve picked the right one.
• If you look at the iPhone sales across the quarter, we were very constrained for much of the quarter on iPhone 5. As we began to produce more and ship more sales went up with the production. iPhone 4 was actually in constraint for the entire quarter and sales remained strong, and so that’s helped sales progress across the quarter
• I know there has been lots of rumors about order cuts and so forth and so let me just take a moment to make a comment on these, I don’t want to comment on any particular rumor because I would spend my life doing that, but I would suggest it’s good to question the accuracy of any kind of rumor about build plans and also stress that even if a particular data point were factual it would be impossible to accurately interpret the data point as to what it meant for our overall business because the supply chain is very complex and we obviously have multiple sources for things, yields might vary, supply performance can vary. The beginning inventory positions can vary, I mean there is just an inordinate long list of things that would make any single data point not a great proxy for what’s going on.
• The most important thing to Apple is to make the best products in the world that enrich customer’s lives. That’s our high order bit; that means that we aren’t interested revenue for revenue sake, we could put the Apple brand in lot of things and sell lot more stuff but that’s not what we’re here for. We want to make only the best products and so what does that mean for market share? We’ve been able to do that and I think we’ve had a great track record here on iPod doing different products at different price points and getting a reasonable share from doing that. And so one doesn’t, I wouldn’t view these things as mutually exclusive as some might, but the high order bit is making a great product, that enriches customer’s lives. And so that’s what we are focused on.
• If you look at the previous year, our Mac sales were about 5.2 million [units]. This year, they were 4.1 million and so the difference is 1.1 million. And so let me try to bridge that. iMacs were down by 700,000 units year-over-year. As you remember, we announced the new iMacs late in October and when we announced those, we announced that they would ship, the first one, the 21.5-inch would ship in November and we did ship it at the end of November, we announced that the 27-inch would ship in December and we did ship that in mid-December. And so there were limited weeks of ramping on these products during the quarter, we left the quarter with significant constraints on the iMac. And we believe we know that our sales would have been materially higher if those constraints would not have exist. We tried to tell people this on the conference call in October, I think I said that we would have significant constraints on iMacs, but I recognized to some folks this maybe to surprise… Number two, if you look at last year… we had 14 weeks in the quarter. We have 13 weeks in the quarter this year. Last year, in the average week, we sold 370,000 Macs. The third part of the bridge here would be that our channel inventory was down from the beginning of the quarter by over 100,000 units. And that’s because obviously we didn’t have the iMacs channel inventory was in significant constraint. So, if you just take these three factors, they bridge more than the difference of between this year sales and last year sales.
• We are working on some incredible stuff. The pipeline is chock-full, I don’t want to comment about a specific product, but we feel great about what we have got in store.
• In terms of Maps, we have made a number of improvements to Maps since the introduction of iOS 6 back in September and will roll out even more improvements across the rest of the year and we are going to keep working on this as I have said before until it lives up to our incredibly high standards. Users can already see many of these improvements because they include things like improved satellite and improved imaginary and improved categorization, improved local information for 1000s of businesses and so forth. The usage in maps is significantly higher than it was prior to iOS 6.
• In terms of other services we feel fantastic about how we’re doing, in notification center we’ve sent over 4 trillion Notifications – this is mind blowing… For iMessage we’ve sent over 450 billion and are currently sending those 6 billion per day…. We have over 200 million registered users [and] we have 800,000 apps on the App Store with over 40 billion downloads and so I feel really, really great about it, there is obviously more stuff we can do and you can bet we’re thinking about all of it.
• I can tell you that the number of ramps were unprecedented in the fact that we had new products in every category is something we have not done before. We feel great to have delivered so many products for the holiday season though and our customers have certainly expressed joy over it.
• If you look at our total China, total Greater China, which would include our retail stores that are in China. Our revenues were $7.3 billion in the quarter. So, this is incredibly high, it’s up over 60% year-on-year. And again, that’s comparing 13 to 14 weeks and so it’s really the underlying growth, it’s higher than that. We saw exceptional growth in iPhones into the triple digits. iPad, we shipped iPad very late in the quarter in December, and despite that, saw very nice growth. We are expanding in Apple retail there. In the year ago quarter, we had 6 stores we now have 11. We obviously have many more to open there. In our premium resellers, we went over 400, up from a little over 200 in the previous year. And we increased iPhone point of sales from 7,000 to over 17,000 there. And now this isn’t nearly what we need and it’s not the final by any means, we are not even close to that, but… I feel that we are making great progress that was just over there recently. And I was talking to a lot of different people and I am very happy with how things are going. It’s clear that China it’s already our second largest region as you can see from the data that we have given you and it’s clear, there is a lot of potential there.
• In terms of the product that we sell today, the Apple TV, we sold more last quarter than we’ve ever sold before, eclipsing 2 million during the quarter. It was up almost 60% year-on-year and so there is actually very, very good growth in that product… I have said in the past this is an area of intense interest for us and it remains that and I tend to believe that the, there is a lot we can contribute in this space and so we continue to pull the string and see where it leads us but I don’t want to be more specific.
• I think overall our team did just a fantastic job ramping a record number of new products during the quarter. We did have significant shortages due to robust demand on both iPad mini and both models of the iMac that persisted the entire quarter. And we are still short of both of those today as the matter of fact. Additionally, supply of iPhone 5 which short to demand until late in the quarter and iPhone 4 was short for the entire quarter, we believe that we can achieve a supply demand balance on iPad mini during this quarter and on iPhone 4 during this quarter. On iMac, we are confident that we are going to significantly increase the supply, but the demand here is very strong and we are not certain that we will achieve a supply demand balance during the quarter.
• I see cannibalization as a huge opportunity for us. One, our base philosophy is to never fear cannibalization. If we do, somebody else will just cannibalize it and so we never fear it. We know that iPhone has cannibalized some iPod business. It doesn’t worry us, but it’s done that. We know that iPad will cannibalize some Macs that doesn’t worry us. On iPad in particular, we have the mother of all opportunities here, because the Windows market is much, much larger than the Mac market is. And I think it is clear that it is clear that it’s already cannibalizing some and I think there is a tremendous amount more opportunity there. And as you know, I have said for two or three, actually three years now I believe that I believe the tablet market will be larger than the PC market at some point. And I still believe that. And you can see by the growth in tablets and the pressure on PCs that those lines are beginning to converge.
• If somebody will buys an iPad mini or an iPad and it’s their first Apple product, we’ve had great experience through the years of knowing that when somebody buys their first Apple product that a percentage of these people wind up buying another type of Apple product. And so if you remember what we had termed “the halo effect” for some time with the iPod, with the Mac, we are very confident that will happen and we are seeing some evidence of that on the iPad as well. And so I see cannibalization as a huge opportunity.
• Today we have 24 carriers on LTE around the world for iPhone 5. Those are in countries like the US, Korea, UK, Germany, Canada, Japan and Australia and a few others. Next week, we are adding 36 more carriers for LTE support. And these carriers will be in countries that were currently not supporting LTE, so the LTE coverage now as of next week in Italy, Denmark, Finland, Switzerland, Philippines, also several Middle Eastern countries. And so if you look at the total of all of these and the incremental subscribers that are in those countries, that’s over 300 million. And so that’s the next range of LTE rollouts that I am pleased to tell you about today.
• I am not going to go into our pricing strategy, but we feel great about the opportunity of getting products to customers and a percentage of those buying other Apple products. And that we have obviously seen evidence of that through history and continue to see evidence of that today.
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MacDailyNews presents live notes from Apple’s Q113 Conference Call – January 23, 2013
