Welcome to live coverage of Apple’s Q1 08 financial results conference call.
Notes will be presented in reverse chronological order beginning 2pm PT/5pm ET:
• End of conference call
• Education market has record; grew about 5 times IDC’s market forecast of 6%
• iPhone retail outlets: 2,500 in Europe; 2,100 in U.S. Apple has no comment today on expansion of iPhone in retail
• Mac available at 9,500 retail locations up from 7,700 a year ago
• Desktop Mac business increases? iMac “extremely well-received”
• Most of other component costs should see historical declines
• Apple expects DRAM and NAND flash will remain in oversupply condition
• Apple “very happy with all of the iPhone launches so far” (U.S., UK, France, Germany)
• 4 million iPhones to date; Apple “very happy with iPhone momentum”
• Apple sees iPhone unlocking as a “good problem to have” and is a sign of iPhone’s popularity
• “Significant” numbers of iPhones sold with intention to unlock, but Apple is unsure how to measure as activation waits sometimes for existing contracts to expire, etc.
• Mac was very strong throughout the quarter
• Apple expects to open 35-40 stores in fiscal 2008; 25 are outside U.S. currently; first Apple Retail Stores in China and more stores in 2008 will open outside U.S. than in 2007.
• Retail Stores: 504,000 units up 64% YOY
• Unit sales YOY for iPod flat in the U.S. (due to iPod touch intro; higher-priced line)
• Apple TV take two: “We think we have it right this time.”
• Apple plans to enter Asia and additional Euro countires with iPhone in 2008
• Apple Retail Store traffic up 10 million in quarter vs. year ago quarter
• Apple will focus on mananging the business and leave the economy predictions to others
• Apple will not discuss terms of their agreements with iPhone carriers
• Apple Japan: desktop share went from 6% to 10% YOY on very well-received iMac; iPod touch also very well-received
• Apple shipping Leopard on very MAc; contributing to great MAc sales results
• Apple’s expectations for Mac OS X Leopard in the March quarter? Sales will be down sequentially, unknown if it will follow same trend as Tiger
• MacBook Air orders are “very strong.”
• Apple believes MacBook Air is “very, very, very competitively-priced”
• Apple’s objective is to run iTunes Store just over break even as it helps to sell iPods and Macs
• Current 286 Best Buy stores have added to Mac momentum – to go to 600 Best Buy locations over the next 6 months
• iPod touch sacrificed overall unit growth (higher price), but APple is very pleased with product results
• Apple established iPod touch which has the potential to become “the very first mainstream mobile platform running all kinds of applications”
• iPod sales meet guidance and set new company record
• Some of iPod’s share gains are “stunning” in UK, Asia, elsewhere
• Apple expects normal sequential decline in iPod sales in upcoming quarter vs. holiday quarter
• Will MacBook Air add or cannibalize? Customer reaction great; orders very strong; too early to know cannibalization factor
• Apple gave guidance that they “have reasonable confidence in achieving”
• Very confident in business, strategy, and products; very confident in products; confident going forward
• Share buybacks? Apple prefers to keep strong balance sheet to make strategic moves and/or acquisitions
• Apple business grew 47% YOY outside U.S.
• U.S. revenue grew 27% YOY (higher than last year’s Q1 YOY growth)
• iPod ASP increased due to very successful of iPod touch
• iPod vs. iPhone cannibalization? UK, France and Germany – no evidence; In US, where iPhone has been available longest, cannibalization could have been one factor in iPod growth, but there were other factors (not discussed)
• Oppenheimer: iPod market is bigger than market for just simple music players. iPod will become first mainstream Wi-Fi mobile platform
• Mac channel target 4-5 week of inventory; entered significantly less than range as Mac sales were higher than expected
• Apple “very confident” of hitting 10 million iPhone goal for 2008
• Pro audio up very significantly YOY; Pro video performing very, very well
• Oppenhemier: “Mac business is on fire”
• Macs in channel are below target range
• Apple’s guidance rationale: up 29% year-over-year, sequential declines for Leopard and iWork software expected as we move away from release dates
• Apple “very confident” in product pipeline for the rest of 2008
• Apple “extremely proud” of outstanding results and growth achieved
• $1.4 billion in operating expenses
• Over 300,000 personal training sessions in retail stores
• Apple Retail Stores: over 50% of Mac buyers were new to Mac
• $1.7 billion in Apple retail store revenue; 204 stores now open
• iPod market share growing on Europe and Asia
• Recent iPod touch software upgrade will add functionality
• iPod touch could become first mainstream mobile platform
• iPod channel inventory within target range of 4-6 weeks
• $170 million in Leopard revenue; 19% of Mac users already using Leopard
• iMac sales “robust,” portable sales “strong.”
• Cash generation for quarter was roughly $3 billion
• Apple very please with recent software releases
• CFO Oppenheimer guides Q2 08: “revenue of about $6.8 billion and earnings per diluted share of about $.94.”
• Quarterly iPhone sales: 2.315 million
• 22,121,000 iPods sold during the quarter representing 5% unit growth and 17% revenue growth over the year-ago quarter
• Apple shipped 2,319,000 Macs representing 44% unit growth and 47% revenue growth over the year-ago quarter
• International sales accounted for 45% of the quarter’s revenue
• Gross margin was 34.7%, up from 31.2% in the year-ago quarter
• Revenue of $9.6 billion and net quarterly profit of $1.58 billion or $1.76 per diluted share vs. revenue of $7.1 billion and net quarterly profit of $1 billion, or $1.14 per diluted share, in the year-ago quarter
• Apple financial results for its Q1 08 ended December 29, 2007
• Those in attendance include CFO Peter Oppenheimer, COO Tim Cook
• Awaiting start of conference call
The conference call replay will be available here shortly: http://www.apple.com/quicktime/qtv/earningsq108/
“Apple shipped 2,319,000 Macs representing 44% unit growth and 47% revenue growth over the year-ago quarter”
Who was the helmet-wearing troll on one of these threads that wrote no one buys Apple’s overpriced computers? Never mind. It doesn’t matter.
@ Ampar
These aren’t the droids you’re looking for.
Move along.
Q: Why the apple stock was not split inspite it hit $200
Why share buybacks are bad for shareholders.
Can we also note a higher average per sale on both Macs and iPods as a snapshot. Mac APS has also increased as a four-year rolling average, from $1425 to $1476.
Please find me another computer or CE company that can maintain or increase the APS, has a growing business, is debt-free and increases its cash/short-term investments balance every quarter.
On a slightly down note, I’m a little worried that the performance in the US was a little flat – hope that’s not a sign of things to come.
Jerry…
Cos it would make the volatility worse rather than better!
@ Jerry Giriyappa
A: English 101
ChrissyOne,
Welcome back. Have a nice weekend?
It was pretty good until today.
Now… not so much.
You?
may someone tell me what “YOY” stands for?
Thanks
Year over year.
Or it could be, like, when a jewish guy tries to be like not-jewish guys. A yiddsh goy.
Thanks ChrissyOne
And in other news, the Zunes are selling by the hundreds of dozens. Now with new firmware update that provides “zero” features all for free, yet every Zune purchase puts money in the Music Cartels pockets. Simply awesome.
A sheynem dank.
@ Carlos
nishto farvos
Yippee! I lost a ton of money today! Duh-duh-da-dum. Snap. Snap.
I don’t know anything about helmet-wearing trolls but I can tell you it was an even better quarter for Dell and Microsoft. Their price-accessible innovations with two-button mice and the ability to play games won non-pretentious computer buyers the world over.
And this is only the beginning. Zune 2 is off to a phenomenal start with its FM radio and the revolutionary touch-interface Windows Mobile 7 is around the corner. It’s gonna be great. Nice try, Apple.
Your potential. Our passion.™
The current market volatility is beyond Apple’s control. As any other company, Apple will have to ride it out. A strong Balance Sheet is a very good thing right now.
Would not surprise me to see the stock retreat to the $120 – 130 range over the next two month’s or so. If true, that would be a very good time to purchase AAPL stock.
ChrissyOne,
Hadn’t seen you here over the weekend. I just figured you have a real life. Lucky girl.
Ya gotta love the whole stock market thing. Too bad we can’t put our Social Security in there also. Why not lose it all?
I’m ready for the drops tomorrow. I got a couple of contracts (200 shrs) of apple that I’ve been riding this down turn with using collars. I started with an April 08 protective put at 195 paid for it by selling 2 April 08 210 calls. This system works well in preserving you capital without using stop losses. I sold the protective puts when the stock hit 175 for a few thousand in profit and bought back the 210 calls about $3500 cheaper. In essence this had the effect of preserving my account value. I could have made more money by just shorting the stock but This is my IRA portfolio and brokerages don’t allow short selling with IRA funds. SO while apple went from 201 to 137 in 6 weeks and the value of my shares went from $40,200 to $27,400 the options plays that I’ve made with the collar has cost me just a few hundred dollars in those 6 weeks my available capital to purchase shares went from arount $9,800 to $22,400 . once this wave bottoms out I’ll buy another 100 shares of AAPL and ride the wave up again. Life is great. In the comming weeks when AAPL starts to rise I’ll be buying some LEAPS and sell near term calls and doing a few bull put spreads. I shold be able to double or triple my money in 6 months.
@ LorD1776
I was working on some home improvement, and the weather (while freezing cold) was otherwise lovely for Seattle in January so I stayed away from The Machine.
Should have stayed a little longer, it seems.
Anyway, so begins the Long Dark Tea Time of AAPL.
Sugar?
@bobchr
i have no idea if you’re telling the truth about the above. it sounds reasonable, but when did the govt allow you to sell protective puts? i thought you could only sell calls? if you don’t mind, tell us the brokerage house that allows you to sell puts in an ira account?
thanks
ChrissyOne,
Yes please; thank you.
The object is to buy a protective put and pay for it by selling a call. This is called a collar trade. These are not naked instruments. The protective put is bought incase the stock drops in value. Their value increase with a falling stock price. If you dont want to use you own capital to finance the cost of the puts, sell a few calls of equal or slightly lower value to lighten your burden. When the stok drops youu can buy the calls bvack at a discount and you keep the difference. The trick is to use options with a minimum of 90 preferably 120 to 180 days to expiration so that little or no time value is lost. I’m currently using April 08 instruments and I’m about to jump to July. As for who allos these transactions: Optionsxpress, Trade King, Interactive Brokers ETrade all will allow these plays and many more. You are allowed to self manage your own IRA account as you see fit. I could have chosen to leave my 401K with my old company’s chosen plan administrator TRowe price but when they let me go I chose to roll it over into an IRA and transfer it into a brokerage account. Mutual funds are instruments that grow primarily and mainly on the contributions of the owner . As the hot funds get larger they tend to cost you more than they make you over the years in fees and depreciation of assets.