MacDailyNews presents live notes from Apple’s conference call discussing Q109 financial results.
Live notes will begin today at 2pm PST/5pm EST/10pm GMT in reverse-chronological order:
• End of conference call.
• Apple has no plans to break out App Store revenues from iTunes Store reporting.
• Apple will not disclose the breakout of free/paid apps of the 500+ million downloads.
• Average number of Apple Stores open during the quarter: 249. Apple set a record of One-to-One sessions during the quarter.
• Derivative iPhone competitors? Cook: “It’s difficult to judge products that are not yet in the market, but iPhone has sold over 17 million units thus far and has received the highest user satisfaction in multiple independent surveys. We’re years ahead on software and that includes the App Store. We approach this business as a software platform business unlike many who approach it as a hardware product. We like competition as long as they don’t rip off our IP, in which case we will go after them. We will not stand for having our IP ripped-off and we will use any weapons at our disposal [to stop it].“
• On a sequential basis, iPhone gross margin was higher in Q1 due to lower component costs and stronger dollar
• Apple margins exceeded guidance by about 420 basis points; a quarter of that were favorable adjustments due to prior items in the supply chain that Apple does not forsee occurring in Q2
• Retail store performance outside the U.S. was stronger than in the U.S. The stores are a great place for new customers especially.
• Macs sales also spiked at end of quarter; not as strong as iPods, but significant nonetheless; Apple belives that was also due to macro economic conditions
• Mac sales were 2nd best ever (3% less than previous record quarter which took place in better macro economic climate); MacBooks sales were very strong in October
• Cook: Not enough data yet on Wal-Mart iPhone sales. Definitely increases iPhone’s reach (some 4,000 locations) beyond Apple Stores and AT&T stores. iPods in Wal-Mart led to iPhones in Wal-Mart.
• Cook: We do not forecast at a product level. Apple concerned that economy may negatively affect iPhone signups, but “we’ll see.” Apple feels very good about their product pipeline.
• Apple is shipping the best products they’ve ever shipped and, thankfully, customers are responding
• Apple now has over $28 billion in cash on-hand and is a debt-free company
• Apple plans not to cut R&D, but instead will continue to bring innovative products to the market that delight their customers
• Apple is very confident in their strategy and their business and plans to invest their way through this downturn just as they did during the last one
• In the quarter, U.S. iPod unit sales contracted about 3% YOY. All of the growth you see was international. Apple saw a rush of buying and all of their growth during last week of quarter which Apple attributes to macro economy and its impact on consumer behavior.
• iPhone channel inventory draw down during quarter: 250,000 units. Apple is very comfortable with current inventory levels.
• iPhone channel build in Q1, despite launching in 20 additional countries, Apple ended quarter with lower channel inventory
• Cook: Snow Leopard: We are very excited, but do not have a launch date to announce today
• Education funding uncertainty and state budget shortfalls contribute to K-12 weakness in Mac sales
• Cook: Apple TV unit sales up almost 3 times over the year ago quarter. It does, however, still remain a “hobby” to Apple. We are going to continue to invest in it. We will continue to invest because we believe there is a future there. Movie rentals really helped Apple TV sales
• Cook: We are watching the “netbook” space which is about 3% of the market right now. The products in there are principally based on hardware that’s much less powerful than we think customers want, software technology that is not good, cramped keyboards, small displays, etc. We don’t think that people are going to be pleased with those type of products. But we’ll see.
• Cook: Apple is not going to play in the low-end voice phone business. We’ll leave that to others. Our objective is not to be the cell phone unit market share leader, it’s to build the world’s best devices.
• iPhone now in over 70 countries; some are non-subsidized markets (India being the largest) – Apple sees materially lower sales in such markets
• Cook: We do expect in Q2 a favorable environment in supply and price for most commodities (RAM, LCDs, etc) that Apple uses.
• Cook: Economy, while not good, is not as unpredictable as it has been in October.
• Oppenheimer: “Apple’s shipping the best products they ever have.”
• Apple expects to continue to offer exceptional products that their competitors will not be able to match.
• Apple expects gross margins of “about 30%” for 2nd half 2009
• Apple believes $199 iPhone is a compelling value. Apple continues to believe they are years ahead of the competition
• Apple plans about 25 new retail stores in 2009, about half of which will be outside the U.S.
• Tim Cook: The values of our company are extremely well entrenched. We believe that we’re on the face of the Earth to make great products, and that’s not changing. We don’t settle for anything less than excellence. Regardless of who’s in charge.
• Peter Oppenheimer: Steve is CEO of Apple and plans to remain involved in major decisions and Tim will run day-today operations during Job’s absence.
• Analyst Ben Reitzes: “How’s Steve?”
• “We are very excited with our new product pipeline.”
• “We are fortunate to have the world’s best customers and employees.”
• Oppenheimer’s guidance: “Looking ahead to the second fiscal quarter of 2009, we expect revenue in the range of about $7.6 billion to $8 billion and we expect diluted earnings per share in the range of about $.90 to $1.00… Visibility remains low, making forecasting challenging.”
• 29.7% tax rate which was slower as result of congressional approval of “R&D tax credit” which was retroactively applied for 2008
• More favorable component pricing during quarter contributed to stronger than expected margins
• 251 Apple Retail Stores in 10 countries (first store in Germany (Munich) this quarter
• 515,000 Macs sold by Apple Retail Stores; nearly half of those to people new to Macintosh
• Competitors are scramboling to copy Apple’s iPhone success; we are years ahead of the competition
• iPhone total sales of 13.7 million for 2008: well ahead of Apple’s 10 million goal for the year
• Over 15,00 apps in App Store with over 500 million downloads
• iTunes Store had biggest music quarter ever.
• iPod holds over 70% share in US and UK in Dec., over 60% in Japan, and over 50% in Canada.
• 3-4 weeks of Mac channel inventory
• Apple see shift towards portables (71% of all Macs) vs. desktops
• IDC: Overall PC market contracted vs. Apple’s growth
• Non-GAAP: $11.8 billion of “Adjusted Sales” and $2.3 billion of “Adjusted Net Income”
• Apple CFO Peter Oppenheimer and COO Tim Cook are present on conference call
• Quarterly iPhone units sold were 4.363 milllion, representing 88% unit growth over the year-ago quarter
• Apple sold a record 22.727 million iPods, representing 3% unit growth over the year-ago quarter
• Apple sold 2.524 million Macs, representing 9% unit growth over the year-ago quarter
• Analysts surveyed by Thomson Reuters forecast Q109 income of $1.39 per share on $9.74 billion in revenue
• Apple today posted record revenue of $10.17 billion and record net quarterly profit of $1.61 billion, or $1.78 per diluted share
