MacDailyNews presents live notes from Apple’s Q310 Conference Call

invisibleSHIELD case for iPadLive notes from Apple’s Q3 -2010 Financial Results Conference Call in reverse chronological order:

• End of conference call.

• How short on iPad and iPhone 4 demand? Cook: “Apple does not have enough supply, so there’s no way to know for sure how large demand is… We’re confident we can pick up the supply.”

• Oppy: With iPhone 4, we have been very aggressive with the price point. It has a higher cost structure than the previous model.

• Cook: “We are very happy to be a partner with AT&T… They’ve been a first class partner… That’s all I have to say about that.”

• Does Apple see iPad halo effect? Cook: “We focus on the synergy between [products]… iPod created a halo for the Mac… Could that happen on iPhone and iPad? … Mac has outgrown the market for 17 straight quarters, but the Mac’s share is still low, so there’s quite the opportunity there… This is why it’s great to have a low share because if it turns out that the iPad cannibalizes personal computers, there’s a lot of PCs to cannibalize.” (More of then Windows than Macs).

• Spain will go from exclusive iPhone carrier model to 3 carriers.

• Mac sales grew 144% in China 184% in Korea, 59% in Spain where the economy was tough.
• Cook: In Asia pacific, mac sales grew 73% YOY. “Phenomenal”
• Cook: Our growth of the company – we’re growing faster internationally than in U.S., however, to put it into perspective, the Americas are growing at 40%.
• Cook: Total cellphone market will increasing become a smartphone market

• FaceTime on Macs, PCs, etc? Cook won’t answer: “We’ll save that for another day.”
• Mac mix: Cook, “There’s clearly a move to mobility.”

• Cook: We value the input of every developer; we are very open to any kind of feedback
• Cook: Most of us do not want pornography and graphic images on the platform
• Cook: Vast majority of apps are approved within 7 days of submission
• 225,000 apps, over 5 billion downloads, $1 billion in payments to developers, iAd’s primary objective to deliver revenue to developers.

• Cook: $15 per month data plans (to start), no contract and a low initial device price seems to be what the customer wants
• Cook: Anecdotally, iPad is beyond early adopter situation; this is the fastest he’s ever seen that happen for any product with which he’s been involved.

• Android competition? Cook: “iPhone sales were up 61% despite inventory drawdowns and product transition. IDC forecast 38% growth for smartphone market, so Apple is growing substantially faster than the market.

• iPhone bumper give away impact? Oppy: Defer revenue for iPhone 4 units that Apple sells where bumpers have not been delivered/where they have not heard from customers. Will record that as revenue in Dec. quarter. Apple will expense the cost of the bumpers as they ship them to customers.

• iPad margins to increase? Oppy: “We were purposely aggressive on iPad [prices] coming out of the chute… We are always working on becoming more efficient and ride down the cost curves.”
• iPad cannibalizing iPod touch? ASP down about $7 sequentially, driven by start of Back to School promo

• Cook on iPhone 4: “We are selling units as quickly as we can make them. We have more work to do [on balancing supply and demand].
• 1.4 million iPhone 3GS and 3G units in channel on June 26th (end of quarter). Currently, Apple has materially less than that.

• Oppy: North Carolina data center is on schedule. Expect it to be completed by the end of calendar 2010 and then Apple expects to use it.

• iPad cannibalization of other Apple products? Cook: “We’ve only been selling for 3 months, so it’s too early to tell. We are thrilled to have had record Mac unit sales in same quarter as iPad launch. For us, that’s a jaw-dropper.”
• Apple will not disclose the splits between iPad Wi-Fi and iPad Wi-Fi + 3G models. Overall ASP for iPad: $640.
• Cook: “Our guts tell us than this [iPad] market is very big. We are working very hard to get iPad out to as many people as we can.”
• Cook: We honestly don’t know when iPad and iPhone 4 supply/demand will come into balance.

• Cook: iPhone 4 “returns are less than iPhone 3GS.”
• Cook: “My phone is ringing off the hook from people who want more [iPhone 4] supply.”
• Cook: “We are selling every iPhone 4 unit we can make currently.”
• We are working very hard to meet iPhone 4 demand.
• Why does Apple still have shortages of iPhone? Cook: “We do not purposely create a shortage for buzz. Demand for iPhone 4 is absolutely stunning.”
• 2.45 million iPhone units in channel at end of quarter with about 1 million of those units in transit, not available for sale
• Cook: We greatly reduced shipments of iPhone 3GS, so we had significantly lower sales after iPhone 4 debut on June 7 until product launched.

• iPhone 4 has a higher cost structure than previous product, so margins are lower for iPhone 4 than for 3GS
• iPhone 4 and iPad will negatively impact gross margins due to supply chain and other product costs that will increase in Q4
• Cook: iPhone 4: We are still ramping and increasing volume
• Cook: We are increasing iPad capacity as quickly as possible; confident they will be able to ramp to meet demand
• Cook: “High demand is never a problem.”
• Apple working around the clock to get supply and demand in balance for both iPad and iPhone 4
• iPad and iPhone 4: Appel not able to fill demand; selling both products as fast as they can make them
• Mac and iPod: no significant supply/demand issues last quarter or currently

• Oppy: Higher iPhone and accessory sales boosted revenue about prior guidance

• Cook: 50% of Fortune 100 deploying or testing iPad
• Mac had an incredible quarter; we are seeing businesses having increasing interest in Macs. Mac unit. sales grew 33% YOY
• Corporate adoption: COO Tim Cook: iPhone up to more than 80% of Fortune 100, 60% of Fortune 500 deploying or piloting iPhone

• Apple is very pleased with market share gains for iPhone, Macs, and iPods
• Q410 guidance: Revenue of “about $18 billion” and diluted earnings per share of “about $3.44”
• Free Bumper cases mean Apple will defer revenue of about $175 million to be realized in Q111

• Preservation of capital remains Apple’s focus
• 26.5% expected tax rate in Q410
• 24.2% tax rate for the quarter; lower than expected due better mix of foreign earnings

• 24 more stores coming this quarter around the world
• 293 stores open at end of quarter
• About half of Mac sold to customers who’d never owned a Mac before
• Apple Retail Stores sold 677,000 Macs, up 38% YOY

• July 23: iPad comes to 9 more countries
• $640 iPad ASP

• 100 million iOS device milestone surpassed during quarter
• iPhone currently on 154 carriers in 88 countries
• iPhone and iPhone-relaed revenue during quarter was $5.33 billion vs. $3.06 billion YOY, 76% increase $595 ASP
• 1.7 million iPhone 4’s sold in countries in which it was launched during the quarter

• Over 5 billion apps downloaded from App Store.
• iTune Store revenue exceeded $1 billion revenue in quarter
• iPod touch grew 48% YOY. ASP grew 12%. Total iPod revenue growth 4%
• Apple CFO Peter Oppenheimer: “We are extremely pleased.”

• AAPL, after-hours, 5:03pm EDT, +$8.47, +3.36%, $260.36 per share.

• 3.27 million in first quarter on market
• 9.41 million iPods, 8% decline YOY
• 8.4 million iPhones, 61% growth YOY
• 3.47 million Macs during the quarter; new quarterly record; 33% unit increase YOY
• $3.51 per diluted share (vs. $2.01 per diluted share in Q309)
• Net quarterly profit of $3.25 billion (vs. $1.83 billion in Q309)
• Record revenue of $15.7 billion (vs. $9.73 billion in Q309)

16 Comments

  1. Hey, the NC center was spoken off: “Oppy: North Carolina data center is on schedule. Expect it to be completed by the end of calendar 2010 and then Apple expects to use it.” Now the secrets out!

  2. Silverhawk,

    Hardly a secret given the state subsidy which is a matter of public record. The interesting bit is the last five words “then Apple expects to use it”.

    But for what?

  3. And now, all eyes turn to Microsoft. The high end expectation for Microsoft is $15.7B; the number Apple just met. Will Apple now produce more revenue to go along with their higher marketcap? Nice dramatic touch, but in truth the suspense is much less than that. If Apple doesn’t beat Microsoft revenue this week, it’ll happen next quarter.

    This is the difference between being entrenched in old legacy markets achieved through illegal monopoly business practices and being the leading innovator in the fastest growing IT markets.

  4. “That’s all I have to say about that”! quote TIm Cook as he channels his best Forrest Gump, or maybe they patterned Forrest after Tim’s speech patterns.

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