MacDailyNews presents live notes from Apple’s Q311 Conference Call

MacDailyNews presents live notes from Apple’s Q311 Conference Call with analysts starting at 5pm EDT/2pm PDT today.

Live notes from Apple’s Q311 Conference Call in reverse chronological order:

• End of conference call.
• Oppy: We have a broad library of movies and TV shows in the U.S. on iTunes. Look for some more content of a variety of iTunes Stores later this year.
• Cook: We learned that people love using iPad for a whole variety of things. That’s why it’s doing so well among a very diverse set of users and markets.

• Cook: It’s up to us to convince people to maybe spend a little more for a materially better product.
• Is gaining smartphone market share strategically important to Apple? Cook: Yes. We do offer iPhone 3GS for $49 in US with a contract, so we are addressing different market segments. However: “We will only make products that we are very proud of; that are the best in the world.”
• Cook: We have more to do and learn about doing business in China. What we learn is applied to other markets as well
• Cook: $8.8 billion in China revenue through the first 3 quarters of Apple’s fiscal 2011
• Cook: Prepaid or unlocked phones; phone sold without a contract are very key in China and in a number of emerging markets where credit systems are not as well-established as they are in USA, Japan, etc.
• 5:52pm EDT: AAPL currently +$23.40 in after-hours trading
• Oppy: We cannot wait to get iCloud and iOS 5 into customers’ hands in the fall. We believe we’ve done things right with iCloud.

• Last quarter, we sold more iPads in K-12 education than Macs. Cook: “Absolutely shocking. We would have never predicted that.”
• Apple has dual-prong strategy towards iPhone/iPad enterprise sales: Carriers sell to enterprise and Apple also has a direct sales team that acts as an overlay to help get corporations into the pilot and deployment stages.

• Cook on reasons why Mac growth is at 14% and not higher:
1. Cannibalization by iPad 2
2. Some customers have delayed purchases until OS X Lion ships (tomorrow)
3. On year ago quarter, Apple launched new MacBook Pro and this year it was iMac. Portable sales are higher than desktops.

• Cook proud of Apple Mac growth of 14%, 5X that of PC market. 21st consecutive quarter that Mac sales beat PC market in general.

• Cook: We do not want to avoid the prepaid phone market
• Cook on iPhone 4: I firmly believe that there is no better smartphone for someone to move up to from a regular phone.
• Cook: Apple has further improved iPad supply in July.
• Cook prefers not to discuss suppliers because Apple feels it is a part of their “secret sauce” and do not want to give competitors any insight.
• 115,00 points of sale now for iPhone worldwide. The channel is extremely well diversified. There are still countries where Apple is working on channel development.
• Cook: Apple TV continues to do well. We still call it a “hobby” here. We really got it right with Apple TV 2. We’re continuing to invest because we think there’s something there. (Gene Munster’s Apple television obsession continues unabated).
• Cook: It does not appear that any other tablets are getting any traction
• Cook: We sold over 33 million iOS devices in Q3.
• Cook: We added 42 new iPhone carriers and 15 new countries throughout Q3
• Cook on patent legal actions: We love competition, we think it’s great, but we want people to invent their own stuff and we are going to defend our IP.
• Cook: Most components are generally at a favorable supply situation

• China business up over six time YOY. Up $3.8 billion in Q3. Cook: “We’re just scratching the surface there.”

• Some iPad 2 SKUs in some countries are now at a supply/demand balance, but much work left to do ramping up throughout the world
• Tim Cook: In the quarter, some customers chose to purchase a new iPad 2 over a Mac, but even more customers chose to purchase an iPad 2 over a Windows PC. Apple Mac outgrew PC market as a whole by about 5X during June quarter.
• Oppy: Apple has a future product transition in fall that they “are not going to talk about this in any detail today. We’ve factored this into our guidance.”

• 5:19pm EDT: AAPL after-hours trading currently: +$23.18 to $396.98

• 24% tax rate expected in fiscal Q411.
• Cash on-hand now $76.2 billion vs. $65.8 billion at end of March quarter, a $10.4 billion sequential increase.
• 23.5% tax rate for the quarter

• To open 30 new retail stores in September quarter; 40 total for fiscal 2011
• Apple Retail Store traffic up 22% YOY
• Over $2.5 billion in total iOS developer payments; well in excess of any of Apple’s competitors
• Oppy: We are looking forward to launching iOS 5 and iCloud this fall.

• 86% of Fortune 500 companies testing or deploying iPads
• Apple “delighted” by varied and sometimes unexpected use cases for iPad
• Oppy: Apple sold every iPad we could make; now available in 64 countries; 1.05 million units in channel inventory, well below Apple’s target
• At end of June quarter, Apple iPhone now on 228 carriers in 105 countries vs. 186 and 90 at end of March quarter
• iTunes #1 music retailer in world with over 225 million accounts

Oppy: “OS X Lion to launch tomorrow.”

• Apple CFO Peter Oppenheimer guides: “Looking ahead to the fourth fiscal quarter of 2011, we expect revenue of about $25 billion and we expect diluted earnings per share of about $5.50.”
• Strong MacBook Pro and MacBook Air sales drove Mac unit sales
• 3.95 million Macs, 14% unit increase over the year-ago quarter; new record for fiscal 3Q
• 9.25 million iPads, 183% unit increase over the year-ago quarter; new all-time quarterly record
• 20.34 million iPhones, 142% unit growth over the year-ago quarter; new all-time quarterly record
• 7.54 million iPods, a 20% unit decline from the year-ago quarter
• On April 20, 2011, Apple had guided “revenue of about $23 billion and we expect diluted earnings per share of about $5.03.”
• Analysts’ consensus estimates called for $5.84 EPS on revenue of $25.00 billion (vs. Q310 results of $3.51 EPS on revenue of $15.70 billion
• International sales accounted for 62 percent of the quarter’s revenue
• Gross margin was 41.7 percent compared to 39.1 percent in the year-ago quarter
• Vs. revenue of $15.70 billion and net quarterly profit of $3.25 billion, or $3.51 per diluted share, in the year-ago quarter
• Record quarterly net profit of $7.31 billion or $7.79 per diluted share
• Apple posted record quarterly revenue of $28.57 billion
• Apple’s fiscal 2011 third quarter ended June 25, 2011
• Awaiting start of Apple’s live audio webcast
4:50pm EDT: AAPL shares up $27.18, or 6.95%, as after-hours trading resumes; AAPL breaks $400 barrier.
• Apple’s Q311 conference call coverage begins Tuesday, July 19, 2011 at 5pm EDT/2pm PDT.

Related articles:
Apple destroys Street with all-time record revenue and earnings – July 19, 2011
Apple to webcast Q311 earnings conference call on July 19th – July 15, 2011

32 Comments

    1. Apple’s fiscal year ends in late September, very similar to the fiscal year for the federal government. So the first quarter is Oct-Dec, second quarter is Jan-Mar, third quarter is Apr-Jun, and the fourth quarter is July-Sep.

      Companies are free to define their own fiscal years. Many use the calendar year, but others do not.

  1. Forget blockbuster – this time it needs to be a bloodbath. Introducing Apple’s latest bloodbath quarter.

    The meagre table scraps Microsoft and google are frantically fighting each over are getting ever more scarce. Soon they’ll have no choice but to start devouring each other.

    1. So many new to Apple’s increasing user base are bewildered by some of our attack-mode comments towards other tech companies. They are unaware of the disparaging remarks Apple a lot of us had to endure for a decade, and the concerted efforts of the WinTel consortium to crush Apple. Apple’s resurgence is vindication, and the degradation of Microsoft, Dell, Nokia, RIM and all their minions in the media that disparaged (and continue to disparage) Apple and their users is sweet revenge.

      1. I’ve endured nearly 25 years of derided as “the Apple guy” among the hoards of WinTel users. Finally, working in IT at a large university, I’m starting to get overwhelmed (a good thing) with Mac OS and iOS work. On top of that, I’ve been making huge profits with my AAPL stock that I bought at $18 back in the ’90’s. Just bought a new iPad 2 with some of the profits.

    1. Even more amazing: little over 1 million iPads in the channel. According to my math, that translates to well below 2 weeks worth of inventory, which is rock-bottom!

      1. What’s also interesting about those 1 million iPads that are “In Channel” … is that (if memory serves) they’re also roughly about the total number being sold per quarter by the best of the Android competition. Hence “competition has no traction” comment.

        -hh

  2. That mountain of cash grew to $76B!!! If the pace continues, this time next year, it will exceed $100B (that’s billion, with a B)!

    Anyone here know this: is there a company, anywhere in the world, with so much available cash? What’s the story with Exxon-Mobile?

    1. “Anyone here know this: is there a company, anywhere in the world, with so much available cash? What’s the story with Exxon-Mobile?”

      It’s conventional wisdom that having such a high amount of cash on hand is a bad idea strategically and it should be used in other ways, so most companies don’t do it.

      I’m not saying it is a bad idea (I think Apple knows what they’re doing and it has helped them tremendously), but most people think it is.

      It still boggles me that with Apple doing so well and their competitors not doing well at all, none of them seem to make any serious attempts to emulate Apple in terms of strategy, organization, etc., but instead just tries to make a half-assed copy of whatever Apple product has been selling well lately.

  3. 401k happy 🙂 Go Apple higher!!!

    Oh ya 4 sure AAPL will be $422 in 2011.
    Add $101 per year ’til 2015 = $828 🙂

    Buy AAPL and Hold 🙂
    no Brainer — MacDogs!
    Zero Virus
    Zero Debts
    CASH = $72 Billion bucks USA 🙂
    Hiring Expanding Building new Stores
    Hot hot Products!!!!!

  4. “Major product transition in fall”
    Hmm, I wonder if this is concerning iPod? Since iPhone 5 is set to debut in September, will it just be iPhones and iPod Touch, and no more Classic or Nano?

  5. “Mayor product transition” coming in the next quarter, mentioned twice but wouldn’t go any further, says it’s why the next quarter’s guidance is low. ARM processors for Macs?

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