MacDailyNews presents live notes from Apple’s Q213 Conference Call

MacDailyNews presents live notes from Apple’s Q213 Conference Call with analysts starting at 5pm EDT/2pm PDT today.

Apple today beat Street on EPS and revenue, posting EPS of $10.09 and revenue of $43.6 billion vs. the analysts’ consensus of $9.97 and $42.3 billion, respectively.

Apple also more than doubled their quarterly dividend to $3.05 per common share, payable on May 16, 2013 to shareholders of record as of the close of business on May 13, 2013.

Live notes from Apple’s Q213 Conference Call in reverse chronological order:

• After-hours AAPL: -$0.18, -0.04%, to $405.95 @ 6:04PM EDT

• End of conference call

• Apple now paying iOS developers a total of more than $1 billion each quarter
• Cook: We see incredible usage of iOS in every study we see; staggering compared to competitors

Cook admits iMac mistake: If we could run it over, I would have announced iMac after the turn of year because customers had to wait too long.

• Cook: iOS in enterprise; 95% of Fortune 500; 89% of global 500
• Cook on Mac: market has a lot of life in it; we are going to continue making the best personal computers on the planet; continue to invest in Mac

• Cook: Because we are not fragmented like our competition, we can update iOS very efficiently and to the majority of customers
• Oppy: We have the largest and broadest ecosystem: App Stores in 155 countis, iTunes Stores in 110 countries, $16 billion run-rate on the iTunes Stores. Apple sees opportunity that they wil invest in tremendously.

• Cook: My view continues to be that iPhone 5 has the absolute best display in the industry. And we always strive to create the very best display for our customers. And some customers value large screen size, others value also other factors such as resolution, color quality, white balance, brightness, reflectivity, screen longevity, power consumption, portability, compatibility with apps and many things. Our competitors had made some significant trade-offs in many of these areas in order to ship a larger display, we would not ship a larger display iPhone while these trade-offs exist.

• Cook on 5-inch smartphones: iPhone 5 has the absolute best display in the industry. We always strive to create the very best display in the industry. Competitior have mad signifact trade-offs for larger displays. Apple would not ship larger displays while these tradeoffs exist (battery life, app compatibility, display quality, portability, etc.)

• Oppy: There are many factors than can affect gross margins. We do not forecast beyond June. The way we think about gross margin: We are managing the business for the long-term. iPad mini is priced with lower margins than the corporate norm because Apple believes in the tablet market long-term. Apple willing to make short-term tradeoffs where Apple sees long-term potential. Over $4 billion in services for the quarter for the first time.

• Cook: That said, we have made iPhone 4 even more affordable for first time buyers; we’re continuing to do this in other markets; allows new customrs to get into the ecosystem with a really, really phenomenal product
• Cook: market share (unit sales) is not the only measure of health. Customer satisfaction, customer loyalty, customer repurchase rates, ecosystem commerce, usage states are also extremely important. Appel is all about customer experience and enriching lives.
• Cook: IDC estimates tablet market this quarter declined 30% sequentially, but Apple iPad only declined 15% in the after-Christmas quarter. That would mean a share pickup for Apple in post-Christmas quarter

• After-hours AAPL: +$9.87, +$2.43%, to $416.00 @ 5:40PM EDT

• Cook cites “new product categories” as one area for potential growth
• Cook: “We’ve got some really great stuff coming in the fall and across all of 2014.”

• Investors have urged the company to borrow rather than repatriate overseas cash to avoid incurring heavy U.S. taxes

• Oppy: Share buyback begins this month and runs for the next 38 months

• Cook: Smartphone market has always been competitive. In the beginning was RIM and, of course, today our top competitor onthe hardware side would be Samsung married to Google for the OS. We feel we have the best product by far. We are very confident in our product pipeline in hardware, software, and services. I fell very good about our competive position.

• Cook: “China has an unusually large number of potential first-time buyers and that is not lost on us.”
• Cook: We see significant opportunity in China. We have 11 stores, hope to double then in next two years.
• Cook: If you look at China revenue on sell-thru basis, China revenue up approx. 18% YOY
• Cook: 138% iPad growth in China; new records for iPhone and iPad sell-thru
• Cook: Best quarter ever in greater China, $8.8 billion, up 11% YOY
• Gross margin 37.5% was at low-end of Apple’s guidance range – due to getting iPad mini into 4-6 inventory range; sold more iPads than they expected

• Oppy: Apple remains very confident in their product pipeline.

• Apple will return approximately $30 billion to shareholders
• Apple has significant revenues offshore that current U.S. tax laws prevents return of that capital
• Apple will access the debt markets.
• Quarterly dividend incrased by 15% to $3.05 per share; Appel is one of the largest dividend payers in the world
• BoD has upped buyback from $10 billion to $60 billion; largest buyback in any company in history; starts this month

• 402 total Apple Retail Stores worldwide at end of quarter

• iOS platform offers much more secure platform. 97% of malware on Android platform; the rest on Symbian and other non-iOS operating systems
• iOS in enterprise: Goog Technology: 77% of all activations by corporate customers

• Oppy recounts iOS app developers’ successes

• Sales for Apple App Store were 74% of all app store sales for March quarter
• 850,000 iOS apps; including 350,000 developed for iPad

• Strong iTunes sales helped Apple achieve, for the first time, more than $4 billion in quarterly revenue from software and services
• iTunes Store now 10 years old; surpassed quarterly billing of $4 billion for quarter, that’s $16 billion annual run-rate

• iPod touch continues to account for over 50% of all iPod sales
• Oppy: Macs in 4-5 week target range of channel inventory

• After-hours AAPL: +$18.95, +4.67%, to $425.08 @ 5:17PM EDT

• Oppy: ChangeWave shows 96% satisfaction rate among iPad customers

• Oppy: Overwhelming number of iPad mini users are first-time iPad buyers
• Oppy: We are extremely happy with sales of both iPad and iPad mini.

• Cisco BYOD: iOS devices connecting to corporate network up 50% over past year

• Kantar: 95% loyalty for iPhone; #1 in satisfaction from JD Power for 9th consecutive time
• IDC: iPhone #1 or #2 in over 50% of the countries IDC tracks
• IDC Japan: iPhone #1 for all 2012 and Q42012 in both handsets and smartphones. 1st time a non-Japanese company held #1 for entire year

• This is the largest single share repurchase authorization in history
• Buybacks upped to $60 billion; to be completed by end of calendar 2015
• More than doubling capital return

• Cook: “We’ve got a lot more surprises in the works.”
• Cook: Apple has the highest loyalty and customer satisfaction in the business
• Cook: Our teams are hard at work on exciting new products and services which we plan to introduce this fall and into 2014

• Cook: We can’t control share price and we continue to focus on long-term and on making the best products and services; things we can control
• Cook: The decline in AAPL share price has been “VERY FRUSTRATING TO ALL OF US.”
• Cook: iPad mini strategically priced with lower margins
• Cook: We acknowledge that our growth has slowed and or margins have decreased

• After-hours AAPL +$22.51, +5.54%, to $428.64 @ 5:03PM EDT

• Apple is among the largest dividend payers in the world, with annual payments of about $11 billion
• Board has approved a 15% increase to quarterly dividend. $3.05 per common share, payable on May 16, 2013 to shareholders of record as of the close of business on May 13, 2013

• Apple’s Q313 guidance:
– revenue between $33.5 billion and $35.5 billion
– gross margin between 36 percent and 37 percent
– operating expenses between $3.85 billion and $3.95 billion
– other income/(expense) of $300 million
– tax rate of 26%

• Cash: $12.5 billion from operations during the quarter; ending cash balance of $145 billion (YKBAID)
• Cook in earnings statement: “Our teams are hard at work on some amazing new hardware, software, and services and we are very excited about the products in our pipeline.”
• All-time record March quarter revenue ($43.6 billion)

• “Just under 4 million Macs” vs. 4 million YOY
• 19.5 million iPads vs. 11.8 million YOY
• 37.4 million iPhones vs. 35.1 million YOY

• International sales: 66% of quarter’s revenue
• Gross margin was 37.5 percent compared to 47.4 percent YOY

• EPS: $10.09 per diluted share
• quarterly net profit of $9.5 billion
• quarterly revenue of $43.6 billion

• After-hours AAPL: +$18.30, +4.51%, to $424.43 @ 4:53PM EDT
• Awaiting start of call.

Apple will provide live streaming of its Q2 2013 financial results conference call beginning at 2pm PDT/5pm EDT on April 23, 2013 at www.apple.com/quicktime/qtv/earningsq213.

Related articles:
Apple beats Street on EPS and revenue; ups quarterly dividend by 15% – April 23, 2013
Apple reports record results: $54.5 billion revenue, $13.1 billion profit, $13.81 EPS – January 23, 2013

24 Comments

  1. Cook said that they are excited to show us their new products in the “fall”. Does that mean we won’t see anything new until the fall? That’s a long time since launch of a previous product

    1. So what’s new?

      Cook hasn’t delivered a substantial product that was fully debugged & ready for the market and on time to stores yet. Why should he change now?

      Even worse, we should be extremely disappointed at the poor explanation of the vanishing margins. Where is Apple blowing all its cash? And no, it’s not the stock buyback program, which Cook decided to finance with DEBT. Pathetic.

      1. Well at least he did mention that there’s a new product category that they are excited about and he confirmed it to Gene. iWatch or TV? Perhaps both? Perhaps something completely different that haven’t been rumored, and is beyond our imagination.? This is why we love Apple!!!

        1. True, but if I had a nickel for every time Tim claimed there was “a great product in the pipeline”, “just wait for it”, then I would have taken over Berkshire Hathaway by now.

          Look over at MacRumor’s buyers’ guide. Apple hasn’t got a single fresh product on the market. That is why analysts are down on Apple. Apple used to innovate aggressively, with major releases at least twice per year. Cook is coasting, and everyone should now be able to see it.

          1. you are right Mike, the previous year TC announced “mind blowing products” yet the best things were, Fusion Drive, iMac mini, Thunderbolt cable and a taller iPhone.

            Maps, Siri, iMac, APPL stock value, taller iPhone were disappointing for most.

      2. First of all, a stock repurchase/buyback has *nothing at all* to do with gross margin. The iPad mini, however, does.

        I am not a huge fan of financing activities with debt, but Apple has around $100B in overseas account that the company does not want to repatriate until the tax situation becomes more favorable. Since the interest rate on the USD is practically zero nowadays, borrowing money is actually not a bad move. If I could borrow a $1M right now at rock bottom interest rates, then I would. I could invest in AAPL and get 3.05% just in dividends. Throw in some puts to hedge the investment and the sky is the limit.

        1. A company with strong cash flow should easily be able to satisfy wall street using its free cash flow, without paying interest on it.

          Moreover, building up a pile of overseas cash that Cook refuses to put to use is a waste. One would think that a corporation would easily be able to move its money — the rest of the Fortune 500 have lobbied in all kinds of special loopholes to allow them to cash around the globe without any tax implications, why can’t Apple?

      3. Apple can’t label a brand new hardware product category “beta”

        If you’re willing to agree that the iPod touch was an iteration on the iPhone and that the iPad was an iteration on the iPod touch, then you can simplify your analysis or investigation into how long it takes Apple to create a whole new hardware category: Approximately 7 years (Steve’s return plus a year or so of getting things squared away, through to 2007). Which paints a scenario where 2014 is right about on time for a whole new hardware product that disrupts yet another staid industry.

    2. @TruFanBoi

      Not Really, Just seems that way, Apple has products in the pipeline and has updated and released Hardware iPad Mini, Etc.. and Software these past few months.

      We just have not been presented to any “Brand New” unseen as yet Products, and to be fair, Apple is right on track.

      The Problem is the “Fast Food Mentality” of our Society that want new things now without showing any patients.

      Since the advent of the internet and the instant gratification it gives users, People haven’t adjusted to the reality that designing and producing new and unique products take time now this is a completely separate from the instant want it now and get it approach that they seem to confuse with each other.

      In truth: Allot of the Public and of Course Wall-Street that have placed very unrealistic expectations on Apple, and the ones that confuse this are truly the ones that live in a Reality Distortion Field.

      i guess the point is, When the “New products are released” how long will it take for users to think that Apple is Due for a New Innovation to satisfy the publics short memory and instant gratification needs, No company can keep up with constant Product introduction that is innovating and to the high standards that Apple places on its Product Line.

      No One wants a Five & Dime Apple that releases Garbage and a few changes every few month just to satisfy the Wall-Street Bunch.

      As all of us that have been with Apple from the start, I can’t see a reason to expect a change in they way innovation goes as well as releases just because of our loss of Steve, Tim is doing a Great job, we just need to sift through all the “Story Link garbage of Apple Dread” to see that Apple is Still strong and getting stronger.

      Peace.

      1. Well Said, and you’re certainly correct. On the other hand, I got a little cash burning a whole in my pocket, and I’m itching to leave it an Apple store before my wife grabs a hold of it. And yes, I’m talking about the cash 😉

  2. Really great stuff coming in the fall? It’s only May! What are you doing until then? iPad Mini Retina, lighter iPad, Mac Pro, iOS 7, OS X 10.9? The current portfolio is stale.

    Damn right you should have released the iMac after the turn of the year, or at least made one you could produce in sufficient volume.

    Need I say anything about Apple Maps? What a waste of limited resources….

  3. 60 Billion dollars worth of stock buy backs beginning – and Peter made it a distinct point to mention “this month” – is a lot of money to get stuck on the wrong side of. If the stock takes a hit, (actually even if it doesn’t), Apple’s going to be a buyer, with numbers that have nine zeros to the left of the decimal point, a substantial buyer.

    And if they spent all 100 billion dollars they have in the bank TODAY – not spread out over the next 2 years – they would still have roughly 45 billion dollars in the bank TODAY (assuming no tax issues) even if they never made another penny. Plenty if money for the unexpected.

    This is still a company that could make tens of more billions of dollars pure profit if they laid off 90% of their employees today and never invented or refreshed another product or service (such as iTunes revenue, sales of iPhone 4, 4S, 5’s, iPad mini’s, iMacs, etc) and wound the company down.

    I wouldn’t start writing an Apple obituary just yet.

  4. So, he would have preferred to have the iMac announcement AFTER the first of the year? Huh?! The RIGHT answer would have been to have the product ready in time for the Christmas shopping season, not to delay it even further. We had waited long enough as it was. That said, I can’t complain to much. My new iMac arrived on Christmas Eve.

    1. “…to have the product ready in time for the Christmas shopping season, not to delay it even further.”
      TC doesn’t make the few hundred various parts that make up an iProduct. They buy them from someone who does. And if those guys all say “yeah, we can have 5 million of these these parts ready to ship by November”, and then they DON’T, well, there ya go. I’ve designed many products and believe you me, it ain’t easy getting all the suppliers lined up for an initial production run. Just one supplier not delivering and the whole thing grinds to a halt. I don’t put much of the blame on Mr. Cook.

  5. I’m Impressed with the iPhone shipments this quarter and that the iPad is still very strong. I feared that that market would see a slow down since a pad is not likely to be replaced as often as a phone or wanted by as many.

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