MacDailyNews presents live notes from Apple’s Q114 Conference Call

MacDailyNews presents live notes from Apple’s Q114 Conference Call with analysts starting at 5pm EDT/2pm PDT today.

Apple today beat Street on EPS and revenue, posting EPS of $14.50 and revenue of $57.6 billion vs. the analysts’ consensus of $14.07 and $57.45 billion, respectively.

Apple sold 51 million iPhones, an all-time quarterly record, compared to 47.8 million in the year-ago quarter. Apple also sold 26 million iPads during the quarter, also an all-time quarterly record, compared to 22.9 million in the year-ago quarter. Apple also sold 4.8 million Macs, compared to 4.1 million in the year-ago quarter.

Apple’s Board of Directors has declared a cash dividend of $3.05 per share of the Company’s common stock. The dividend is payable on February 13, 2014, to shareholders of record as of the close of business on February 10, 2014.

Live notes from Apple’s Q413 Conference Call in reverse chronological order:

• End of conference call
• In After-Hours trading, shares of Apple Inc. (AAPL) are down $44.65, or -8.11%, to $505.85 @ 5:58PM EST

• Cook: Innovation is deeply embedded in everybody here. We think we can disrupt [certain markets] in a major way.

• MDN Ed. – Cook sounds like he’s watching the AAPL After-Hours stock ticker

• Cook: We are working on things that you can’t see today

• Cook: I think, with the iPhone 5s, people are really exciting about TouchID and other things unique to the phone (64-bit, etc. – MDN Ed.). This propelled iPhone 5s to greater popularity in the iPhone mix than Apple expected. (We expected it immediately. See: Why would anyone buy an iPhone 5c instead of an iPhone 5s? – September 10, 2013

• In After-Hours trading, shares of Apple Inc. (AAPL) are down $46.74, or -8.49%, to $503.76 @ 5:48PM EST

• Cook on innovation: “It’s never been stronger. I think our customers are going to love [what’s coming].”
• Cook: We saw a significant “new to iPhone: number and particularly on i{Phone 5c; it’s not just upgraders buying iPhones

• Cook on “smartphone saturation”: If I look at iPhone 5s sell-though, there was growth in that line despite adding “an entirely new phone” with iPhone 5c (Cook’s nose may have grown an inch or so there as iPhone 5c is hardly all that – MDN Ed.)

• Cook: We’re a big believer in buying back the stock
• Cook on buybacks: We doubled it to $100 billion ($60 billion in buybacks) last year
• Cook: For guidance, just don’t look at sell-in, look at sell-through
• Cook: The guidance needs to be looked at fully; the underlying sell-through, less iPod (“a declining business”), is strong

• Cook: China Mobile deal was a watershed moment for Apple
• Cook: In North America, some carriers changed their upgraded policies which restricted customers from upgrading early (a major factor on sales, but a short-term effect)
• Cook: In North America, our iPhone business contracted somewhat YOY because we sold more iPhone 5s units than we projected; it took us some time to build the mix to match customer demand
• Cook: We have to grow in emerging markets and we are in many
• Cook on why iPhone is not gaining share worldwide, not growing in line with the market, despite having the best product: We announced two iPhones for the first time. Last quarter, sell though for every model grew YOY vs. previous version phones
• Cook: I don’t have anything to announce today, but you can tell by looking at the demographics of our customers vs. the competition that mobile payments are a big opportunity for Apple
• Cook: In general, we’re seeing that people love being able to buy content from their iPhone 5s units using Touch ID. “There is a lot of opportunity there.”

• Cook: Mac sales up 28% in Greater China and Windows PC market contracted
• Cook: We’ve got quite the ramp ahead in China; very exciting
• Cook: Last week the best week Apple has every had for iPhone activations in China
• Apple very, very please with DoCoMo in Japan and China Mobile in China

• In After-Hours trading, shares of Apple Inc. (AAPL) are down $43.06, or -7.82%, to $507.44 @ 5:28PM EST

• Apple is “very excited” about their R&D investments for future products
• Apple continues to invest very heavily in R&D

• iPod sales continue expected decline
• Apple expects value of underlying sell through to increase YOY in fiscal Q214 vs. Q213
• Channel inventory already at target levels this year, they weren’t last year in Q214
• Oppy: The underlying performance of the business is stronger than guidance would imply
• Oppy: Biggest reason relates to changes in channel inventory Q214 vs. Q213
• Revenue guidance shows sequential decline, why?

• $22.7 billion in cash flow during quarter
• $34.4 billion in U.S. cash on hand, $124.4 billion cash on hand is outside the U.S., which is 78% of Apple’s total cash on hand

• iBeacon rolled out in Apple Retail Stores
• 21,000 visitors per store per week on average during quarter
• $16.7 million per store average during quarter
• 420 total Apple Retail Stores
• $7 billion, up 9%, in Apple Retail Store revenue in Q114
• $15 billion paid to App Store devs to date
• Apple’s deferred revenue now totals $11.4 billion

• In After-Hours trading, shares of Apple Inc. (AAPL) are down $45.52, or -8.27%, to $504.98 @ 5:14PM EST

• Happy Birthday, Mac!
• 30 years ago today Apple launched Macintosh
• Mac channel inventory within 4-6 week range
• Mac sales were “strong” (rather easy to do when you had no new iMacs available last Christmas – MDN Ed.)

• 80% of iOS devices are running iOS 7 – iOS 7 is now “the most popular operating system in the world.”

• The Wall Street Journal: Apple Reports Flat Earnings for Holiday Quarter; Maker of iPhones, iPads Issues Disappointing Revenue Outlook Amid Rising Competition
• Bloodbath: In After-Hours trading, shares of Apple Inc. (AAPL) are down $41.70, or -7.57%, to $508.80 @ 5:09PM EST

• iPad has 78% of U.S. commercial tablet market
• iPad in target range of 4-6 weeks of channel inventory
• Response to non-Retina iPad mini was strong
• iPad sales more than doubled in China YOY

• iPhone has 59% share of the U.S. commercial smartphone market
• iPhone owners are significantly more loyal and satisfied than users of other phones
• iOS devices account for 57% of all mobile web browsing in China
• Apple “very pleased” to have inked deal with China Mobile
• iPhone now 69% share of Japan’s smartphone market
• iPhone 5s saw supply constraints throughout Q114

• In After-Hours trading, shares of Apple Inc. (AAPL) are down $32.95, or -5.99% to $517.55 @ 5:03PM EST

• Apple’s guidance for Q214:
– revenue between $42 billion and $44 billion
– gross margin between 37 percent and 38 percent
– operating expenses between $4.3 billion and $4.4 billion
– other income/(expense) of $200 million
– tax rate of 26.2 percent

• Cumulative payments under Apple’s capital return program now over $43 billion
• $7.7 billion used for dividends and share repurchases in Q114
• $22.7 billion in cash flow in Q114

• Dividend is payable on February 13, 2014 to shareholders of record as of the close of business on February 10, 2014
• Cash dividend of $3.05 per share of AAPL common stock

• Mac unit sales: 4.8 million (vs. 4.1 million YOY)
• iPad unit sales: 26 million, an all-time quarterly record (vs. 22.9 million YOY)
• iPhone unit sales: 51 million, an all-time quarterly record, (vs. 47.8 million YOY)

• International sales accounted for 63% of the quarter’s revenue
• Gross margin was 37.9 percent compared to 38.6 percent in the year-ago quarter
• EPS $14.50 (vs. $13.81 YOY)
• Apple posted quarterly net profit of $13.1 billion (vs. $13.1 billion YOY)
• Apple posted record quarterly revenue of $57.6 billion (vs. $54.5 billion YOY)

• In After-Hours trading, shares of Apple Inc. (AAPL) are down $30.69, or -5.57% to $519.81 @ 4:55pm EST
• In After-Hours trading, shares of Apple Inc. (AAPL) are down $29.37, or -5.34% to $521.13 @ 4:45pm EST
• Apple’s Q114 conference call starts @ 5pm EDT/2pm PDT


    1. Apple stock is being punished because iPhone sales were below Wall Street consensus estimates. Never mind the fact that iPad and Mac sales exceeded estimates, and the company’s revenue and earnings beat estimates. It’s Apple we’re talking about, and the company is held to a standard way above anyone else.

      My advice: Do. Not. Worry. A company’s stock price eventually will track its earnings growth, and the positive earnings surprise will eventually be rewarded. To invest in any stock, especially Apple, requires patience.

      PS You will receive a hefty dividend in February. Make sure to reinvest it, as you should with every dividend. Over time, that is what will make you rich.

      Personally, I think the delta between actual iPhone sales and Wall Street estimates is proof of analyst incompetence. But as you should know, analysts never get fired for being as accurate as most TV weathermen. Even though they should be.

      Patience, fellow investors. Wall Street might own the watches. But you have the time. Patience.

    2. This will be another year of zero stock appreciation–two in a row, time to jump ship after many years with this great company, don’t worry I’ll still buy there amazing products every year, but the stock is broken and that pattern will continue.

      1. Actually, its a market. You have to decide to buy and sell or just hold. Apple will slowly climb overall but if you want to make money you have to be able to bet.

        My friend said to sell some apple stock so I sold at 550$ right at the end of the day.
        Bought it back this morning at 505$. Picked up an extra share with the difference. Its timing and sweat and luck or just wait and the stock will climb slowly.

        PS, never bet the market with more than you can afford to lose.

        Just saying.

    1. What’s going on is one usual thing and one manipulative thing.

      The usual thing is to buy up stock before a major announcement, then dump it after. It’s like cows eating grass. First they chew and swallow. Then they barf it up again to chew it some more. It’s a rote behavior having nothing to do with the rational mind. I only partially joke.

      The other thing, as I quoted at the previous article about the Q114 announcements:

      Both the iPhone and iPad sales figures for the December quarter were new records for Apple, besting sales of 47.8 million iPhones and 22.9 million iPads in the year-ago quarter.

      Shares of Apple fell nearly 6 percent after the results were first revealed Monday afternoon. Market expectations called for Apple to post $58 billion in revenues on sales of around 56.5 million iPhones and 24.5 million iPads.

      IOW: Apple has a record quarter. But someone (who?) set the expectations waaayyyy out in LaLaLand as a built-in guarantee that record results could be taken as BAD.

      That’s perceptual MANIPULATION. It has no relationship with reality It’s just a move to screw over the suckers. The con-job-manipulators pick up some cheap AAPL stock after the mini-crash then play the game for another round.

      So why is ‘Screw Thy Customer’ and ‘Screw Thy Neighbor’ the spirit of the age? I have theories. But in the end it’s about making money by any means possible, consequences and personal responsibility be damned. And they are damned. It’s entirely self-destructive. I call it ‘The Self-Destructive Imperative’. Short term profit, long term disaster. It’s our species unhinged from the natural world. And so forth.

      1. The behaviour seems so unnatural because our species’ social and organizational skills have evolved way too fast for our primitive limbic systems to adapt to them, hence the Byzantine rationalisations we come up with to prove how our brute animal actions, still at the service of a selfish instinct, are really the products of cool rational thought. This is in fact the fundamental fallacy that underlies man’s inhumanity to man.

  1. AAPL never goes up after earning report. This is just temporary and smart investors should be ready to pick up some cheap AAPL stock tomorrow. Bad news is stock market will be down in January and that does not bode well for long positions. 2015 I suspect will be bad for the market. 2014 is therefore a transitional year. Apple? Who knows. It aint gonna be $700 again any time soon.

      1. Say it ain’t so.

        If Cook doesn’t care about the Mac platform anymore he should split off his favorite piece ( iOS ) as a new company to play in the mud with the wall street pigs and the fickle fashion-oriented consumers. Leave the tough little underdog Mac to make the best — and most user-friendly — hardware and software in the world. There’s no point allowing the Mac to get dumbed down by crappy GUI artists and gutted by wall street speculators.

  2. Ya know I’ll understand if the company’s products suck, they are losing money and not making any. But to a company that actually makes money, is popular, BEATS Estimates, give a good dividend, and has Products people want, Why is Investor attitude towards is so negative? Makes absolutely no Sense at all. This stock should be at $560-70 after hours not at $515!

    1. It’s always about expectations, not what just happened. iPhone sales were a little less than expected. Tim said this was because people favored the 5s and Apple couldn’t build them quickly enough. The other thing is that the guidance, Apple’s prediction for next quarter, is less than expected. The fear is that iPhone sales are not growing with the market so the easiest thing is to sell until things become clear.

  3. iPhone sales. Not nearly what the street was expecting. Not even close. Also, Q2 revenue forecast is also below the street estimate. Hey it’s Wall Street. In the summer of 2012 AAPL skyrocketed far above reality. Far above the very good fundamentals that it maintained. People profited. Tremendously. People got in at high prices. No one complained. No one. It’s a bit of the reverse now. It happens. It’s to be expected. Happens to all stocks eventually. Anyone who has invested in the stock market for any length of time understands this. It’s not what you have done for me lately it’s what are you going to do for me going forward. Holding through earnings with any stock can be dangerous. AAPL is no exception. Never be greedy. Learn to take profit at appropriate times.

  4. On the bright side we can take comfort that Icahn lost about $2.8 million today, and will likely lose that much more tomorrow when it goes to $450 a share. So all is not bad news, huh?

      1. It is good because he is a parasite and makes management have deal with his irrational games instead of being able to concentrate on developing and producing product.

    1. It will be interesting to see what “Carl the prick” has to say tomorrow? But he will have something to say. And there’s another “kick in the stomach” situation coming at some point. The “Icahn move”. It’s coming, we just don’t know when. But if you aren’t any more prepared for that then you were for the quarterly earnings you will get your face ripped off again! He made money coming into the stock and he will make money exiting the stock. Everyone knows that. It won’t be a surprise. And it shouldn’t be. No excuses when that happens.

  5. It’s supposed to be, analysts report projections so investors can make the correct investments. What it turns out, analysts report projections so investors know who to dump each quarter. Don’t they have such a cushy job. They are always right and giant corporations always do poorly when analyst’s numbers aren’t met. Boy are they the drum beaters and Apple is their slave boy.

    Investors need to fire analysts who continuously make the wrong calls. It’s ridiculous that they get a clear pass each quarter. So who are the true idiots? Investors, but the problem is, they have money, and they like using it to punish others and get their ways.

    That’s why Steve Jobs hated the market and didn’t listen to them… So I say don’t listen to them or you end up being their little play toy.

  6. “iPad Christmas” Helps Apple Beat Street, Q2 Guidance a Grinch
    Apple posted earnings of $14.50 per share on revenue of $57.6 billion in its fiscal first quarter, beating analyst estimates of $14.07 on sales of $57.46 billion.

    Needless to say, Wall Street hates Apple!. Even though Apple beats Wall Street expectation.

  7. Let the analysts pile on until Apple finishes its buy back. All of the share holders will profit from it. Meanwhile I’m enjoying reinvesting dividends and buying the best products in the world.

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