MacDailyNews presents live notes from Apple’s Q414 Conference Call

MacDailyNews presents live notes from Apple’s Q414 Conference Call with analysts starting at 5pm EDT/2pm PDT today.

Apple today announced financial results for its fiscal 2014 fourth quarter ended September 27, 2014. The Company posted quarterly revenue of $42.1 billion and quarterly net profit of $8.5 billion, or $1.42 per diluted share. These results compare to revenue of $37.5 billion and net profit of $7.5 billion, or $1.18 per diluted share, in the year-ago quarter.

Gross margin was 38 percent compared to 37 percent in the year-ago quarter. International sales accounted for 60 percent of the quarter’s revenue.

Thomson Reuters‘ analysts consensus called for Apple to report net income of $1.31 per share on revenue of $39.84 billion.

Apple Unit Sales Q414:
iPhone: 39.272 million (vs. 35.203 million YOY, +16% YOY)
iPad: 12.316 million (vs. 13.276 million YOY, -13% YOY)
Mac: 5.520 million (vs. 4.413 million YOY, +21% YOY)
iPod: 2.641 million (vs. 2.926 million YOY, -24% YOY)

Live notes from Apple’s Q414 Conference Call in reverse chronological order:

• AAPL After Hours : 101.23 Up 1.47 (1.47%) 6:03PM EDT

• End of conference call.

• Cook: My gut tells me a great percentage of iPhone 6 and iPhone 6 Plus buyers will be new to iPhone.

• 150,00 apps from Chinese developers in App Store.
• Cook: China is an incredible market. We’re investing like crazy in the market. 15 stores now, close to 40 in the next couple of years
• Cook: Only 20% of the iPhones we’ve sold in Chin were subsidized in the traditional fashion.
• iPad up 9% YOY in China
• App Store seeing phenomenal growth in China
• Mac sales up 54% YOY in China.
• Cook: No China iPhone 6/Plus sales in this quarter (Q414). Those sales began in Apple’s current Q115 (December) quarter.

• Cook: Apple Pay is classic Apple. Taking a mess, a kludge and focusing not on how to make money, like other companies, but on the customer, and making a seamless, easy service.

• Cook: Continuity. Use your imagination and think about where that goes. Only Apple can do this sort of thing.
• Cook: Apple investors should look at the skills inside the company. Only Apple can integrate software, products, and services so seamlessly.
• Cook: Apple Pay and Apple Watch are two new categories and, obviously, we are working on other things as well. I will keep those things in the “cone of silence” as best as possible until Apple is ready to share them with the world.
• Putting Apple Watch into “Other Products” says nothing about our expectations. It is there because it has no revenue to date. Could be broken out into its own category in the future. Cook not anxious to give a lot of detail on Appel Watch because competitors want that information.

• AAPL After Hours : 101.52 Up 1.76 (1.76%) 5:49PM EDT

• Cook: I am very bullish on iPad over time. We are continuing to invest in iPad.
• Cook: I see catalysts for iPad going forward. And there is com cannibalization. I’m fine with people choosing Macs or iPhones over iPad.
• iPad upgrade cycle is unknown. iPad is only 4 years old. Customers hold onto iPads longer than they do subsidized iPhones.
• Cook: We do not see iPad market as saturated. Top 6 revenue countries, 50-70% are first-time buyers. Those are not saturated market figures.
• iPad sales are a speed bump, not a huge issue. That said, we want to grow iPad sales.
• Cook on iPad: 237 million units in four years (about 2X the number of iPhone after 4 years).
• Cook: Mac has an “absolutely blow away quarter; just absolutely stunning.” Back-to-School season voted and the Mac won the day.
• Cook: Once there is adequate supply, we’ll know more about iPhone 6 vs. iPhone 6 Plus. Geography will show different preferences.

• Cook: I’ve never felt so great about an iPhone launch before
• Cook: Some of the first time iPhone buyers are people who’ve never owned a smartphone before and some are upgrading from Android
• Cook: Upgrade market with iPhone 6/Plus is “huge.”
• Cook: I still see a fairly large opportunity in people buying their first iPhone ever
• iPhone ASPs up $42 sequentially. Due to higher mix of iPhone 6/Plus.

• AAPL After Hours : 101.44 Up 1.68 (1.68%) 5:37PM EDT

• Cook on iPhone 6/Plus storage sizes: “We’re selling everything we can make.”
• Currency headwind in Q115 from foreign exchange rates will be significant YOY (U.S. dollar is strengthening vs. many currencies)

• Cook: We’re seeing something unusual: iPhone demand significantly higher in every country in which it is released
• Cook: We’re nowhere near in balance on iPhone supply/demand. “Not even on the same planet.”
• Cook: It is difficult to gauge demand before supply comes into balance
• Cook: It is unclear when supply will catch up with demand.
• Cook: iPhone 6/Plus ramp is going great, fastest ever in Apple history, but demand is far outstripping supply
• Apple has transition costs for new products (new iPhones, new iMac, new iPads)
• Apple continues to see fairly favorable commodity markets

• AAPL After Hours : 101.09 Up 1.33 (1.33%) 5:28PM EDT

• Cook: “Apple Pay is the the most customer-centric mobile payment system that there is.”
• Cook: We do have commercial terms between Apple and the commercial banks – which we will not disclose for competitive reasons. No charge to customers.
• Cook: Apple Pay is “a killer feature.”
• Cook: Customers do not want their data sold, they want it to be private.
• Cook: Apple Pay. We’re focused on making it simple and elegant. Also focused on security and privacy, esp. vs. traditional credit cards

• Over 25% of Apple’s sales are now from emerging markets. Therefore, Apple will work with a 5-7 week target range.

Changes to reports starting in Q115:
– “Other Products” category (Accessories, peripherals, Apple Watch, and iPod sale)
– “Services” category (iTunes Software Services + Apple Pay)

• For reference: Luxembourg’s 2013 GDP: $60.54 billion

• Apple’s Q115 guidance:
– revenue between $63.5 billion and $66.5 billion
– gross margin between 37.5 percent and 38.5 percent
– operating expenses between $5.4 billion and $5.5 billion
– other income/(expense) of $325 million
– tax rate of 26.5 percent

• $94 billion ($68 billion in buybacks) spent in capital return program to date
• Over $20 billion spent in just the Sept. quarter (dividends, buybacks)
• $165.2 billion cash on hand
• 102 million visitors total to Apple Retail Stores
• 25 new stores to open in 2015
• Retail Stores: $5.1 billion, upt 15%, a new Sept, quarter record
• Minnesota/St. Paul schools to equip every student with an iPad

• AAPL After Hours : 100.90 Up 1.14 (1.14%) 5:16PM EDT

• iPad sales consistent with Apple’s internal expectations. iPad sales were particularly strong in Japan.
• 21% YOY Mac growth and an all-time Mac unit sales quarterly record. Especially strong growth from MacBook Pro and MacBook Air.

• iPhone momentum in enterprise: IDC: 69% share of U.S. commercial smartphone market. ChangeWave: 75% of enterprise plans to purchase iPhones
• iPhone demand is strong, outpacing supply
• EPS up 20% YOY
• Maestri: Better than expected iPhone and Mac sales drove results beyond Apple’s expectations

• Cook: I could not be more excited about Apple’s fiscal 2015.
• Cook thanks, customers, employees and business partners for Apple best year yet.

• More acquisitions planned
• 7 of those 20 acquisitions took place in Sept. quarter
• 20 acquisitions in fiscal 2014
• 437 Apple Retail Stores worldwide now

• App Store: 85 billion downloads
• Highest quarterly Mac market share since 1995!
• iPhone 6/Plus helped fuel a new Sept. quarter unit sales record.
• Apple reports very strong results, strongest revenue growth rate in 7 quarters. A new record for Sept. quarter revenue.

• Continuity is now active with iOs 8 and OS X Yosemite releases now completed. These are things only Apple can do.

• AAPL After Hours : 101.01 Up 1.25 (1.25%) 5:05PM EDT

• We can’t wait to get Apple Watch to customers in “early 2015.”
• Apple Pay went live today. Apple Pay continues to sign new retailers.
• 69 countries and territories to get iPhone 6/Plus by end of month
• Tim Cook: iPhone 6 and iPhone 6 Plus are the best we have ever created and our customers absolutely love them

• By the way: IDC estimated Mac shipments at only 4.982 million units for the quarter (Source: IDC Worldwide Quarterly PC Tracker, October 8, 2014)

• The dividend is payable on November 13, 2014, to shareholders of record as of the close of business on November 10, 2014.
• Apple’s board of directors has declared a cash dividend of $.47 per share of the Company’s common stock.
• AAPL After Hours : 100.94 Up 1.18 (1.18%) 4:58PM EDT
• AAPL After Hours: 100.20 Up 0.44 (0.44%) 4:50PM EDT
• AAPL After Hours: 99.92 Up 0.16 (0.16%) 4:45PM EDT

Related article:
Apple bulldozes Street with record quarterly revenue of $42.1 billion – October 20, 2014


    1. They’ll have to do a turnaround and say iPads should be included with Macs, and since iPads declined YOY, total unit sales were dragged into negative territory. That should do it.

      1. If you expect stock jumps in the 15-20 range after a blowout quarter, those days are gone. Post-split AAPL is only going to jump a couple dollars here and there. Consider that it’s up $2 after hours, when you adjust for the split (x7), thats about $14 which isn’t a bad jump.

        Gotta keep the total number of shares in mind.

  1. Hey, MDN, I bet your fingers were flying… what say you edit the comma to a decimal point? (Not that we’d all like what you wrote to be correct!!)

    “• By the way: IDC estimated Mac shipments at only 4,982 million units for the quarter ”


    1. Never mind the comma, how about MDN reporting iPhone unit sales, at the top of this page, as increasing from 35.203 to 39.272 YOY, 16% YOY? From Apple’s own detailed summary, the 35.203 number is from Q3’14 not Q4’13. YOY means comparing Q4’14 with Q4’13, I naïvely thought. Even if not, the math sucks because those numbers of unit sales represent a 12% increase, not 16%. I’m going from memory because I left the spreadsheet at work. If I’m wrong I don’t belong here.

  2. Although painfully repetitive with unnecessary superlatives that impress exactly no one on Wall Street, Tim does his best on these occasions to boost AAPL. Problem is that his best inspires investors not at all. Let’s move on and hope that one day that pipeline he is always touting will actually flow with at least something that is again innovative and deserving of the hype.

  3. If Apple hadn’t been buying back it’s own stock or paying out the dividend the last few years, they would be sitting on a cash pile of $250,000,000,000.

    That’s a quarter of a billion dollars.

    Numbers taken from these 2 MDN bullet points:
    • $94 billion ($68 billion in buybacks) spent in capital return program to date
    • $165.2 billion cash on hand

  4. Jay M,

    Welcome back (from a while ago). I can’t help but disagree on your assessment of TC, however. It’s the analysts that have the problem and not Tim’s execution at Apple. Apple continues to make great products and expand their boundaries as the sales numbers prove quarter after quarter, year after year. No serious long-term investor should be very concerned about the fluctuations over the period of a few weeks or months. And now, in the last few years, with the dividend payout as well, AAPL will be the stock to hold over the next five and maybe even ten years.

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