MacDailyNews presents live notes from Apple’s Q216 Conference Call with analysts starting at 5pm EDT/2pm PDT today.
Apple will provide live audio streaming of its Q216 Results Conference Call using Apple’s industry-leading QuickTime multimedia software.
The live webcast will begin at 2pm PDT/ 5pm EDT today here.
Apple today announced financial results for its fiscal 2016 second quarter ended March 26, 2016. The Company posted quarterly revenue of $50.6 billion and quarterly net income of $10.5 billion, or $1.90 per diluted share. These results compare to revenue of $58 billion and net income of $13.6 billion, or $2.33 per diluted share, in the year-ago quarter. Gross margin was 39.4 percent compared to 40.8 percent in the year-ago quarter. International sales accounted for 67 percent of the quarter’s revenue.
Wall Street expected Apple to report earnings of about $2 a share on $51.97 billion in revenue, according to a consensus estimate from Thomson Reuters. Analysts also expected Apple to report iPhone shipments of about 50.3 million units in the second quarter, bringing in revenue of $33.23 billion for the product category, as per StreetAccount. Apple’s Q215 results: Profit of $13.6 billion, or $2.33 a share, on revenue of $58 billion.
Live notes from Apple’s Q415 Conference Call in reverse chronological order:
• End of conference call.
• Cook: I think there are growing number of people in both major U.S. political parties that would like to enact comprehensive corporate tax reform in the U.S. and that would benefit the U.S. economy.
• Apple are strong advocates for comprehensive corporate tax reform in the U.S.
• When you factor in the over $2 billion reduction in channel inventory, you can see why the Q316 guidance is given
• One more time: iPhone 6 was a tough compare. It was an anomaly
• Cook: If you compare to iPhone 5s, we see a slightly higher upgrade rate, but if you compare to iPhone 6, its clearly a lower upgrade rate
• Cook: The purchase value of the install base grew by 27% and the value is just shy of $10 billion, so its huge.
• Cook: We want to offer a great customer experience. We want to embark on service that do that. In doing so, we have developed a very large and profitable business in that area.
• Apple expense to revenue is around 10% and Apple is very proud of that number.
• Cook: Now at 35 stores in China and 5 more will open for 40 by end of quarter
• Cook: Larger picture, I see China not as week, but a lot more stable than the common view
• Currency headwinds are significant vs. year ago.
• “Death to the ‘S,'” Tim. – MDN Ed.
• But this is a tough compare. iPhone 6 was an anomaly
• Cook: If iPhone 6s saw an upgrade rate like they saw for iPhone 6, it would be time for a huge party
• Cook: iPhone 6s upgrade cycle likely better than the rate for iPhone 5s, but it is a lot lower than iPhone 6
• Cook: We believe we are going to have the best compare for iPad than Apple has had for a very long time
• Cook: iPad satisfaction and usage are both very high. Cycle is very long vs. iPhone
• Cook: I don’t think iPhone SE will be like iPad mini; replacement cycle is materially different
• Cook: Demand for iPhone SE is much greater than Apple antcipated
• Cook: Apple thrilled with response to iPhone SE
• Cook: Vast majority of channel inventory reduction is in iPhone
• Apple’s music business has hit an inflection point with streaming subscriptions from Apple Music making up for loss of download sales from iTunes Store. Apple expects music revenue growth gong forward
• Apple’s services business is growing. 35% growth from the App Store
• Luca: iPhone ASPs will face downward pressure due to lower price of iPhone SE
• Cook: Great to see the overwhelming demand for iPhone SE
• Cook: iPhone SE is attracting customers who wanted latest tech in a more compact package (more than Apple thought there would be) and people who aspire to own an iPhone and who can now meet the entry price
• Apple is always looking at companies to acquire if they offer technologies/people that interest Apple
• With iPhone SE, Apple has seen ability to attract even more customers into the platform due to and incredible product with the latest technology at a new price point for Apple
• In first half, Apple iPhone has set a record on switchers from other platforms
• Cook: iPhone 6/Plus was an extraordinary cycle. Leads to a tough compare this year
• Cook: The worldwide smartphone market is currently not growing. Due to macroeconomic issues. Apple is optimistic that “This too shall pass.”
• YOY channel inventory reduction less than $800 million in 2015
• Guidance includes effects of Channel inventory reduction, constrained supply and lower ASP of iPhone SE
• Apple expects a seasonal sequential decline in iPhone and iPad sales and an increase in Mac sales
• Planned channel inventory reduction is over $2 billion.
• Apple is providing the following guidance for its fiscal 2016 third quarter:
— revenue between $41 billion and $43 billion
— gross margin between 37.5 percent and 38 percent
— operating expenses between $6 billion and $6.1 billion
— other income/(expense) of $300 million
— tax rate of 25.5 percent
• Apple plans to continue to access the domestic and international debt markets to assist in funding the program
• Apple is proud to be one of the largest dividend payers in the world
• Apple’s Board has approved an increase of 10 percent to the Company’s quarterly dividend, and has declared a dividend of $.57 per share, payable on May 12, 2016 to shareholders of record as of the close of business on May 9, 2016
• Apple expects to continue to net-share-settle vesting restricted stock units
• Apple’s Board has increased its share repurchase authorization to $175 billion from the $140 billion level announced last year
• Apple cash on-hand now at $232.9 billion 90% of the total outside the United States.
• IBM MobileFirst for iOS continues to grow in the enterprise the world over
• Maestri: Other products grew 30% YOY thanks to Apple Watch.
• Other Products*: $2.189 billion revenue (vs. $1.689 billion YOY / +30% YOY)
*includes sales of Apple TV, Apple Watch, Beats products, iPod and Apple-branded and third-party accessories.
• Services*: $5.991 billion revenue (vs. $4.996 billion YOY / +20% YOY)
*Includes revenue from Internet Services, AppleCare, Apple Pay, licensing and other services.
• iPad: 10.251 million units, $4.413 billion revenue (vs. 12.623 million, $5.428 billion YOY / -19% units YOY, -19% revenue YOY)
• Apple generated double-digit Mac growth in a number of markets despite a challenging market for personal computers
• Mac: 4.034 million units, $5,107 billion revenue (vs. 4.563 million, $5.615 billion YOY / -12% units YOY, -9% revenue YOY)
• ChangeWave: Record 70% of companies plan to buy iPhone smartphones
• iPhone: 51.193 million units, $32.857 billion revenue (vs. 61.170 million, $40.282 billion YOY / -16% units YOY, -18% revenue YOY)
• Currency headwinds were significant
• Apple remains very optimistic in the CHina market over the long term and remain committed to investing in China for the future
• Under the expanded program, Apple plans to spend a cumulative total of $250 billion of cash by the end of March 2018
• Luca Maestri: Apple Board of Directors has authorized an increase of $50 billion to the company’s program to return capital to shareholders
• Cook: The future of Apple is very bright. Apple has a very strong product pipeline.
• Apple plans to lower channel inventories in the June quarter
• Apple believes in privacy
• Apple excited with how Apple Watch, iPhone and CareKit can improve people’s health and lives
• In June quarter, Apple expects to see their best iPad unit sales compare in two years
• iPhone SE demand has been very strong and Apple continues to work to increase supply
• Cook: We believe Apple Watch has an exciting future
• Unit sales of Apple Watch exceeded sales of iPhone in its first year
• Apple Watch: Unit sales met Apple’s internal expectations
• Cook: We are confident in our Mac business and confident the company can continue to innovate
• Over half of Mac buyers were new to Mac
• Mac channel inventory reduced by about 100,000 units
• Apple Pay is seeing 1 million new users per week.
• Huge install base on over 1 billion devices is a source of revenue that is growing independent of the unit sales sold each quarter.
• Apple Music continues to grow with over 13 million subscribers to date
• March quarter services revenue was Apple’s highest ever.
• Apple added more Android switchers during the first half of the fiscal year that during any other 6-month period.
• Kantar: 95% iPhone loyalty rate, the highest ever measured for a smartphone
• Upgrade of rate for iPhone 6 cycle, slightly higher that iPhone 5s cycle. Lower than iPhone 6
• Rate of Android to iPhone switchers accelerated
• Installed base of over 1 billion grew significantly
• Tim Cook: Our team executed extremely well in the face of strong macroeconomic headwinds and a tough YOY compare
• Tim Cook: Very busy and challenging quarter.
• Start of conference call
• AAPL: After Hours : 96.45 Down 7.90 (7.57%) 5:00PM EDT
• AAPL: After Hours : 96.98 Down 7.37 (7.06%) 4:58PM EDT
• AAPL: After Hours : 97.85 Down 6.50 (6.23%) 4:48PM EDT
• AAPL: Close: 104.35 Down 0.73 (0.69%) 4:00PM EDT
I’ve starting to think Tim and Co. want the stock to be exactly where it has been for the last year or two – low as possible, advantageous for the buy back, but not great for a investor like myself – I have completely lost all faith that he posses the qualities necessary to drive the stock price higher, he seems too preoccupied with trying to save the world – adding 10+B quarterly to the coffers and the stock still goes nowhere – go figure ???
Simple, sell!
Or perhaps he should focus on running a great company, and not focus on the stock price, which is largely out of anyone’s control. As a long term shareholder, I can tell a lot of you short term alarmists that Apple is a very complex co., given its size. We eagerly await groundbreaking new products, but the reality is that groundbreaking products cannot happen on a regular cycle. What I can tell you is that those who are calling for a replacement of Tim have very limited experience tracking Apple. People have been calling for his replacement for the last four years, and it has always been, and continues to be, a joke. Perpetual whining from relative short termers.
And finally, here we arrive. I have been saying since Cook took over that he will ride the coat-tails of Steve Jobs for 3-5 years, until the product pipeline dries up, and then be on his own. And when that happens, we’ll see the true colours of the man. And that is: does he have a winning vision and can he execute on it?
You are now seeing Apple, the wayward ship. It’s being driven by a man who pales in comparison to Steve Jobs. Someone who, in Steve’s words, isn’t a “product guy”. Unfortunately for Apple, it was founded and built by the world’s most brilliant “product guy”: Steve Jobs. Because Steve was mortal, he was Apple’s greatest strength and greatest weakness, since he would eventually have to pass away. And he did.
Apple will never be the same, and Cook is not the right person to lead Apple. I don’t see anyone replacing Jobs.
Alright let’s all just accept this now. Apple Watch is just a niche product and not near a success. It simply hasn’t caught on. Apple TV? A shell of what it could have been. That’s Apps as channels where people can build their own programming.
This is going to be an interesting year. Look at next quarter guidance. This quarter and next are huge drops. I’m truly surprised things dumped this much.
Can Apple get their CFO Rossetta Stone for English. Compare with Google’s CFO.
Lower channel inventories = new products coming soon???
We would certainly hope so. But I’m not going to hold my breath. The supply chain genius also has inadequate supply of the newest iPhone. I know Cook fans don’t want to hear it, but these results are exactly what happens when a leadership team starts coasting on new product development and instead spends most of their time on social agendas, fashion expos, and self-adoration.
It’s unfortunate your main contribution to the world is copious amounts of hot air and noxious methane. You have more in common with circling vultures and their carrion pickins than any real contribution. STFU. You add nothing and have no idea of how difficult it is. You’re simply one of those who goes overboard, going for the jugular when he can but then fails to offer praise when appropriate. By nature you’re a pessimist and a cynic. All mouth and no ability. Aren’t you late for a Scrooge Convention somewhere?
Predicatable comment from a Cook fanboy. Aren’t you supposed to be carrying a pail of water somewhere for your master?
Predictable comment from a total loser. Isn’t there a village short of it’s idiot you can apply for?
MacUser can’t get that position until you reliquish it.
Look, your unshakeable faith in Apple’s leaders is great and all, but please stop attacking people who don’t share your religion.
I only attack disingenuous morons who refer to Apple as a religion. But then you guys wouldn’t know fair-mindedness, mistaking it for “unshakeable faith.” Pleas go back to Getting Clued-In School. So far you’re getting a fat “F.”
“Tim Cook: Our team executed extremely well in the face of strong macroeconomic headwinds and a tough YOY compare”
in certain sections yeah, in certain sections no.
and the results show there are serious problems.
EXAMPLE:
Mac revenues EXCEED iPad (5 vs 4 b) yet apple treats Mac like a unwanted stepchild. There hasn’t been a serious Mac marketing campaign for years vs numerous iPad ads (yet like i said Macs make more money! Image if they had MARKETED ! ) . More Apple Watch ads in 6 months than mac ads in 6 years.
Test now show HP workstations are 6 times faster than Mac Pros. Where’s the Mid Tower pros are clamouring for?
is the Mac team ‘executing extremely well’ ? No.
If Tim (“nobody uses PCs”) Cook took Macs and Mac marketing seriously through Windows 8 fiasco (GIANT GIANT opportunity missed) it would certainly have helped the bottom line and stock ..
people voting me down, maybe you’ll like to EXPLAIN what’s wrong with my argument?
I’m an aapl shareholder and stuck with Apple for a long time, seen it go up and down… but I’m so tired with people giving T.C a FREE PASS just because it’s ‘Apple and they can do no wrong belief’. The reason is that I’m fearful that T.C reads those adulations and sees posts criticizing him (with factual arguments) get voted down AND ACTUALLY BELIEVES that’s he’s infallible, maybe he reads all the fan (as in fanatic) adulation and doesn’t FIX the issues.
as a aapl shareholder I’ve been patient but the stock has dropped to where it was years ago.
(Note years back I said my pressure sensitive thin pointed pencil for my BIG Cintiq is better than the fat foam head stylus I can get for my iPad and I was VOTED down because according to the ‘FAN’atics Apple is perfect (“Nobody needs a stylus”) , Now Apple comes out with a pressure sensitive thin pointed iPad Pro pencil and fanatics now say ‘a pencil is wonderful’. My point? Apple is not infallible. T.C needs to fix problems seriously and get his troops to focus on PRODUCTS. Addressing Social issues is good but Apple’s core is PRODUCTS ).
Tim isn’t reading your posts. Saying.
how do you know?
(T.C says he reads every email he get — I don’t know how that’s possible but that’s what he says — so he’s concerned about what people think but he doesn’t scan the most popular fan sites after earnings ? )
even if he doesn’t maybe his staffers do and push up concerns?
IF NOBODY AT APPLE PAYS ATTENTION TO APPLE FAN SITES, to feel the pulse of it’s most loyal consumers … SHIT THAT IS A SERIOUS PROBLEM.
(note I post the same comments every where on fan sites. I also believe the huge fan complaints about needing a big iPhone PLUS others saying they wanted an UPDATED SMALL phone did cause Apple to make changes. ).
yesterday a poster Gary suggested that Apple should make a tower mac with PCIe upgradable cards.
that got 96 votes average 4.5 stars.
If APPLE STAFFERS DIDN’T PAY ATTENTION TO THINGS LIKE THAT , IF THEY DIDN’T PAY ATTENTION TO OTHER STUFF LIKE THE WRITE UPS IN FORUMS ON WIFI ISSUES SEVERAL MONTHS AGO ETC — THEN NO WONDER THEY HAVE PROBLEMS
If T.C can spend so much time dealing with SOCIAL issues OUTSIDE of Apple’s direct concerns but he doesn’t pay attention to Apple sites, really that is a shareholder issue. But I have a belief that he DOES pay attention.
Spot on Dave – I too have articulated the same concerns, but everyone will vote you down because they take it as a direct slam of Apple – not thinking for a second there are serious problems at Apple – serious, a 10 PE is all you need to know compared to any or all of their colleagues.
Looks you heterosexual turds, I’ll ban the damn Confederate flag and pee in the ladies room and you can’t do a damn thing about it.
The Mac is yesterday’s technology. All of MY friends want rose colored hardware, and that’s what you’ll get. Like It Or Not.
Learn to love the cute little Mac Pro. It’s only going to get smaller, with ONE USB-C connector and WiFi.
You’ll get AMD GPUs. Screw Nvidia and their CUDA crap. Learn to love it!
F all of you.
I use the new Mac Pros but still have some G5’s that I use. My G5’s are much more reliable than my new Mac Pros. Sad but true. We waited a long time for a new Mac Pro but it was certainly not worth the wait. And I make a living with them so it isn’t a hobby. Performance, reliability, upgradability etc., these things matter in the real world.
I don’t find that to be true. My 2005 G5 Mac Pro is a slow steaming pile at this point. My 2007 Intel Mac Pro however is still going strong, even running El Capitan at a decent clip. I agree the “new” 2013 Mac Pro is a disappointment on the level of what most pro’s want and need. I will need to do a lot of platform soul searching if there is no real change at the 2016 WWDC.
Manufacturing is the challenging part. Apple is so good at it, but(S) it has to do it with HUGE chain of suppliers and they fall short/do too much/miss behave/backstab/copy things. Maybe it is time for Apple to start really rolling this in instead of giving me all that extra 70 billion (part of it). I want Apple to own more about the manufacturing. Tim Cook will that, but I want that to happen 70 billion faster.
MDN, I hate having to deny cdnadfront cookies every time I visit your site…every time I visit a new page on your site. I despise having to do that. I accidentally hit “OK” rather than “deny” a few minutes ago and had to clear my entire Safari history to get rid of it. That is how much I do not want it. I DON’T WANT THAT DAMN COOKIE! Please do something about it…soon.
There are those who would say the climb couldn’t last forever, but I would say that innovation will always bring sales growth. Apple has gone from iPod, iPhone and iPad to a watch and maybe a car?!
The product line now sounds the Mac Product line from the 90’s (iPhone 4, 4s, 5c, 6 Plus reminds me of Centris and Performa).
Force Touch, Live Photo are examples of trying anything different to see what sticks.
They missed their chance to be truly ahead in the TV box market, their software is much more buggy and non intuitive than it used to be, and OS updates add and take away features almost randomly.
Apple after Steve Jobs is in some important ways reminding me of the Apple of the 90’s, with a bit of Microsoft hubris thrown in.
We need someone from within the ranks who remembers what it’s like to make a dent in the universe, and focus less on championing their sexual preference and social standing.