MacDailyNews presents live notes from Apple’s Q117 conference call

MacDailyNews presents live notes from Apple’s Q117 Conference Call with analysts starting at 5pm EDT/2pm PDT today.

Apple will provide live audio streaming of its Q117 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 2017 first quarter ended December 31, 2016. The Company posted all-time record quarterly revenue of $78.4 billion and all-time record quarterly earnings per diluted share of $3.36. Analysts’ consensus called for the company to report revenue of $77.4 billion and $3.23 EPS.

For their fiscal 2017 second quarter, Apple guided for revenue between $51.5 billion and $53.5 billion.

Live notes from Apple’s Q117 Conference Call in reverse chronological order:

• AAPL After hours: $125.09, +$3.74 (+3.08%) @ 5:57PM EST
• End of call.

• Cook: “We’ve got some exciting things in the pipeline.” (Ugh – MDN Ed.)
• Home automation, enterprise, health, CarPlay, etc.
• The smartphone is still in the early innings of the game and there is still a lot more to do
• We are still in a shortage situation now and not projecting to totally get out supply/demand imbalance throughout the quarter
• We have some things coming regarding iPad in the future; customer sat. numbers for iPad Pro are 99%
• We did under-call the number of iPad models that would be in demand, so there were supply issues there, too
• Cook: 1.6 million unit swing in iPad inventory YOY

• Cook expects it to take time, but, in the end, the courts will see it the way Apple sees it
• Qualcomm withheld a billion dollars in payments they owed Apple, so Apple had no choice but to litigate
• The more Apple innovated, the more Qualcomm charged for technology they had nothing to do with
• Qualcomm instead on charging for technologies they had nothing to do with
• Cook: I don’t like litigation and view it as a last resort. Qualcomm lawsuits should be viewed as a last resort

• Pent-up demand for iPhone 7 Plus surprised Apple
• Strong dollar forces price increases in certain countries which doesn’t help Apple move product in those countries
• In the U.S. annual upgrade programs are proving to become popular; that is good for Apple’s iPhone sales
• Apple feels very good about iPhone unit growth in many markets around the world
• Maestri: iPhone install base growing in strong double digits

• iPhone 7 Plus was the most popular Plus model Apple has ever had
• The way Apple looks at this is that in a quarter where there is a significant supply constraint, it’s difficult to draw firm conclusions
• Number of upgraders and switcher were highest Apple has seen in any quarter
• Apple had an exceptional iPhone quarter; did not predict iPhone 7 Plus demand well
• In the longer term, I feel good about how we’re doing in India; fully intend in investing in the country
• Cook: Despite demonetization move in India that created lots of economic pressure, Apple has all-time quarterly revenue results

• Revenue ahead of expectations, so Apple gained some leverage
• Apple brand is very strong around the world
• Level of interest for Apple products is very strong
• iCloud storage is also growing very quickly as is the AppleCare business
• Apple’s music business has returned to growth over the last three quarters
• We are the market leader in digital music
• We can grow in various parts of the world; grow our developer community
• Maestri: App Store is driving significant growth (43% growth 13 weeks/13 weeks YOY) for Services business

• Challenges include currency headwinds and Hong Kong remains a very, very difficult market
• We also saw 50% of iPhone sales in China were to switchers and to first-time buyers
• Apple set a new revenue record in China in Q117
• Cook: Greater China revenue down 12% and 4 points of that was due to currency, so 8% in constant currency; much better performance in China vs. previous 3 quarters

• Apple Services will be a Fortune 100 company this year and we have a goal to double it in the next four years
• Maestri: The number of people transacting on Apple stores [iTunes, iBooks, Music, Movies, etc.] is increasing in double digits

• We are learning about the original content business and thinking about our opportunities
• We have put out toe in the water on creating original content for Apple Music and we’re learning. They will roll out throughout the year and we’ll build from there
• We’ve acquired 15-20 companies every year for the last few years; based on strategic value
• Cook: I am optimistic given what I’m hearing that there will be some sort of tax reform and tax repatriation this year; very good for the country [U.S.] and for Apple

• If dollar is weaker than expected, we’ll do a bit better; we’ll see where we land
• Maestri: Foreign exchange is very volatile, so we’ve broadened the range of gross margin

• The dividend is payable on February 16, 2017 to shareholders of record as of the close of business on February 13, 2017
• Apple’s board of directors has declared a cash dividend of $0.57 per share of the Company’s common stock
• Apple is providing the following guidance for its fiscal 2017 second quarter:
– revenue between $51.5 billion and $53.5 billion
– gross margin between 38 percent and 39 percent
– operating expenses between $6.5 billion and $6.6 billion
– other income/(expense) of $400 million
– tax rate of 26 percent
• Apple will update capital return program as usual this spring
• Apple has $246.1 billion in cash on-hand; $231.2 outside the U.S.A.
• Apple Retail Stores posted strong, double-digit growth

• NPD: iPad has 85% market share of tablets priced over $200
• iPad was ahead of internal expectations (13.081 million units (-19% units, -22% revenue YOY))
• App Store revenue continues to outpace industry; more than double the revenue of Google Play during calendar 2016
• Services: $7.172 billion revenue
• 451 Research: 97% customer satisfaction rating for iPhone owners; 99% sat. rating for iPhone 7 Plus owners
• $695 ASP for iPhone due to strong demand for iPhone 7 Plus
• Strong customer demand left Apple scrambling to meet supply for many products during most/all of the quarter
• Apple had the benefit of a 14th week this year during the quarter
• Very challenging currency headwinds during quarter due to strength of the U.S. dollar
• Apple CFO Luca Maestri reviews results

• Cook thanks developers, business partners, employees, and Apple customers for the outstanding quarter.
• SAP SDK for iOS coming soon
• Enterprises using IBM MobileFirst for iOS in increasing number

• Cook pitches Apple’s iOS, Home app, and HomeKit for home automation
• Cook: We are unmatched when it comes to securing your home with IoT locks, etc.
• Cook: Number of HomeKit accessories growing rapidly
• Every major car maker incorporating CarPlay
• Cook: We could not be more excited about Apple Watch
• Apple could not make enough Apple Watches to meet strong demand throughout the quarter
• MacBook pro supply-constrained throughout quarter; now coming into supply/demand balance
• Apple’s goal is to double Services business within the next 4 years
• Comcast to accept Apple Pay for bill payments beginning this quarter
• App Store customers broke all-time quarterly revenue record
• iPhone 7 Plus demand did not come into supply/demand balance until after the quarter ended
• iPhone: exceptional demand beat Apple’s internal expectations
• Tim Cook: Highest quarterly revenue in Apple’s history
• Start of conference call

• Other Products: $4.024 billion revenue (-8% YOY) (includes Apple TV, Apple Watch, Beats products, iPod and Apple-branded and third-party accessories)
• Services: $7.172 billion revenue (+18% YOY)

• Unit sales:
– iPhone: 78.290 million (+5% units, +5% revenue YOY)
– iPad: 13.081 million (-19% units, -22% revenue YOY)
– Mac: 5.374 million (+1% units, +7% revenue YOY)

• AAPL After hours: $124.41, +$3.06 (+2.52%) @ 4:57PM EST
• AAPL After hours: $124.40, +$3.05 (+2.51%) @ 4:48PM EST

AAPL Q117 Results

SEE ALSO:
Apple beats Street, services revenue grows 24% to all-time quarterly record of $6.3 billion – October 25, 2016

27 Comments

    1. ”Apple had the benefit of a 14th week this year during the quarter.”

      In other words, their comparison year over year is bullshit since they had an extra week of sales here?

      1. The “period” is the Quarter, and YOY periods are compared for all companies regardless of the appearance of a 14th week, which is a normal necessary accounting procedure (look it up).

        So… it is not “bullshit” to compare YOY qtrs. You just need to take the extra week into account. Cook was being transparent by noting the extra week. BUT… for accounting purposes, Q1 2016 gets compared to Q1 2017, regardless of the number of weeks in them.

        Cook’s pointing it out was,

        1. Right. So when an entire extra week is factored in, doing some math reveals that Apple DECLINED YOY based on average revenues per week if shaving off 1 week in the current quarter for a fair comparison.

          This extra week is so misleading it’s absurd. A company cannot say it GREW YOY when in fact it is including an extra week. They would have to compare the exact same ending points to make that claim.

          1. I know it is a fluke, but it is a required accounting procedure. And as I said, Apple was up front in stating that they had an extra week in the quarter. It is what it is. View it however you want.

  1. I’m shareholder and happy that the results are good.
    (haven’t sold a share for years and years unlike some like Eddy Cue who liquidated nearly all his Apple shares)

    Results are good but NOTE: there is AN EXTRA WEEK to this quarter compared year ago.

    Also the iPhone was boosted by Samsung, the only significant high end rival IMPLODING from exploding phones.

    And so my good feelings are tempered just as they were in the REVERSE direction during the quarters of doom and gloom prognostications following the giant iPhone 6 launch (analysts never correctly factored that one time event) .

    What I AM concerned about is the LONG TERM trends.

    The iPhone looks good especially the iP8.
    ( besides the new body, the big Chinese market would be attracted to the ‘8’ as to them it’s a lucky number. Chinese businessmen spend thousands on ‘8’ numbered license plates, addresses etc and a prestige phone like iPhone with 8 would be an immediate draw) New body, secondary incentives like the 8 number, people upgrading from 6 , it’s going to be smash hit.

    which translates to good accessory sales like EarPods and apps.

    etc.

    NOTE: Services is booming but a big part of Services revenue is APPLE CARE WARRANTIES. No hardware sales = no app, media and warranty sales.

    Worrisome trends are the Mac line, neglect of the eco system : routers, monitors (big attraction for mac users is SEAMLESS INTEGRATION of various products)

    for people who say Mac is OVER, note that Mac sales this quarter is 7 billion vs 5 b for iPad.
    Mac sales could be much higher if Apple didn’t neglect or mistreat it for years . Look at the slow updates and virtually no marketing (no marketing even during the Win 8 fiasco years). There are dozens of Apple Watch, iPad ads over the years vs the ONE ‘bulb’ Mac ad in spite of Macs good earnings. If Apple had paid full attention to Mac all those YEARS (of neglect) , I suspect the sales would have been easily 10 b or more vs 7 b now.

    Apple needs to fix the desktop and Pro line especially. (Right now top Macs have ONE QUARTER or less the GPU power of a mid range desktop PC card. Not even the new MBP costing thousands can play high end games at full resolution much less deal with certain pro needs like high end 3D rotation etc) . Like I said it’s also about the ECO SYSTEM. Even the lower selling Mac lines are important. Cutting the ENDS of the CURVE off means that the curve keeps getting smaller.
    ( Apple is going to have a ‘built to iPhone Standards’ billions costing new Campus and LG monitors and old Cheese Grater Macs under the tables like this pix of Ive’s studio late 2015? )

    Apple already has a kick ass OS in MacOS so there’s not like big development costs (like the Car) , so Apple should use it to the Max in products.

    Space precludes me from talking much about other worrisome trends: launched products supply constrained, issues with Cloud, Siri, iTunes (using it as an interface hub for iOS devices is a pain etc) , Pro iOS file system, bizarre things on the Apple store website (trying to buy certain Apple Watch items is an exercise in frustration, not to mention touting the 2013 non updated Mac Pro –with no price drop– as cutting edge flagship is laughable — the standard MP has 256 GB drive ! … ) , Apple TV (whats with the remote…)
    ETC.

    My conclusion : Good Quarter, gives Apple breathing room, Apple should regain focus and fix some long standing problems.

      1. love that pix, shows so much! Stops people arguing with me immediately when they say ” Macs are of no use to anyone, pros can work with iOS devices alone and the Cylinder is GREAT and can do ANYTHING… etc “.

        (I’m not the one that made the INGREDIENTS possible for that classic pix– namely 6 year old MPs — last Cheeser model was the 2010 — in the THROBBING HEART of Apple . They must be using them for the upgradable GPUs because they can’t be trying to SAVE money right ?– billions in the bank, billions to make the Campus, and they MAKE the Cylinders — don’t think so, so fact they are using them (instead of Cylinders ) TELLs a lot.).

        1. “Macs are of no use to anyone”

          It just shows that Macs are of use to people in that room 🙂 They’re not going to release a Mac Pro for 23 people!

          The better statement is Macs are of use to FAR fewer people than iOS devices. That’s because the vast majority of people don’t have complex needs that require a Mac.

          1. “They’re not going to release a Mac Pro for 23 people!”

            but they will make coffee table books, furniture for charities, Christmas trees (Ok that’s probably Ive and Apple designer Newson’s hobby but still… ) , sponsor fashion shows like the Met Gala, hold debates about Kanye West, make a mini series “sex filled romp of Dr. Dre’s Life” (the six episodes seemingly taking longer production than a two seasons of Game of Thrones) , protest about social issues that don’t have even remote connection to Apple ( I won’t specify as I’ve been called BOTH a Conservative freak AND a Liberal Nut) etc etc etc.

            I think the Mac Pro is more important than those things.

            People who don’t use them keep looking down on them YET NOBODY HAS EVER GIVEN ME PROOF THAT a Proper TOWER Mac won’t sell. Dell, HP etc keep making Desktops (HP especially recently innovating like crazy) , you would think they would stop making them if there was no market. (Mac Minis btw were Amazon top desktop bestseller for years ) Also please note Mac sales have LAGGED Windows PCs sales recently when they surpassed Win Growth for many years when Apple decided to neglect the desktops (besides the MP , they neutered the Mac Mini by dropping Quad core and making RAM non upgradable. Why do you need to make a DESKTOP non upgradable so they can be THINNER by an inch or something — fashionistaness gone crazy but that’s another topic…. ).

            Microsoft says they have shipped 300-400 million Win 10 licenses and their target is 1 Billion. With market share now at lowered 7% for Mac, there’s a HUGE market opportunity.

            ALSO: The reason aapl is ONE THIRD the PE of Goog/alphabet, (one of its PEERS) — i.e the stock would be 300+ and Not 100+ now if it had their valuation — is that big investors refuse to buy in because they say it’s a DANGEROUS ONE PRODUCT IPHONE COMPANY (your iOS ref I believe is about iPhone as Macs make more than iPad). Since Tim Cook has spent about $100 BILLION in buybacks etc to Boost the stock NOT SPENDING ON MACS to SAVE RESOURCES is CRAZY. (like I said I believe even TOWER desktops would make money). If TC wants to boost the stock a DIVERSE product line would do more than billions in buybacks.

            Also there is NEGATIVE HALO effect I believe, cut high end macs (and also the entry level minis) and people might start cutting other stuff because a company (like Apple) that need high end machines might not like a few high end Win/Linux workstations and then MacBooks etc, they might decide to switch everything .

            I can go on …..
            (oh Yeah GIVE US THE MYTHIC MID TOWER– between mini and Pro — MAC as well ! since I’m ranting I might as well go all out… !)

            1. talking about fears of one product iPhone company , I always find it weird that investors don’t consider Goog as a one product search company, maybe because their PR for crazy moonshot ideas is so effective .

              Also I think big investors believe iPhone is vulnerable (like Blackberry, Samsung exploding Notes) while Goog search has a wide moat. So anyhow DIVERSIFY the product line is in Aapl’s best interests.

          2. “The better statement is Macs are of use to FAR fewer people than iOS devices.”

            but perhaps this is because they have NEGLECTED the Mac?

            imagine a MICROSOFT forum:
            people would be saying (paraphrasing you) :
            “Msft is right in emphasizing Windows desktop because many more Windows desktops are sold than Windows Phones. ”

            perhaps if Msft. had NOT NEGLECTED the mobile market that would not be true?

            note that stats show that Phone Market growth is slowing just like PCs a few years ago.
            (people should sit back and think about this a bit before they beat up on the Mac and ‘the future is just iOS’… ).

            Also there is No reason , no lack of resources that prevents Apple from doing BOTH iOS and Mac.

            (the Mac desktop issues I believe is more fashionistas in Apple not wanting to do ‘trucks’ — look at the neutered Mini like I mentioned: make a DESKTOP RAM non upgradable so that it can be ‘thinner’ and more jewel like — than lack of sales potential )

            Not to mention WITHOUT MACS imagine the PR disaster if Apple Hardware Software had to be designed on Windows machines….

            1. (since I got some more time now let me add.. )

              I’ve not even talked about the ETHICAL ISSUES on continuing Mac Pro support.

              Many Pros listening to Apple’s Marketing Spiel that they are committed to Pros (Apple’s Photoshop shootouts with PCs, buying FCP, pushing the Cylinder… etc) . Abandoning pros, some of whom have spent tens of thousands on the pro eco system, now is sort of hypocrisy as Apple’s has touted it’s ‘ethical’ stance in helping minorities etc…. are OUTSIDE minorities more important than Customers? (and like I argued above I don’t even think a Tower would lose money ).

              Leaving Pros without updating (the non upgradable) Cylinder, not giving an answer whether it is discontinued ( do pros switch over to Windows, retrain their staff etc?) is bad form. The new MBP has quarter the GPU power of a mid range desktop PC card, for Pros needing high end GPU abilities there is no good solution now.

              If Apple abandons , betrays its pro uses it would really damage it’s ‘ethical’ front. (and that’s in addition to all the other good reasons I listed above for keeping up the Macs).

      1. really hope so.

        If news is true the designer who masterminded the Cylinder has gone to work at Tesla….

        Most of the problems I listed I think are relatively to the complexity of something like ‘the Self Driving Car’ easy to fix if they focused.

      1. That $550 M of which you speak is accounted for very differently than the numbers we are discussing. It does not fit into the direct comparison, especially when you compare product segments.

    1. Let’s do the arithmetic (I won’t call it math, it’s really that simple).

      If you scale the numbers back for a 13 week quarter rather than a 14 week quarter in order to do a direct comparison you get, in unit sales:

      iPhone: -2.8% year over year growth
      iPad: -24.7% year over year growth
      Mac: -6.1% year over year growth

      In gross revenue you get…

      iPhone: -2.2% year over year growth
      iPad: -27.5% year over year growth
      Mac: -0.3% year over year growth
      Services: 10.0% year over year growth
      Other Products: -14.1% year over year growth

      So with ALL of the product segments contracting except services on a year over year basis why is *anyone* celebrating? Hell on a direct 13 week comparison even the iPhone contracted! On a 13 week direct comparison even the unit sales of the iPhone contracted. On a 13 week direct comparison the only bright spot on the iPhone was the increase in average selling price ($694.57 versus $690.50, a 0.59% increase, which is barely positive, but positive nonetheless). Similarly, the average selling price for Macs went up by 6.14%, likely due to the radical increase in MBP prices and the pent up demand for the higher end models of those Macs.

      Now, one could argue that the extra week was the first week of the quarter (not the “average week” as I did it) so that the final results would not appear so negative. However, one could also argue that the extra week was during the holiday shopping period so that the best week needed to be excludes so that the final results would appear significantly worse than the way I did it.

      The only product segment that saw unmitigated growth was the Services segment. Does this mean that Tim and company are pushing Apple to become a Services company? Only time will tell.

  2. Apple is spread in too many directions.

    When Jobs came back in the 90s, he found product lines with myriad confusing models and features. He scrapped it all and illustrated it all by a little diagram. He drew a cross; above it, he wrote Consumer | Pro; on the side, he wrote Desktop / Portable. The resulting table contained iMac and Powermac, and bottom was iBook and PowerBook. Four models, with minor variants between them. Those were the four product lines of Apple, and the only stuff beside that were Studio Displays that were sold with those PowerMacs.

    Today, we have multitude of hardware, and for some of it, it’s unclear where it belongs. From iPods, phones, watches, to iPads, Macs, let’s not forget services and software, a spaghetti tangle of offerings far, far away from Jobs’s simple four-field table of Consumer/Pro Deskop/Mobile.

    I wonder if at least some of these product lines could be brought down and simplified with the same diagram….

    1. Apple should focus on new/better Macs, reintroduce Apple displays, make APPLE TV great, before defocusing on new TV shows, etc.

      Sounds like they will be doing the opposite. 🙁

      As a shareholder I think the days of unusual growth are over …. UNLESS Apple fixes its focus and pulls some major new product area out.

      Augmented reality would be great, but the technological hurdles of a VR system are more realistic for now and a complete VR OS would be awesome!!

      Loving my Rift and wishing it had a full (Apple) OS and I could work in it. Would get more exercise standing and moving with that too. This seems like a huge opportunity Apple might be missing.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.