Notes of interest from Apple's Q1 2010 conference call

Posted:
in General Discussion edited January 2014
The first quarter of Apple's 2010 fiscal year was another record breaking three-month frame for the company, which sold more Macs and iPhones than ever before. Monday, the company conducted a financial conference call with analysts and the press, and notes of interest follow.



On Monday, Apple revealed the results of its fiscal 2010 first quarter, which ended Dec. 26, 2009. The company posted revenue of $15.68 billion and a net quarterly profit of $3.38 billion, or $3.67 per diluted share. That's an increase from revenue of $11.88 billion and net quarterly profit of $2.26 billion, or $2.50 per diluted share, in the year-ago frame.



Apple's blowout quarter surpassed its previous quarterly record by almost $3.5 billion.



Participating on Monday's call were Apple Chief Financial Officer Peter Oppenheimer and Chief Operating Officer Tim Cook.



Apple's regional business segments



The real standout in Apple's worldwide business breakdown was the fact that international sales accounted for 58 percent of the company's revenue. The largest overseas slice came from Europe, which accounted for $5.024 billion in revenue, partially from sales of 1.068 million Macs.



Mac sales in Italy, France, Switzerland and Spain all grew more than 40 percent. Australia up over 70 percent, China up almost 100 percent.



Apple Americas garnered $6.092 billion in total from the U.S., including sales of 1.187 million Macs. In all, 3.362 million Macs were sold in the quarter.



Asia Pacific accounted for $1.183 billion, including sales of 313,000 Macs. And Japan was $783 million, selling 105,000 computers.



Apple's "Other Music Related Products and Services" segment was responsible for $1.164 billion in revenue. Apple's "Peripherals and Other Hardware" added $469 million in revenue.



The company's "iPhone and related products and services" accounted for $5.578 billion in revenue, based on sales of 8.737 million units. Apple's "Software, Service and Other Sales" segment produced $631 million.



$39.8B in cash at the end of the Dec. quarter, an increase of 5 billion from the previous quarter.



Apple's Mac business



Mac sales were broken down into 2.128 million portables, and 1.234 million desktops. Desktop sales were up 70 percent year-over-year, and saw a 60 percent increase in revenue. They also spiked 57 percent in sales from the previous quarter. Customers are thrilled with the new iMacs, officials said.



Portable sales were also up 18 percent in sales year over year, and 9 percent in revenue. However, the notebook market was down 6 percent in units and 5 percent in revenue from the previous quarter. Mac and MacBook sales were up 16 percent year over year in education. New December records for K-12 and high-ed channels.



Cook said that represented the best growth rate for education since before the recession began.



"Our whole education business is based on we really understand teaching and learning and student achievement at a deep level, we think we're the only company that really gets it, we do more than sell boxes like other companies do," he said. "I think we can continue to do well and was thrilled to see the results from last quarter."



Previous Mac record was set in September quarter, Apple beat it this quarter by almost 300K. Grew more than 30 percent year over year.



"We are extremely proud of this result and believe our Mac hardware and software are providing outstanding software and innovation that our customers really love," Oppenheimer said.



Apple's iPhone and Apple TV businesses



Record 8.7 million iPhones sold Revenue for iPhone handset sales, accessories, and carrier payments was $5.58 billion.



Average Selling Price of about $620 for the iPhone during the quarter. Added 17 new carriers during the quarter. iPhone distribution now in 86 countries.



Business carriers ranked the iPhone No. 1 in JD Power's customer satisfaction survey in the second year in a row. Business adoption is strong.



Over 70 percent of the Fortune 100 deploying iPhone. Penetration doubled since the iPhone 3GS first shipped this last summer. However, Cook declined to comment on whether the "halo" effect applied to iPod use in the consumer markets could lead to Mac adoption in the corporate world.



More than 200,000 iPhones have been sold in China with carrier China Unicom. Cook said Apple is concentrating now on the customer experience and point of sales.



"We would prefer to move slow because we're building the brand for the long term and we're very much focused on the long-term of the market, because we think there is significant potential there," Cook said. He declined to forecast where sales could go.



Cook also defended the company's approval process for the App Store, noting that more than 90 percent of software submitted is approved within 14 days of submission. He said some rejections are to prevent inappropriate content, like pornography.



"Most of the rejections, however, are actually bugs in the code itself," Cook said. "This is protecting the customer and the developer to a great extent, because they don't want customers who are unhappy with the app."



Apple's iPod business



Sold almost 21 million iPods. iPod average selling price increased 9 percent, revenue increased 1 percent. Share remains at almost 70 percent. iPod is the top-selling MP3 player, and gains share internationally. Year to year sales dropped, as expected, and the iPhone continues to cannibalize that market.



iPod touch sales in particular were strong, up 55 percent.



iTunes store had a record breaking quarter with strong sales of music, video and apps. iTunes has 8,000 Hollywood films, 10,000 music videos, and 50,000 TV episodes.



Apple's retail business



Apple's retail locations accounted for 689,000 Mac sales, and produced $1.971 billion in revenue. About half of sales during the December quarter were to customers who never owned a Mac before. About 10 new stores opened during the quarter.



There are 62 stores outside of the U.S., and the company is on track to open between 40 and 50 stores in its 2010 fiscal year, half of which will be international. Ten new stores opened last quarter, including one at the Louvre in Paris, France, and one on New York's Upper West Side.



Apple ended the quarter with 283 stores in 10 countries.



Average revenue per store was $7.1 million, compared to $7 million a year ago.



Stores saw a record 50.9 million visitors in the quarter.



Apple added 280,000 One to One membership subscriptions during the quarter.



Apple's next (Q2 2010) fiscal quarter



Officials provided a range of guidance under the new accounting principals. Apple has forecast revenues between $11 billion and $11.4 billion compared to $9.1 billion in the March quarter last year under old principles.



Expect gross margin to be about 39 percent, and operating expenditures about $1.64 billion, including $190 million related to stock-based compensation. Expect the tax rate to be about 29 percent. EPS of about $2.06 to $2.18, compared to $1.79 in the year ago quarter.



"We are incredibly excited about our new product pipeline," Oppenheimer said.
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Comments

  • dr millmossdr millmoss Posts: 5,403member
    Quote:
    Originally Posted by AppleInsider View Post


    $39.8B in cash at the end of the Dec. quarter, an increase of 5 billion from the previous quarter.



    That's over $40 million a day, folks.
  • aaarrrggghaaarrrgggh Posts: 1,511member
    21% of their market cap in cash!? Can we please have a dividend?



    TTM P/E after deducting cash is 17! Wow... we should see $275 before too long as the P/E ramps up to ~25 (without cash).
  • rbonnerrbonner Posts: 574member
    Wonder how much Microsoft is worth, they should buy them.
  • macsharkmacshark Posts: 229member
    Quote:
    Originally Posted by rbonner View Post


    Wonder how much Microsoft is worth, they should buy them.



    Why would Apple waste their cash?
  • mactrippermactripper Posts: 1,328member
    Average cost of a Mac in Europe is $4,704 based on the above data.



    Average cost of a Mac in the U.S. is $5,132 based on the above data.



    Average cost of a Mac in Japan is $7,457 based on the above data.





    WTF?
  • oc4theooc4theo Posts: 294member
    As good as only Apple can do. A good all-around company, with good products. Nothing short of perfection. Keep it up!
  • solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by aaarrrgggh View Post


    21% of their market cap in cash!? Can we please have a dividend?



    Please, no. I don't want the value decreased by a dividen. With the tech industry I don't think that is excessive. It's exceedingly health for 2010, but with start ups being bought for billions for having a potentially pofitable idea I don't think $40B is huge to weather any potential economic perfect storm that may arise in the future, especially when Apple is growing rapidly and needing to pay more and more vendors up front for choice deal on components or risk staling growth.





    Quote:
    Originally Posted by rbonner View Post


    Wonder how much Microsoft is worth, they should buy them.



    MS worth more. Apple couldn't buy MS even if they could afford them.
  • joe hsjoe hs Posts: 488member
    Quote:

    Originally Posted by rbonner

    Wonder how much Microsoft is worth, they should buy them.



    Why? so they can fire everybody and burn all their factories? that's one way to take out your competition.

    Edit: that quote failed >.>
  • quinneyquinney Posts: 2,379member
    Quote:
    Originally Posted by aaarrrgggh View Post


    21% of their market cap in cash!? Can we please have a dividend?



    I was watching CNBC a few minutes ago and they said something about a rumor that Apple might start repurchasing shares at a rate of $1 billion per quarter. Would you prefer a dividend to that?
  • paulmjohnsonpaulmjohnson Posts: 1,357member
    Quote:
    Originally Posted by quinney View Post


    I was watching CNBC a few minutes ago and they said something about a rumor that Apple might start repurchasing shares at a rate of $1 billion per quarter. Would you prefer a dividend to that?



    I think share repurchase makes more sense than a dividend. Unless Apple have a strategy for using the money, I would imagine some institutional investors wanting them to give some of their money back.
  • aaarrrggghaaarrrgggh Posts: 1,511member
    Quote:
    Originally Posted by quinney View Post


    I was watching CNBC a few minutes ago and they said something about a rumor that Apple might start repurchasing shares at a rate of $1 billion per quarter. Would you prefer a dividend to that?



    Either way is fine by me. I have about 65% of my share count in options, so a re-purchase is best short-term. Long-term, I think closer to 10-15% of market cap is reasonable to keep as cash, plus a little as acquisitions require.



    It's just hard to see what AAPL can purchase with the money right now. They do pretty well with their pile-o-cash, I just hate it that it obscures their multiplier.
  • Quote:
    Originally Posted by MacTripper View Post


    Average cost of a Mac in Europe is $4,704 based on the above data.



    Average cost of a Mac in the U.S. is $5,132 based on the above data.



    Average cost of a Mac in Japan is $7,457 based on the above data.





    WTF?



    Each region's total revenue numbers includes Mac unit sales. IOW - revenue from iPods and iPhone are included in each region's total revenue and not that each region's total revenue is accounted from just Mac sales alone.



    They could have expressed it better in the article.
  • hypermarkhypermark Posts: 152member
    Quote:
    Originally Posted by PaulMJohnson View Post


    I think share repurchase makes more sense than a dividend. Unless Apple have a strategy for using the money, I would imagine some institutional investors wanting them to give some of their money back.



    A share repurchase makes no sense, unless Apple thinks that the stock is DEEPLY undervalued. Even with all of the bullishness around Tablet, of which I am a believer, I can see no logical scenario where they think that that's the best use of their cash reserves. Apple, after all, isn't about financial mechanics.



    That's also the same reason you won't see a dividend any time soon. Companies in heavy R&D mode, like Apple, need to keep their reserves at the ready for both capital investment and the surrounding M&A to fill in the gaps.



    Plus, rainy days do come, and they hardly have a monopoly position to print money, despite their burgeoning market position.
  • quinneyquinney Posts: 2,379member
    Quote:
    Originally Posted by hypermark View Post


    A share repurchase makes no sense, unless Apple thinks that the stock is DEEPLY undervalued. Even with all of the bullishness around Tablet, of which I am a believer, I can see no logical scenario where they think that that's the best use of their cash reserves. Apple, after all, isn't about financial mechanics.



    That's also the same reason you won't see a dividend any time soon. Companies in heavy R&D mode, like Apple, need to keep their reserves at the ready for both capital investment and the surrounding M&A to fill in the gaps.



    Plus, rainy days do come, and they hardly have a monopoly position to print money, despite their burgeoning market position.



    Paying a dividend or repurchasing shares to the extent that it depleted their cash reserves entirely would indeed be irresponsible. Returning value to shareholders in some manner at a cost much lower than the amount of cash it is adding to its reserve in each quarter is a different story. Say for example that they returned $1 billion and added $5 billion (as they did in the quarter just reported). Neither R&D, capital investment, M&A, or rainy day contingencies need be impacted for Apple to demonstrate to the market that they consider their company a good investment. To the contrary, not returning value to shareholders may persuade the general market to evaluate Apple more on the basis of its lack of interest in financial mechanics.
  • digitalclipsdigitalclips Posts: 15,025member
    Quote:
    Originally Posted by rbonner View Post


    Wonder how much Microsoft is worth, they should buy them.



    Nooo someone has to make the OS for the trolls
  • digitalclipsdigitalclips Posts: 15,025member
    Quote:
    Originally Posted by aaarrrgggh View Post


    21% of their market cap in cash!? Can we please have a dividend?



    TTM P/E after deducting cash is 17! Wow... we should see $275 before too long as the P/E ramps up to ~25 (without cash).



    That would be nice for sure, I am deep and long in AAPL. I once read that companies that do pay dividends don't ultimately do as well as those that don't ... what do the experts say on this? I would not want to see anything that hurt Apple happen.



    What would it mean to share value if Apple start buying back shares?
  • hypermarkhypermark Posts: 152member
    Quote:
    Originally Posted by quinney View Post


    Paying a dividend or repurchasing shares to the extent that it depleted their cash reserves entirely would indeed be irresponsible. Returning value to shareholders in some manner at a cost much lower than the amount of cash it is adding to its reserve in each quarter is a different story. Say for example that they returned $1 billion and added $5 billion (as they did in the quarter just reported). Neither R&D, capital investment, M&A, or rainy day contingencies need be impacted for Apple to demonstrate to the market that they consider their company a good investment. To the contrary, not returning value to shareholders may persuade the general market to evaluate Apple more on the basis of its lack of interest in financial mechanics.



    To be clear, I am not specifically disagreeing with the goodness of a company looking out for its investors or voting with its precious reserves about the long-term view of the value of their stock, I am just saying that that's not how Apple has historically rolled, and given how much R&D and M&A spend I could see them making in the year ahead, it's not unreasonable that that would be their continued position.



    One simple scenario is Apple deciding to go big into the media space, and buying a Comcast-sized entity ($45B market cap), as a way of gaining distribution and footprint to materially re-shape the media landscape.



    Unlikely, sure? Out of the question, no, given where I think they are headed in coming year, relative to Tablet and Apple TV.
  • digitalclipsdigitalclips Posts: 15,025member
    Quote:
    Originally Posted by hypermark View Post


    One simple scenario is Apple deciding to go big into the media space, and buying a Comcast-sized entity ($45B market cap), as a way of gaining distribution and footprint to materially re-shape the media landscape.



    Unlikely, sure? Out of the question, no, given where I think they are headed in coming year, relative to Tablet and Apple TV.



    Why would Apple want a middle man like Comcast? Their strategy, it seems to me, is to offer content from creators i.e. the networks, directly via iTunes as on demand programming. The only value Comcast would have would their stake in NBC but I suspect Apple might not want to get involved in owning a content provider.
  • justflybobjustflybob Posts: 1,337member
    Quote:
    Originally Posted by hypermark View Post


    To be clear, I am not specifically disagreeing with the goodness of a company looking out for its investors or voting with its precious reserves about the long-term view of the value of their stock, I am just saying that that's not how Apple has historically rolled, and given how much R&D and M&A spend I could see them making in the year ahead, it's not unreasonable that that would be their continued position.



    One simple scenario is Apple deciding to go big into the media space, and buying a Comcast-sized entity ($45B market cap), as a way of gaining distribution and footprint to materially re-shape the media landscape.



    Unlikely, sure? Out of the question, no, given where I think they are headed in coming year, relative to Tablet and Apple TV.



    I am not disagreeing with you, but when you say "how Apple historically rolled" it made me think of a really historical answer.



    A: Probably their own, and most definitely NOT in the garage of Steve's parents house.
  • hypermarkhypermark Posts: 152member
    Quote:
    Originally Posted by digitalclips View Post


    Why would Apple want a middle man like Comcast? Their strategy, it seems to me, is to offer content from creators i.e. the networks, directly via iTunes as on demand programming. The only value Comcast would have would their stake in NBC but I suspect Apple might not want to get involved in owning a content provider.



    It's absolutely a fair push-back, and I am not sure whether I believe that's a 1+1=3 either, but the argument is that Apple needs a surplus of content to make their media ambitions a success, and there is a much great entanglement of TV and film libraries than with Music (i.e., Apple could have a harder time securing a big enough library to truly own TV anywhere).



    Comcast has the leverage of existing deals in place, has a ton of media assets and a large subscriber base that could use some loving in terms of better technology, multi-device integration and the like.



    Plus, based upon the recent acquisition of NBC Universal by them (Comcast), it's clear that they have a natural chokepoint with both media cos and subscribers, something that Apple groks relative to fortifying their own end to end story across device, desktop, living room, retail and beyond.



    In other words, Apple is the one company that might see themselves as able to "fix" the broadcast/pay TV malaise in the same way I believe they are immediately going to pursue print media starting Wednesday.
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