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Notes of interest from Apple's Q2 2010 conference call

post #1 of 60
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Apple blew out Wall Street expectations yet again Tuesday when it announced sales of 8.75 million iPhones and 2.94 million Macs last quarter, pushing the company to a 90 percent increase in profit. Following the news, Apple executives conducted a financial conference call with analysts and the press, and notes of interest follow.

The second quarter of Apple's 2010 fiscal year produced $3.33 earnings per share, well above Wall Street's expectations of $2.45. The company posted revenue of $13.50 billion and net quarterly profit of $3.07 billion.

On Tuesday's call were Apple Chief Financial Officer Peter Oppenheimer and Chief Operating Officer Tim Cook.

Apple's regional business segments

CPU units in America alone were up 20 percent year-over-year, representing a 26 percent increase in revenue. Worldwide Mac sales were up 3 percent, increasing revenue by 49 percent. The worldwide leader in growth was Asia Pacific, where Apple shipped 67 percent more Macs for an 184 percent revenue increase.

China: Added another 800 points of distribution. Through the first half of the fiscal year, revenue was almost $1.3 billion. Up over 200 percent year over year.

Will open two stores in Shanghai this summer, target having 25 stores open in China by the end of calendar 2011.

Apple's Mac business

$1.7 billion in Mac revenue came from desktop sales, while a majority -- $2.8 billion -- came from sales of MacBook portables. In all, CPUs accounted for $4.5 billion in revenue, up from $3 billion a year ago.

Desktop sales grew 40 percent from the second quarter of 2009, and saw a 45 percent increase in revenue. Portable notebook sales grew 28 percent year-over-year, good for a 17 percent rise in revenue.

Best March quarter for Mac sales ever

Beat IDC's estimate of 24 percent. Strong, double-digit growth in desktop and portable categories. Last week they improved the MacBook Pro lineup even more.

Apple's iPhone and Apple TV businesses

The 8.75 million iPhones sold in the second financial quarter represents 131 percent growth over the same frame a year ago. Total iPhone revenue for the quarter was $5.6 billion, well up from the $2.4 billion a year ago.

Best quarter for iPhone sales ever

131 percent year-over-year growth over the previous March quarter's results, and more than 3 times the IDC estimate of 41 percent growth of overall smartphone growth.

Average selling price of iPhone continues to be about $600.

Customers ranked iPhone first in JD Power study again in 2010.

Developer response to iPhone OS 4 has been "very positive." Customers will enjoy the over 100 new features including multitasking and folders.

Are on track to begin shipping the 3G version of the iPad on April 30 and 9 additional countries at the end of May.

Strong performance from new and existing carriers carried iPhone to record quarter. "It was widespread and just generally terrific results," Cook said.

DRAM pricing is constrained, which will lead to higher prices.

iAd is Apple "putting its toes in the water," Oppenheimer said. Don't expect much from Apple this year, but they expect to learn a lot in 2010.

Both additions and existing carriers were important to growth. Added eight carriers. Out of the 151 carriers at the country level, "it's a good number but not a significant number," Cook said.

Three main countries where Apple has a contractual exclusive relationship: U.S., Germany and Spain. A few smaller countries have exclusive or co-exclusive, but those three are the major ones. Over the past year they've moved a number of markets to non-exclusive. In each case they've seen unit growth accelerate and market share improve. "That's our learning so far, that's the results that we've seen so far. We think very carefully about each of these at the country level to conclude what's in our best interest," Cook said.

Apple drives iPhone demand with product innovation. New software, new hardware, new products, new distribution points, new carriers and geographic expansion.

Cook: Smartphone category is a "great" market to be in. High growth rates and revenue. Numbers were even better outside the U.S. than they were inside the U.S.

"We do everything we can to try to get the best deal possible for the consumer." Regarding lowering monthly rates. $99 iPhone 3G mix surprised, because many people opted for the higher-priced iPhone 3GS.

"There are other things that people really want, like an extremely innovative product and all of the apps and the ecosystem and the great OS and the incredible hardware that we've got. I think it (monthly price) is just one of the factors."

Apple TV: "The units were up for the quarter 34 percent year over year, but the absolute number of units are small, and we still classify the product as a hobby for the company."

The Mac competes in a market of 300 million units a year. The iPhone competes in a market of 1.2 billion phones a year. iPod competes in a market of 100 million units a year. "These are enormous size markets," Cook said. Apple TV market is not nearly as large. Don't want anyone to get the "wrong impression."

"A number of us love the product, use the product, and we continue to think there's something interesting there and we continue to invest in it."

Apple's iPad business

iPad sales did not begin in the last quarter, but analysts still had questions for Apple executives about the new device.

iPad announcement had no obvious impact on the Mac or iPod sales in the March quarter. "We really don't have enough experience to come to a judgment yet," Cook said. "We're obviously thrilled with the sales of the iPad. They have far exceeded our expectations."

As for 3G vs. Wi-Fi, "It's too early to tell," Cook said. "We really need to be selling both models side by side in an unconstrained environment before we can really know what the mix will be."

No production problem, but the demand in the U.S. was stronger than predicted. "Regrettably we had to push out the international launch to be able to launch the 3G unit in the U.S. and to be able to get enough Wi-Fi units into the United States."

"It has shocked us, the level of demand, at least initially," Cook said.

iPad margins: Apple doesn't give out specifics for products, but refer to the company's gross margin. "We priced it very aggressively in order to deliver tremendous value to our customers," Cook said. "We think the market size for the iPad is very large, and we want to capitalize on our first mover advantage."

Priced it "extremely aggressively" because they think there's a huge market for it. "Certainly our initial results suggest that's the case."

No comment on iPad software upgrades and whether they plan to charge for them. Will reveal that information in the June conference call when they report first iPad sales.

Cook: "Although we announced the iPad in January, there was nothing obvious in the iPod numbers or the Mac numbers to suggest cannibalization." They don't know what the impact will be until they go forward. "We are thrilled with how the iPad is selling and the enormous response that we've received."

Vs. netbook market: "To me it's a no brainer. iPad, netbook, it's sort of 100 to zero. I can't think of a single thing the netbook does well, and iPad does so many things so very well. I'm already personally addicted to mine. I couldn't live without it."

Cook thinks the iPad is better at e-mail, browsing, listening to music, watching videos, reading books. "The larger canvas provides an artist a lot more room to do things that are very cool." Said he thinks it's a new category of device. "Certainly it's early, but we really, really like what we see right now."

"We had what we thought were high hopes, and we have exceeded those."

Accessory portfolio as it pertains to the iPad: Over 5,000 accessories for the iPhone and iPod largely work for the iPad. "We've come out with some great accessories for the iPad in the first weeks, and the developer community is rallying around it as well. Let's give it a little time and presumably some great things will happen there, just like it has for iPhone and iPod," Oppenheimer said.

iPad will be reported similarly to the iPhone. Separate iPad unit listings on its quarterly report.

"We are not focused on trying to make a lot of money on the App Store," Oppenheimer said. They run it a bit over break even, but have been pleased with the performance of App Store for new iPad owners.

Apple's iPod business

Apple earned $3.3 billion in revenue from its iPod business, based on sales of 10.89 million devices. That was a 1 percent decline from the same period in 2009, but total revenue increased by 12 percent to $1.7 billion.

About equal to 11 million a year ago. Sales of iPod touch are strong, with units growing 63 percent year over year. Strongest iPod revenue growth rate in last two years.

Share of U.S. MP3 player market remains over 70 percent, iPod is the top player and continues to gain share internationally in Australia, U.K., Canada and Japan

Sales of $1.1 billion in iTunes. Best quarter ever.

Well over 4 billion downloads of software from App Store.

Apple's retail business

Increase of 22 percent in revenue. 606,000 Macs sold, up 38 percent over last year. Half of sales continue to go to people who never owned one before.

Average of 284 stores open, average revenue per store was $5.9 million, compared to $5.5 million in the year ago quarter.

47 million visitors during the quarter, compared to 39.1 million a year ago.

607,000 in One to One program.

Will open 40 to 50 locations in 2010, including locations in London, Paris and Shanghai.

Retail stores had a "great" March quarter, Oppenheimer said. Average increase of revenue per store was up 8 percent, the best they have seen in six quarters. Same-store Mac sales were up over 20 percent. Stores are a great place for customers to come in, look at and buy the iPad.

"We are just ecstatic about the fact that roughly half of the Mac sales that occur each quarter are to people who have never owned a Mac before," Oppenheimer said.

Apple's next (Q3 2010) fiscal quarter

Apple has projected revenue between $13 billion and $13.4 billion, with earnings per share between $2.28 and $2.39. Apple earned $9.7 billion in the June quarter last year, with EPS of $2.01.

Have revised forecast of 2010 tax to 27 percent, down from 29 percent, due to higher mix of international earnings.

Expect a stronger U.S. dollar, a Mac portable transition, the beginning of the education buying season, and a future device transition.

Guidance has sequentially lower ASPs from the beginning of the education buying season. Also factored in lower iTunes, which is typical as holiday gift cards are used in the March quarter. For Mac, they expect to see a sequential increase in sales because of eduction buying season as well as recent refresh of MacBook Pro line.

Not much experience with seasonality with current distribution of carriers and countries for the iPhone.

"We feel very good about the start of iPad," Oppenheimer said.

Guidance factors in legal expenses for pending litigation.
post #2 of 60
And of course the stock plummets. No good deed goes unpunished.
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post #3 of 60
Quote:
Originally Posted by Robin Huber View Post

And of course the stock plummets. No good deed goes unpunished.

I think it hit new all time highs in after hours after this news came out..........

or maybe i should check my sarcasm detector?
post #4 of 60
It seems not everyone waited for MacBook Pro updates

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> > > My wEb SiTe < < <

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post #5 of 60
Quote:
Originally Posted by Robin Huber View Post

And of course the stock plummets. No good deed goes unpunished.

260 after hours!
From Apple ][ - to new Mac Pro I've used them all.
Long on AAPL so biased
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From Apple ][ - to new Mac Pro I've used them all.
Long on AAPL so biased
"Google doesn't sell you anything, they just sell you!"
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post #6 of 60
Quote:
Originally Posted by Robin Huber View Post

And of course the stock plummets. No good deed goes unpunished.

Buy on rumor. Sell on news. It'll be up tomorrow.

Life is too short to drink bad coffee.

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Life is too short to drink bad coffee.

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post #7 of 60
Quote:
Originally Posted by OriginalG View Post

I think it hit new all time highs in after hours after this news came out..........

or maybe i should check my sarcasm detector?

My guess is, no. A lot of people just assume that AAPL is going to drop no matter what they report. Just ain't so.
Please don't be insane.
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Please don't be insane.
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post #8 of 60
Quote:
Originally Posted by AppleInsider View Post

Apple's iPhone and Apple TV businesses

The 8.75 million iPhones sold in the second financial quarter represents 131 percent growth over the same frame a year ago. Total iPhone revenue for the quarter was $5.6 billion, well up from the $2.4 billion a year ago.

I don't see anything there about aTV.
post #9 of 60
Dooommmmmed!

Realistically, this company is a juggernaught.

One day there will only be Apple and Taco Bell.
:-D * * * * * * * * * * * * * * * *
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post #10 of 60
And I'm glad I didn't listen to guys like G3Pro who insisted the stock was going to tank when it was at $130. Did he ever come back after that or still hiding under some rock?
post #11 of 60
AAPL at $350 seems very much attainable by this year end
post #12 of 60
WOW!!! One amazing quarter, especially iPhone sales!

$300 before end of April?
post #13 of 60
Quote:
Originally Posted by aaarrrgggh View Post

$300 before end of April?

I don't know if we'll see that, but another round of iPad release with X hundred thousand sold in the first few days certainly won't hurt. The big question right now is whether the 3D iPad will be more popular than wifi or not.
post #14 of 60
Wow. I particularly liked SJ's line about there being several more great new products coming this year.

iPhone HD
iOS4
iPT

other?
iPadAlone
Wherein I ponder a future with an iPad as my primary computer...
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iPadAlone
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post #15 of 60
Quote:
Originally Posted by minderbinder View Post

I don't know if we'll see that, but another round of iPad release with X hundred thousand sold in the first few days certainly won't hurt. The big question right now is whether the 3D iPad will be more popular than wifi or not.

A 3D iPad would rule!
post #16 of 60
But no-one even mentioned the new iPhone - just the "officially" announced iPhone OS4. I wonder if the Wall Street analysts were all warned not to go there . . . .
post #17 of 60
I thought I kept hearing that iPhone sales were "stagnating" in the face of the Android onslaught. Guess not.

It doesn't seem like to much of a stretch to imagine that Apple can sell 100 million iPhone OS devices next year, on top of the likely 60 to 70 million this year. If iPad sales take off and they are in fact selling nearly as many iPod Touches as iPhones (as apparently they were doing last year) they could hit the 100 mil mark this year.

Hundreds of millions of iPhone OS devices in circulation is a pretty potent market force, whatever Android may or may not do.
They spoke of the sayings and doings of their commander, the grand duke, and told stories of his kindness and irascibility.
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They spoke of the sayings and doings of their commander, the grand duke, and told stories of his kindness and irascibility.
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post #18 of 60
Quote:
Originally Posted by minderbinder View Post

And I'm glad I didn't listen to guys like G3Pro who insisted the stock was going to tank when it was at $130. Did he ever come back after that or still hiding under some rock?

Yes, he came back to say there was ABSOLUTELY NO WAY that the new MacBook Pros would have an i7 chip.
post #19 of 60
Nice to see the expansion.
post #20 of 60
Quote:
Originally Posted by sandau View Post

Dooommmmmed!

Realistically, this company is a juggernaught.

One day there will only be Apple and Taco Bell.

Best part of that movie. Good one...
post #21 of 60
Quote:
Originally Posted by Dr Millmoss View Post

My guess is, no. A lot of people just assume that AAPL is going to drop no matter what they report. Just ain't so.

I wasn't being sarcastic. Just looked at the closing price. I didn't think that the conference call came after the market closed. My assumption was that it didn't, and the stock was down. I watch it pretty carefully as I own it.
A.k.a. AppleHead on other forums.
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A.k.a. AppleHead on other forums.
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post #22 of 60
Quote:
Originally Posted by minderbinder View Post

I don't see anything there about aTV.

Just try reading a little further...
post #23 of 60
Quote:
Originally Posted by sandau View Post

Dooommmmmed!

Realistically, this company is a juggernaught.

One day there will only be Apple and Taco Bell.

Sounds like a very gut wrenching combination.
Crying? No, I am not crying. I am sweating through my eyes.
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Crying? No, I am not crying. I am sweating through my eyes.
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post #24 of 60
Very happy for Apple's success... just wish they'd use a little money and some of their energy to clean up Apple Japan... They'd have even more success to write home about.

 

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Your = the possessive of you, as in, "Your name is Tom, right?" or "What is your name?"

 

You're = a contraction of YOU + ARE as in, "You are right" --> "You're right."

 

 

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post #25 of 60
Quote:
Originally Posted by Bergermeister View Post

Very happy for Apple's success... just wish they'd use a little money and some of their energy to clean up Apple Japan... They'd have even more success to write home about.

What is wrong with Apple Japan?
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post #26 of 60
Quote:
Originally Posted by minderbinder View Post

And I'm glad I didn't listen to guys like G3Pro who insisted the stock was going to tank when it was at $130. Did he ever come back after that or still hiding under some rock?

He comes around once in a while to continue his little jihad.

For a while he was saying it would go down to something like $85, which it did, but it certainly didn't stay there for long.
post #27 of 60
Quote:
Originally Posted by bigdaddyp View Post

What is wrong with Apple Japan?

I'll say... 200+% growth Q/Q!

(Alternately, they are using some money to improve it.)
post #28 of 60
Quote:
Originally Posted by Robin Huber View Post

I wasn't being sarcastic. Just looked at the closing price. I didn't think that the conference call came after the market closed. My assumption was that it didn't, and the stock was down. I watch it pretty carefully as I own it.

Earnings reports always come after the markets close, so today's trading did not represent a reaction to the report. Even after-hours trading was suspended for about 20 minutes when the report was released. Honestly, I so often hear about how AAPL "always goes down" after earnings announcements that I had to make the point (again) that this is hardly always true. Not meant to be at your expense.
Please don't be insane.
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Please don't be insane.
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post #29 of 60
Quote:
Originally Posted by Dr Millmoss View Post

Earnings reports always come after the markets close, so today's trading did not represent a reaction to the report. Even after-hours trading was suspended for about 20 minutes when the report was released. Honestly, I so often hear about how AAPL "always goes down" after earnings announcements that I had to make the point (again) that this is hardly always true. Not meant to be at your expense.

A few years ago, AAPL going down after a report happened more often than not, but I think that has changed. It wasn't something that always happened, but it seemed predictable.
post #30 of 60
Quote:
Originally Posted by Wonder View Post

Just try reading a little further...

Except that that wasn't there when I posted, it was added later.

Quote:
Originally Posted by JeffDM View Post

He comes around once in a while to continue his little jihad.

For a while he was saying it would go down to something like $85, which it did, but it certainly didn't stay there for long.

AND it went up to 160 before dropping. That sure got him quiet for a while.
post #31 of 60
Quote:
Originally Posted by Robin Huber View Post

I wasn't being sarcastic. Just looked at the closing price. I didn't think that the conference call came after the market closed. My assumption was that it didn't, and the stock was down. I watch it pretty carefully as I own it.

The financial conference calls always come after the market has closed.
post #32 of 60
Quote:
Originally Posted by JeffDM View Post

A few years ago, AAPL going down after a report happened more often than not, but I think that has changed. It wasn't something that always happened, but it seemed predictable.

They have to beat the Street, usually by a fair margin -- 10% or more, and have no gotchas in the small print. But that's been happening a lot lately.

Quote:
Originally Posted by cvaldes1831 View Post

The financial conference calls always come after the market has closed.

The earnings numbers are released before the conference call, but after the close of the markets.
Please don't be insane.
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Please don't be insane.
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post #33 of 60
Really bad day to be a troll...
Progress is a comfortable disease
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Progress is a comfortable disease
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post #34 of 60
I note Apple still claims to be satisfied with AT&T's progress, and repeats that the multi-carrier model is not for every market or country. Sounds like no Verizon iPhone yet. How would that work anyway? The Verizon 3G network can't support multi-tasking (talking on phone while surfing the 'net or sending email). Anyone?
post #35 of 60


Perhaps the stock dropped on the news of a guy losing next gen iPhone at a SF bar.

Sorry, that was my attempt at humor. But i did think that the lost-and-found iPhone was breath of fresh air, considering how well Apple guards its secrets.



Dan
post #36 of 60
Quote:
Originally Posted by bigdaddyp View Post

What is wrong with Apple Japan?

Sadly, lots. Just looking at figures doesn't tell the whole story; they could be better IMO. I've gone into detail elsewhere recently and some time ago. What I'd like to say here is that Japan could be a much better market for Apple than it is and there are a few things they could improve that would make a huge impact. Due to some recent moves, I wouldn't be surprised if Japan's sales drop over the next couple of quarters, but with a little effort they could have increased. We'll see; I hope I'm wrong. Right now, nobody seems to know what Apple Japan is doing nor why, which is creating a bit of anxiety here (the two resellers I've visited recently were both shocked at the changes and neither had received any real explanation from AJ, so they can't explain things to their customers, who are asking questions).
---
The thing here is, we have two systems: Apple USA runs the five Apple Stores (walk-in), Apple Japan runs the rest. I'd like to see a break-down showing the units sold for each of these. My expectation is the walk-in stores are seeing the increase. Of course, the resellers will see a decrease as Apple Japan just this month is ending sales at thousands of resellers across the country for reasons unknown to anybody. Consolidation could be a good thing in the long run as it will create sales staff who are more knowledgeable. This is not to say that the staff at some of the resellers until now haven't known their stuff; some I know blow the staff at the local Premium Reseller away. If they could also start a program whereby the Geniuses would appear at the Premium Resellers say once or twice a month that would be awesome. But, with two systems, it might be difficult to do that; I don't know the relationship between Apple US and Apple Japan.

 

Your = the possessive of you, as in, "Your name is Tom, right?" or "What is your name?"

 

You're = a contraction of YOU + ARE as in, "You are right" --> "You're right."

 

 

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Your = the possessive of you, as in, "Your name is Tom, right?" or "What is your name?"

 

You're = a contraction of YOU + ARE as in, "You are right" --> "You're right."

 

 

Reply
post #37 of 60
Quote:
Originally Posted by Robin Huber View Post

I wasn't being sarcastic. Just looked at the closing price. I didn't think that the conference call came after the market closed. My assumption was that it didn't, and the stock was down. I watch it pretty carefully as I own it.

These calls always (for all traded companies) happens after markets close.
post #38 of 60
Dear AppleInsider,

If you look at this chart, you will find that many of the 'pros' you have cited in the past for information about Apple are worse than a monkey throwing darts at a board. It's almost as bad as any tech article quoting Robert Enderle for anything. So please do us a favor in the future and refrain from quoting Shaw Wu, Richard Gardner, Kathryn Huberty, and the rest of these Wall Street know-nothings when it comes to Apple.



(Note that the people listed at the top are not professional Wall Street insiders.)
post #39 of 60
The ASP for the iphone dropped by quite a bit ($16).
post #40 of 60
Quote:
Originally Posted by digitalclips View Post

260 after hours!

Trading around the announcements has been harder to predict recently. The old run up to sell off after announcement pattern no longer seems to apply, and the after hours leap seems to have settled down to a minimal gain for now. Bizarre.... Plunge Protection Team, anyone?

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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