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Notes of interest from Apple's Q4 2010 conference call

post #1 of 64
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Apple on Monday reported another record quarter, achieving $4.46 billion in profit thanks in part to a whopping 14.1 million iPhones sold. Following the news, Apple executives conducted a financial conference call with analysts and the press, and notes of interest follow.

In addition to record-breaking iPhone sales in its fourth fiscal quarter of 2010, Apple also achieved a best for Mac sales, which hit 3.89 million, up 27 percent from a year prior. iPad sales were also 4.19 million.

It was a record quarter for Mac, iPhone and iPad sales. In all, it amounted to the company's highest revenue and earnings ever. CEO Steve Jobs, COO Tim Cook and CFO Peter Oppenheimer participated in Monday's call to discuss the results with analysts and media.

Apple's regional business segments

Sales in the Americas generated $7.2 billion in revenue. Europe accounted for $5.4 billion, while Asia Pacific was $2.7 billion.

Apple's Mac business

Most Mac sales, as usual, came from notebooks, which represented 2.6 million units. Desktops accounted for the remaining 1.2 million Mac sales.

It was the best-ever quarter for Mac sales, reaching a total of 3.89 million, exceeding the previous record of the June quarter by 400,000.

Apple's iPhone business

The iPhone continues to be the biggest money maker for Apple, accounting for $8.8 billion in revenue for the quarter on sales of 14.1 million units.

The 14.1 million units sold easily bested last quarter's sales of 8.4 million units.

Sales value of iPhones alone was about $8.6 billion, which led to an average selling price of about $610.

Strong year-over-year growth, particularly in Asia, Europe and Japan. Also began shipping China in the last day of the September quarter.

Oppenheimer said the company believes they could have sold even more iPhones if they had them available, but Apple is struggling to keep up with demand.

"Very impressed" with early results for iAd, Oppenheimer said.

"We've now passed RIM, and I don't see them catching up with us in the foreseeable future," Jobs said.

He also slammed Google's attempt to characterize iOS as "closed," versus its own "open" Android platform.

Jobs was asked by Gene Munster of Piper Jaffray about Adobe Flash. The CEO quipped back: "Flash memory? We love flash memory."

Jobs said he thinks there is room for "some number of companies to be successful" as the smartphone market continues to grow, but in the future he sees it turning into a zero-sum game.

"Right now iPhone and Android are winning that battle (for mindshare of customers)," Jobs said.

Apple's iPad business

With just two quarters on the market, the iPad is officially a major part of Apple's business. It accounted for $2.8 billion in total revenue, more than the $1.4 billion iPod hardware sales generated.

Over 65 percent of the Fortune 100 are already deploying or trying the iPad, including Procter & Gamble, Lowes, NBC Universal and Hyatt.

U.S. iPad distribution will include Walmart, Target, AT&T and Verizon stores for the holiday season.

Cumulative iOS device sales topped 120 million last month, including iOS, iPod touch and iPhone.

App Store has more than 65K game and entertainment titles, and more than 30K apps designed specifically for iPad.

Jobs slammed iPad competitors with 7-inch screens. Said that because the screen size is measured diagonally, it's only 45 percent as large as the iPad's 10-inch screen.

Jobs also revealed there are more than than 35k apps for iPad on the App Store.

"The iPad is clearly going to affect notebook computers," Jobs said. "I think the iPad proves it's not a question of if, it's a question of when."

"We haven't pushed it (the iPad) real hard in business, and it's being grabbed out of our hands," Jobs said.

"We've got a tiger by the tail here, and this is a new model of computing which we've already got tens of millions of people trained on with the iPhone, and that lends itself to lots of different aspects of life, both personal and business," he said.

On the competition, Jobs said he isn't worried. "We're not done. We're working on a lot of things for the future." He added: "We're out to win this one."

Apple's iPod business

The iPod dropped 4 percent sequentially and 11 percent year over year in unit share to 9 million units sold.

Oppenheimer said that iPod share of the U.S. market remains more than 70 percent. iPod is the top MP3 player in most countries overseas, and has seen significant overseas growth.

iTunes had revenue of more than $1B for the quarter.

The newly launched Apple TV sold a quarter-million units. "We're thrilled with that," Jobs said.

Apple's retail business

Retail sales were a record $3.5 billion for the quarter, up 75 percent year-over-year in terms of revenue. That's also an increase of 38 percent from the previous quarter's revenue.

Sold 874,000 Macs, an increase of 30 percent from a year ago. About half of Macs sold in stores were to customers who never owned a Mac before.

Opened 16 stores outside the U.S., including "spectacular" stores in Beijing, Shanghai and London, Oppenheimer.

Total of 317 stores worldwide as of the end of the quarter, with 84 of them outside of the U.S.

Average revenue per store was $11.8 million, up 52 percent from a year ago.

Apple's next (Q1 2011) fiscal quarter

For the upcoming holiday season, Apple has projected revenue of $23 billion, and expects diluted earnings per share of about $4.80. Gross margins are expected to be about 36 percent.

"We see great opportunity to continue our retail growth," Oppenheimer said of the coming fiscal year. Apple expects to open 40 to 50 stores in the next year, with more than half of them overseas.
post #2 of 64
Fantastic quarter.

So how many ipads have been sold since introduction?
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post #3 of 64
The main note of interest for me was Steve's comment:

"We still have a few surprises left for the remainder of this calendar year."
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post #4 of 64
BIGGEST NOTE FROM CALL:

Steve Jobs delivers a long, lengthy rant speaking frankly (albiet from a well written script) about a number of issues that must have been weighing on his mind.
post #5 of 64
Quote:
Originally Posted by FormerARSgm View Post

BIGGEST NOTE FROM CALL:

Steve Jobs delivers a long, lengthy rant speaking frankly (albiet from a well written script) about a number of issues that must have been weighing on his mind.

Indeed. Interesting that he spent quite a while laying into the idea of 7" tablets. If anyone's waiting for a smaller iPad from Apple, they're going to be waiting a loooooooooong time
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post #6 of 64
Steve Jobs delivers a long, lengthy rant about how 7" screen size is too small for a tablet and 10" is the right form factor.

Expect Apple to introduce a 7" iPad early next year...
post #7 of 64
"iPad will clearly affect notebook computers. It is not a matter of if, it's a matter of when."

"The more time passes, the more I am convinced that we've got a Tiger by the tail here."
post #8 of 64
Quote:
Originally Posted by bigdaddyp View Post

Fantastic quarter.

So how many ipads have been sold since introduction?

All of them.

3.27M (Q2 2010) + 4.19M (Q3 2010) = 7.46M
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Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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post #9 of 64
Steve's speech was clearly one of those "C-E-Oh-no-he-didn't!" moments. Not only did he slam RIM as yesterday's news, but threw the gauntlet down at Android. This call is the most interesting in some time.
post #10 of 64
Quote:
Originally Posted by solipsism View Post

All of them.

3.27M (Q2 2010) + 4.19M (Q3 2010) = 7.46M

People are making a big deal out of this but you cant expect record sales when the product is unavailable to buy for a walking customer.

I think next quarter is going to be much better for the ipad.
post #11 of 64
Quote:
Originally Posted by macshark View Post

Steve Jobs delivers a long, lengthy rant about how 7" screen size is too small for a tablet and 10" is the right form factor.

Expect Apple to introduce a 7" iPad early next year...

Sometimes its pretty obvious when Steve pooh-poohs an idea that they are planning to tackle it. Usually its by stating how others are struggling in that area, but the 7 iPad response didnt sound like Apple is planning to come at the 7 tablet anytime soon.
Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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post #12 of 64
Apparently that performance wasn't enough for the investment community; aapl down ~6% in after-hours trading. maybe they can get a government bail out....
post #13 of 64
Quote:
Originally Posted by macshark View Post

Steve Jobs delivers a long, lengthy rant about how 7" screen size is too small for a tablet and 10" is the right form factor.

Expect Apple to introduce a 7" iPad early next year...

Hmm... I don't think so. The smaller form factor is because the other guys can't figure out how to make a larger pad for the same money.

I do anticipate the next iPad to be lighter, possibly with FaceTime+vid cam. If Steve's going to get FaceTime integrated with Facebook, they'll need every possible device equipped for videoconferencing.

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post #14 of 64
Quote:
Originally Posted by Sevenfeet View Post

Steve's speech was clearly one of those "C-E-Oh-no-he-didn't!" moments. Not only did he slam RIM as yesterday's news, but threw the gauntlet down at Android. This call is the most interesting in some time.

How's that massive lawsuit against Google progressing?

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post #15 of 64
Quote:
Steve Jobs on the call:
- I couldn't help dropping by for our first $20+ billion quarter.
- Discussing iPhone performance. Handily beat RIMM in their last quarter. We just passed RIMM, and we don't see them catching back up. They must move beyond their comfort zone and become a software company, and we don't see them being successful at it. They have a high mountain ahead of them.
- What about Google? Apple activates 275,000 iOS devices per day, sometimes over 300,000. Unfortunately, no solid data on how many Android handsets shipped per quarter. Gartner says 10 million in June quarter, and we wait to see whether iPhone or Android won in the most recent quarter.
- Discussing Google claiming Android is "open". We find this disingenuous. Android is fragmented.
- "TwitterDeck" (probably TweetDeck) revealed that it had to contend with over 100 different versions of Android in developing its app. Compare to Apple with two different versions.
- Amazon, Vodafone, and Verizon have announced creating their own Android app stores. A mess for users and developers. Contrast with Apple's integrated App Store.
- Even if Google was right, open doesn't always win over closed. See Microsoft's "Plays for Sure" system that they were forced to scrap. Google flirted with integrated approach with Nexus One. Google's claims are a smokescreen for what is best for customers: integrated or fragmented. We believe integrated will trump fragmented every time. Users and developers will agree.
- Commenting on avalanche of tablets heading to market. Just a handful of credible entrants. Almost all use 7" screen, compared to iPad at nearly 10" screen. 7" screen is only 45% as large as iPad's screen. Hold an iPad in portrait view and draw a horizontal line halfway down. What's left is a 7" screen...too small. There are clear limits to how close elements can be on the screen before users can't touch accurately. We believe 10-inch screen is minimum necessary.
- All of these tablets are using Android, but Google is telling them it isn't ready for tablets and to wait until next year.
- Even with smaller, less-expensive screens, competitors are having a hard time matching iPad pricing. We have tons of experience in design...we've designed everything on ours. The 7-inch tablets will be dead on arrival. Their manufacturers will learn the painful lesson and abandon them for larger sizes next year, abandoning customers and developers. Sounds like a lot of fun.

Steve cracks me up!! AI left out the best parts...
post #16 of 64
Interesting. When asked about Apple's huge cash stockpile, Steve said he strongly believes there will be one or two strategic opportunities in the future that they will need the cash for. He is saving up to buy Microsoft!
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post #17 of 64
Quote:
Originally Posted by macshark View Post

Steve Jobs delivers a long, lengthy rant about how 7" screen size is too small for a tablet and 10" is the right form factor.

Expect Apple to introduce a 7" iPad early next year...

Or at least a 10" one without the stupid side bezels so someone can actually type on it.

Steve Jobs is far from perfect in terms of "seeing the future" of tech and has been forced to make quite a few complete turnarounds in his thinking by the realities of the market over the last few years. Thinking that the iPad is a usable portable computer for any kind of serious work is one of them.

He's just wrong about this, but I guess we are the ones that will suffer until he figures it out.
post #18 of 64
Steve basically told one analyst, through several examples, that he doesn't understand the Industries involved.

Spot on.
post #19 of 64
Quote:
Originally Posted by mdriftmeyer View Post

Steve basically told one analyst, through several examples, that he doesn't understand the Industries involved.

By "he", you mean the analyst, right?
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post #20 of 64
Quote:
Originally Posted by Postulant View Post

Steve cracks me up!! AI left out the best parts...

Thanks for these.
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post #21 of 64
Quote:
Originally Posted by Mr. H View Post

By "he", you mean the analyst, right?

would you prefer a colon in there?
post #22 of 64
Quote:
Originally Posted by solipsism View Post

Sometimes its pretty obvious when Steve pooh-poohs an idea that they are planning to tackle it. Usually its by stating how others are struggling in that area, but the 7 iPad response didnt sound like Apple is planning to come at the 7 tablet anytime soon.

Actually, no. It means their 7" prototyping series proved to be not the sweet spot. Whereas, the 10" prototyping did.
post #23 of 64
Quote:
Originally Posted by Mr. H View Post

Interesting. When asked about Apple's huge cash stockpile, Steve said he strongly believes there will be one or two strategic opportunities in the future that they will need the cash for. He is saving up to buy Microsoft!

I thought this was one of the most interesting points. He does seem to imply they're saving a lot of money and he has been eyeing some other giant company. I doubt it's Microsoft, but it looks like one day they will try to buy up someone big.

Microsoft?
Adobe?
Oracle?
HP?
RIM?
Intel?
AMD?
Qualcomm?
who knows
post #24 of 64
Quote:
Originally Posted by Prof. Peabody View Post

Or at least a 10" one without the stupid side bezels so someone can actually type on it.

Steve Jobs is far from perfect in terms of "seeing the future" of tech and has been forced to make quite a few complete turnarounds in his thinking by the realities of the market over the last few years. Thinking that the iPad is a usable portable computer for any kind of serious work is one of them.

He's just wrong about this, but I guess we are the ones that will suffer until he figures it out.

How are "we," the ones doing serious work, suffering if, obviously, we are not using iPads?
post #25 of 64
Quote:
Originally Posted by Prof. Peabody View Post

Or at least a 10" one without the stupid side bezels so someone can actually type on it.

Apparently, according to how fast they're flying off of the shelves, that doesn't seem to be much of a problem .... ok .... except for you .... and I would imagine any touch screen device NEEDS a bezel around the perimeter so you can hold it without your thumbs activating something on the screen, by mistake .... no?
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post #26 of 64
Quote:
Originally Posted by AppleInsider View Post


On the competition, Jobs said he isn't worried. "We're not done. We're working on a lot of things for the future." He added: "We're out to win this one."

Wow. He sounds like he is meaning business now!! This is the first time that I've heard Steve say that he wanted to win, not just to be the best. I love it.
post #27 of 64
Quote:
Originally Posted by djmikeo View Post

Wow. He sounds like he is meaning business now!! This is the first time that I've heard Steve say that he wanted to win, not just to be the best. I love it.

How do you define win? They are the 2nd largest company in the world and well past the 2nd largest company in their category, and likely be the largest company in the world within a year. They are likely the highest revenue gainer for their category. They will likely become the highest profit gainer in their category within the year.

If were talking about PCs (and not including the iPad) then Apple has already won here in terms of profit by a large margin. No other PC marker comes close to Apple who takes ⅓ of the entire markets profits. If you were talking Mac HW compared to Windows OS (which makes no sense at all) then they wont ever win that unless MS only installs Windows on their PCs forcing all other PC makers to do the same or if Apple destroys their PC business by licensing Mac OS.
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post #28 of 64
Quote:
Originally Posted by OriginalG View Post

I thought this was one of the most interesting points. He does seem to imply they're saving a lot of money and he has been eyeing some other giant company. I doubt it's Microsoft, but it looks like one day they will try to buy up someone big.

Microsoft?
Adobe?
Oracle?
HP?
RIM?
Intel?
AMD?
Qualcomm?
who knows

From the list:
Adbe yes
Msft maybe tomorrow
Amd maybe
And maybe they go back to producing and not just outsourcing, maybe slr or jbl or something like fox conn
post #29 of 64
Quote:
Originally Posted by djmikeo View Post

Wow. He sounds like he is meaning business now!! This is the first time that I've heard Steve say that he wanted to win, not just to be the best. I love it.

by saying he wants to win, not just be the best, Steve J is saying that he will be watching market share, not just profits. He isn't going to let the iPhone and iPad become what the mac was, a PC with a small market share but profitable. He wants both market share and profits (by keeping costs low and delivering insanely great product experiences.) With that, he is telling M$ not to bother throwing away $400 million in advertising with the W7.
post #30 of 64
Quote:
Originally Posted by solipsism View Post

How do you define win? They are the 2nd largest company in the world and well past the 2nd largest company in their category, and likely be the largest company in the world within a year. They are likely the highest revenue gainer for their category. They will likely become the highest profit gainer in their category within the year.

If were talking about PCs (and not including the iPad) then Apple has already won here in terms of profit by a large margin. No other PC marker comes close to Apple who takes ⅓ of the entire markets profits. If you were talking Mac HW compared to Windows OS (which makes no sense at all) then they wont ever win that unless MS only installs Windows on their PCs forcing all other PC makers to do the same or if Apple destroys their PC business by licensing Mac OS.

They R not the second company of the world, just the second "most valued" ...
post #31 of 64
Quote:
Originally Posted by Prof. Peabody View Post

Or at least a 10" one without the stupid side bezels so someone can actually type on it.

Steve Jobs is far from perfect in terms of "seeing the future" of tech and has been forced to make quite a few complete turnarounds in his thinking by the realities of the market over the last few years. Thinking that the iPad is a usable portable computer for any kind of serious work is one of them.

He's just wrong about this, but I guess we are the ones that will suffer until he figures it out.

The new "Teckstud" I see...
post #32 of 64
Quote:
Originally Posted by soward View Post

Apparently that performance wasn't enough for the investment community; aapl down ~6% in after-hours trading. maybe they can get a government bail out....

Just typical behavior from the idiot investing community.

Apple blew out their own guidance and also blew out the projections of every single analyst - including the most bearish ones. And the stock falls 6%.

Idiots. What did they expect - Apple to announce a cure for cancer or something?
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post #33 of 64
Quote:
Originally Posted by OriginalG View Post

I thought this was one of the most interesting points. He does seem to imply they're saving a lot of money and he has been eyeing some other giant company. I doubt it's Microsoft, but it looks like one day they will try to buy up someone big.

Microsoft?
Adobe?
Oracle?
HP?
RIM?
Intel?
AMD?
Qualcomm?
who knows

Microsoft? Are you kidding?

Adobe? Only if they go nuclear and stop producing Mac software (which is financial suicide anyway)

Oracle? Nahh, Steve and Larry are friends and Steve doesn't want Oracle's business

HP? Steve doesn't care for HP but still doesn't want their business

RIM? Please. Never buy someone on the way down.

Intel? Too expensive and fraught with anti-trust problems. And Steve doesn't want their business either.

AMD? Unnecessary. What do they have that Apple needs...I mean, really?

Qualcomm? Maybe. Apple could easily write that check. The problem is that Apple would have to be faced with being in the cell phone chip business to their competitors (you don't really want to kill $10b in annual revenue). Lots of anti-trust issues too.
post #34 of 64
I'll review my stops in the morning. I want to hold Apple but typically keep my stops at 5% of the share price so I'll need to adjust if it is down 6%. Might be a good day to sell some other stocks though and pick up some more Apple.

"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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post #35 of 64
Quote:
Originally Posted by FormerARSgm View Post

BIGGEST NOTE FROM CALL:

Steve Jobs delivers a long, lengthy rant speaking frankly (albiet from a well written script) about a number of issues that must have been weighing on his mind.

I think the biggest note from the call was when he was questioned about what they are going to do with the $50 billion USD cash they have in the bank (plus an additional $5 billion or so every quarter going forward). In response, Jobs said they think they have "one or two opportunities" that they are waiting for.

What is Apple planning to do with its $50 billion? What are the "one or two opportunities"?
post #36 of 64
Most interesting to me is that as usual after their blow out quarterly reports, Apple's stock has again plummeted - over 6% in after hours trading so far! Anyone in the financial community care to explain why?
post #37 of 64
Quote:
Originally Posted by pnoble View Post

Most interesting to me is that as usual after their blow out quarterly reports, Apple's stock has again plummeted - over 6% in after hours trading so far! Anyone in the financial community care to explain why?

The stock had risen a lot before the earnings were announced. Investors then wait and see if anything unexpected happens. In this case earnings were pretty much as expected: slightly above projections. So, sell the stock and take profits.
post #38 of 64
Quote:
Originally Posted by pnoble View Post

Most interesting to me is that as usual after their blow out quarterly reports, Apple's stock has again plummeted - over 6% in after hours trading so far! Anyone in the financial community care to explain why?

Quote:
Originally Posted by TNSF View Post

The stock had risen a lot before the earnings were announced. Investors then wait and see if anything unexpected happens. In this case earnings were pretty much as expected: slightly above projections. So, sell the stock and take profits.

Not to toot my own horn, and fully recognizing that it is very easy to sound smart after-the-fact, see http://forums.appleinsider.com/showt...55#post1735155.
post #39 of 64
Quote:
Originally Posted by TNSF View Post

I think the biggest note from the call was when he was questioned about what they are going to do with the $50 billion USD cash they have in the bank (plus an additional $5 billion or so every quarter going forward). In response, Jobs said they think they have "one or two opportunities" that they are waiting for.

What is Apple planning to do with its $50 billion? What are the "one or two opportunities"?

This is a very astute observation.

My small prediction? Major greenfield investments in the 'cloud', here in the US, so as to avoid all sorts of cross-border issues (therefore making it more expensive) combined with the purchase of a company such as Dropbox.

But that will still leave tens of billions of dollars in the bank.

Don't know after that......
post #40 of 64
Quote:
Originally Posted by AppleInsider View Post

Jobs was asked by Gene Munster of Piper Jaffray about Adobe Flash. The CEO quipped back: "Flash memory? We love flash memory."

classic!
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