or Connect
AppleInsider › Forums › Investors › AAPL Investors › Notes of interest from Apple's Q2 2012 conference call
New Posts  All Forums:Forum Nav:

Notes of interest from Apple's Q2 2012 conference call

post #1 of 17
Thread Starter 
Apple got off to a record start to the year in 2012, with sales of 35.1 million iPhones propelling the company to its best-ever second fiscal quarter. Following the release of its second-quarter results, Apple executives participated in a conference call, and notes of interest follow.

Profits grew 94 percent to start 2012, compared to the same three-month span in 2011, to 11.6 billion, or $12.30 per diluted share, on quarterly revenue of $39.19 billion. In addition to the iPhone, it was also a record quarter for the iPad and Mac.

Following Tuesday's earnings release, Apple executives held a conference call with analysts and members of the media to discuss the results. Participating in the call were Apple Chief Executive Tim Cook and Chief Financial Officer Peter Oppenheimer.

Highlights
  • Q2 2012 was second only to the all-time revenue record Apple reported in the holiday quarter of 2011.
  • Greater China saw iPhone sales 5 times the level of the year-ago quarter.
  • Apple sold more than two iPads to every one Mac to education institutions in the March quarter. Education sales were helped especially by the $399 iPad 2.
  • Supply constraints continue with the new iPad, but Cook believes Apple will be able to supply "a significant number of iPads" in the June quarter.
  • More than 365 million iOS devices have been sold to date.
  • 67 million iPads have been sold through the last quarter. It took Apple 24 years to reach that level with the Mac.
  • iOS App Store now has more than 600,000 applications, with more than 200,000 specifically for iPad.


Apple's iPhone business

Oppenheimer highlighted the success the iPhone has seen in the enterprise. Said iOS in-house development has improved productivity.

Most Fortune 500 companies that use the iPhone are also app developers.

Cook said Apple is very happy with pricing of the iPhone 3GS for free and iPhone 4 for $99. "Both of them contributed to our ability to achieve 35 million in sales, which is our second-highest quarter of all time."

On carrier subsidies, Cook said Apple is focused on making "the very best smartphone in the world." He thinks that most carriers want to provide what their customers want to buy.

"The most important thing by far is for Apple to continue making products that customers want," Cook said. "We are deeply committed to doing this."

He said that it's important to remember the carrier subsidy is not large relative to the sum of payments over a 24-month contract period. Any differences between the iPhone and other phones is an "even smaller" difference.

He said carriers have told him that the churn from iPhone customers is the lowest of any phone that they sell. "That has a significant direct financial benefit to the carrier," Cook said.

Apple's design team also work very hard to be efficient with data. Cook believes that the iPhone is better with data efficiency than other competing smartphones.

Cook also thinks the iPhone is the best smartphone at enticing users to switch from a traditional mobile phone to a smartphone. "There's a win, win, win there," he said, noting that carriers, the customer and Apple are all happy with the results.

On patent litigation, Cook said he hates it, but "we just want people to invent their own stuff." He said he would rather settle than battle, but it's also important that "Apple not become the inventor for the whole world."

Oppenheimer believes they will see a sequential decline in iPhone sales in the coming quarter, though there will be year over year growth.

Apple's iPad business

iPad sales grew 151 percent from the year-ago quarter

New iPad is now available in over 40 countries, and Apple saw "very strong sales," Oppenheimer said.

Recognized revenues from iPad and iPad accessories was $6.6 billion, an increase of 132 percent.

Hopeful that iPad will be a popular choice heading into K-12 buying season.

U.S. Air Force Air Mobility command deploying "thousands of iPads" to serve as electronic flight bags.

Apple saw a sequential decline in price of iPad of 7 percent in March, suggesting the new $399 entry-level model got off to a strong start.

"We're just learning about the elasticity of demand at the $399 price point," Oppenheimer said. "It's doing well." But, he added, that the new iPad is "on fire," and Apple is selling them as fast as they can make them.

On the $399 iPad 2, Cook said he's "thrilled with the results," but cautioned it's "only been a few weeks."

"This unlocked some education demand that is probably a more price-sensitive customer," Cook said. Other countries also saw a "marked change in demand" at the lower price point.

"The new iPad was supply constrained last quarter for the first three weeks or so that it was shipping, and it is still constrained," Cook said.

"The absolute sales of iPad 2, at least in the early going, is very exciting," Cook said.

On merging the iPad and Mac: "Anything can be forced to converge," Cook said, but "products are about trade-offs." "You can converge a toaster and a refrigerator, but those things are probably not going to be pleasing to the user."

The iPad is "sort of everywhere you look now," and applications are "so easy to make very meaningful for someone," Cook said. He expects that as the ecosystem gets better and the products improve, "the limit here is nowhere in sight."

94 percent of the Fortune 500 are testing or deploying iPads, and 74 percent of the global 500 are doing so as well. Now they are focusing on penetrations within these accounts.

Apple's Mac business

Macs grew 7 percent in the March quarter, outpacing the total PC market of 2 percent.

Cook said the March quarter was a "tough compare" to 2011, when Apple introduced new portable models. He also added that there were 14 weeks in the December quarter, which skewed those results.

"I think there was some cannibalization from iPad, and the market is slow," he said, but the market is a "much, much larger factor."

"There is a very good market for the MacBook Air, and we continue to innovate in that product," Cook said. But he said it "appeals to someone who has a little bit different requirements" than those who use the iPad.

On converging the Mac and the iPad, Cook said: "We're not going to that party. But others might."

Apple's App Stores, iTunes and iCloud

Oppenheimer said there are over 125 million users of iCloud to date. "They're building up documents and music and other things that they want to store. I think storage growth will come over time."

"Our real desire here was not about selling more storage? We just really wanted to increase the customer delight," Oppenheimer said.

On iTunes content, Oppenheimer said Apple is "thrilled" with the rate they're adding content into iTunes. "This is something that we have to do country by country, so it takes a bit of time."

Apple has the largest catalogue of songs and movies available anywhere, with 28 million songs and revenue of almost $1.9 billion in the March quarter.

Apple's iPod business

iPod touch still accounts for more than half of all iPods sold.

Oppenheimer said that iPod sales during the quarter exceeded Apple's expectations.

Apple's retail business

Revenue in retail was $4.4 billion, second only to record revenue in the December quarter.

826,000 Macs sold in the quarter, compared to 790,000 a year ago. About half were to customers who never owned a Mac before.

Average revenue per store was $12.2 million, an increase of 22 percent from a year ago.

85 million visitors at Apple stores in the quarter, compared with 71 million a year ago. An average of 18,000 visitors per store, per week.

On the store-within-a-store concept at Walmart, Cook said Apple is "trying some things." He doesn't expect Apple will be in 10,000 Walmarts.

Apple's regional business segments

Revenue in China for the quarter $7.39 billion. First half of fiscal 2012 revenue is $12.4 billion. Cook said it's "mind boggling that we could do this well."

China has very strong demand for the new iPhone 4S and the iPad 2. The new iPad has not yet shipped in mainland China, but it is shipping in Hong Kong.

"The halo that both of these products have produced for the Mac is also incredible." The Mac was up over 60 percent year over year in China during the quarter.

"China has an enormous number of people moving into higher income groups ? middle class, if you will," Cook said. "And this is creating a demand for goods ? not just Apple's, but other companies' goods as well." He said Apple is doing "everything they can" to understand the market and make the most out of the China market.

In Spain, Vodafone has changed policy on subsidies. Cook said that Spain has been "weak" for Apple. Revenues grew there last quarter, but "materially less" than in Europe or worldwide. But he said that had nothing to do with subsidies, and is related to a "terrible economic situation" in Spain.

Cook explained that the carriers still have subsidies for existing customers. "They pulled subsidies on new customers. And so it wasn't a pull of all subsidies." He wouldn't use the situation as a "proxy for the world."
post #2 of 17

Average revenue per store was $12.2 million, an increase of 22 percent from a year ago.

 

WOW !!

post #3 of 17

Go, Apple, go!

Proud AAPL stock owner.

 

GOA

Reply

Proud AAPL stock owner.

 

GOA

Reply
post #4 of 17
Totally amazing! I can come out of hiding now, several folks that bought AAPL on my advice not long ago were looking for me.
Been using Apple since Apple ][ - Long on AAPL so biased
nMac Pro 6 Core, MacBookPro i7, MacBookPro i5, iPhones 5 and 5s, iPad Air, 2013 Mac mini, SE30, IIFx, Towers; G4 & G3.
Reply
Been using Apple since Apple ][ - Long on AAPL so biased
nMac Pro 6 Core, MacBookPro i7, MacBookPro i5, iPhones 5 and 5s, iPad Air, 2013 Mac mini, SE30, IIFx, Towers; G4 & G3.
Reply
post #5 of 17

LOL, I love the song they played at the end of the conference call...

 

"It's so nice to be happy, sha la la la..."

post #6 of 17

 

 

Quote:
On converging the Mac and the iPad, Cook said: "We're not going to that party. But others might."

 

 

I got an infraction earlier today for suggesting that OSX was on the way to being replaced by iOS.

 

And here is Tim, answering a public question about it.

 

I don't think I was so far off-base.

post #7 of 17

Here's to the GLOBAL ACCEPTANCE, RELIANCE ON AND DOMINANCE of APPLE PRODUCTS--SJ you are a genius!

Quote:
My job is NOT to be easy on people. My job is to take these great people we have and to push them and make them even BETTER.

--Steve Jobs on being a CEO
Reply
Quote:
My job is NOT to be easy on people. My job is to take these great people we have and to push them and make them even BETTER.

--Steve Jobs on being a CEO
Reply
post #8 of 17
Quote:
Originally Posted by digitalclips View Post

Totally amazing! I can come out of hiding now, several folks that bought AAPL on my advice not long ago were looking for me.

 

Mine is just the opposite. I've had friends ridiculing me for not selling. I told them that had I more money, I'd be buying more right now. Sucks to be them. I will certainly be hunting them down like animals tomorrow. :)
post #9 of 17

In case people were wondering, that was their chance to buy Apple during a price dip. That chance is gone.

post #10 of 17

 

Quote:
Originally Posted by I am a Zither Zather Zuzz View Post

 

 

 

 

I got an infraction earlier today for suggesting that OSX was on the way to being replaced by iOS.

 

And here is Tim, answering a public question about it.

 

I don't think I was so far off-base.

 

Maybe not, but you were wrong. As usual.

"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
Reply
"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
Reply
post #11 of 17

Apple sells almost three times more iPads than Macs. If they just stopped making Macs and put that production capacity towards iPads they wouldn't be backlogged. They could earn money faster. They could also make a super iPad with a file system, a memory card slot, and a Thunderbolt port to connect it to everything.

 

If Apple wants to double its income it should create an audio codec and format that totally captures the complete musical experience of analog recordings. The file sizes would be huge, but that would mean that everybody would upgrade their music catalogs and need to purchase many new external hard drives just to keep their tunes. It would make the iTunes store seem like it was brand new and everybody needed what it offered, except this time there would be millions of already happy customers familiar with making purchases on iTunes.

 

post #12 of 17

Thanks, TIm & Company. I feel sane again. I was beginning to wonder... Apple has been killing it on all fronts and pundits were coming up with all kinds specious reasons why Apple was DOOMED. 

 

I think people are so used to playing the marker psych-out game that they don't know what to do when a legit powerhouse company like Apple comes along. Normally, the hype exceeds the reality, but Apple has been so successful that the hype actually trails reality. In our hype-fueled world, a hot company that isn't just hot air is inconceivable. The numbers don't lie, people.

 

Today, the naysayers were pulling out all the stops. My favorite was Trip Chowdhry, who is either hallucinating or flat making things up. A few choice quotes:

 

 

 

Quote:
...with the exception of a handful of international markets, I would say the majority of Apple stores in USA look old, filthy and small versus what Microsoft stores are versus the new stores that Sony (NYSE: SNE) is making.
 

 

Filthy?

 

 

 

Quote:
The iPad 1 and iPad 2 were dramatically different, so iPad 2 became very successful," Chowdhry noted. "The form factor from iPad 2 and iPad 3 is almost the same. To generate revenue further, your design has to change.

http://www.benzinga.com/analyst-ratings/analyst-color/12/04/2524219/apple-needs-a-supernatural-being-to-replace-steve-jobs

 

iPad 1 and 2 were dramatically different?

 

 

post #13 of 17
Quote:
Originally Posted by I am a Zither Zather Zuzz View Post

I got an infraction earlier today for suggesting that OSX was on the way to being replaced by iOS.

And here is Tim, answering a public question about it.

I don't think I was so far off-base.

1) It seems doubtful you got an infraction for simply stating an opinion.

2) You don't think you are "off-base" with Tim Cook stating the exact opposite of your comment?



Quote:
Originally Posted by jakeb View Post

iPad 1 and 2 were dramatically different?
For a tablet? Absolutely! The iPad 1 has a curved back and the iPad 2's back is flat. That curve makes a huge difference, and that's before you even consider any technical differences, like the magnets that allow the SmartCover to be used.

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

Reply

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

Reply
post #14 of 17

 

Quote:
Originally Posted by Smallwheels View Post

Apple sells almost three times more iPads than Macs. If they just stopped making Macs and put that production capacity towards iPads they wouldn't be backlogged. They could earn money faster. They could also make a super iPad with a file system, a memory card slot, and a Thunderbolt port to connect it to everything.

 

If Apple wants to double its income it should create an audio codec and format that totally captures the complete musical experience of analog recordings. The file sizes would be huge, but that would mean that everybody would upgrade their music catalogs and need to purchase many new external hard drives just to keep their tunes. It would make the iTunes store seem like it was brand new and everybody needed what it offered, except this time there would be millions of already happy customers familiar with making purchases on iTunes.

 

 

No they should not stop making Macs.    Many of us still need to do real work using complex applications on a large monitor (or more than one monitor) and need to type efficiently on a real keyboard.     The iPad is an amazing device and is fantastic for people who mainly consume content.   But it does not replace the sophisticated use of a computer.   

 

Macs and iPads are made on different production lines with different parts.  One does not impact the other.     Why do people think that the device that they favor is the only one the company should make?      Apple has many different kinds of users and they need to make many different types of devices.      Should they stop making iPods because iPod functionality is built into every iPhone?    Of course not.   

 

Apple doesn't make a lot of profit from iTunes and only a tiny percentage of iTunes users care enough about audio quality to start using a new format that would greatly reduce the number of songs they could carry on their iPods or iPhones because the file sizes would be so much larger.      And no digital format, not even uncompressed 96/24, would sound like analog.   I'm not claiming that analog is better, but it is different.    And besides that, Apple devices have amplifiers that are about 1/4 watt at best.    The vast majority of people listen on cheap, cruddy earphones.    When they plug the devices into those little portable amplifier/speaker combinations, the quality is quite poor, even on the expensive boxes, like the Zeppelin.    Few people today have quality "hi-fi" components at home.    High-resolution formats such as SACD and DVD-Audio have failed.   No one is interested in audio only Blu-ray.    I happen to be an ex-recording engineer and care very much about audio quality, but the mass market most certainly does not.    I certainly have no objections should Apple wish to support higher-resolution formats, but it will always be a niche market.   

post #15 of 17

thank god your not running the company..the reason they macs as well is because want macs and not everyone wants a ipad...plus it wont help fix the display production issue.

post #16 of 17

Now just wait for the negative news story that has followed all good news from Apple lately. Someone has to keep that stock price in check. ;-)  Seriously though, Apple is on an incredible roll.

post #17 of 17

 

 

People in the US really do underestimate the market potential of China and the rest of the world in general. So many here tend to think outside of the US is all third world or something of that sort. I think we saw this in action with the investors who dumped AAPL over the past few weeks. Apple is still only scratching the surface in China (China Mobile still to come) and has barely gotten started in India and Brazil.

These so-called analysts as well as the investors will have to do a lot more digging than just looking at AT&T and Verizon numbers. It won't be long before Apple's international sales numbers reach 70% and it may eventually get to as much as 80%. Ignore the rest of the world at your own risk. The US population only makes up 5% of the world's population and the remainder of the world is getting richer by the day - especially the big three of China, India and Brazil.

Why are analysts and investors only focusing on the past? They look at Apple's performance of the past, say, 5 years and say, "Oh, that's it. It can't possibly go on like this any longer. The market (i.e., US) is saturated. What goes up must come down." Well, the problem is that they just have no idea on when it will stop going up and it sure won't be soon.

New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: AAPL Investors
AppleInsider › Forums › Investors › AAPL Investors › Notes of interest from Apple's Q2 2012 conference call