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Notes of interest from Apple's Q2 2013 conference call

post #1 of 15
Thread Starter 
Increasing product sales were offset by reduced margins in Apple's second quarter of fiscal 2013, as the company reported its first year over year profit decline in a decade. Executives from the company participated in a conference call on Tuesday to discuss the results, and notes of interest follow.

Execs


Participating in Tuesday's call were Apple Chief Executive Tim Cook and Chief Financial Officer Peter Oppenheimer.

Highlights


  • Cook said comparisons to 2012 are difficult, because last year was a particularly strong year, and margins are lower this year because of the iPhone 5 and iPad mini.
  • Cook called the decline in Apple's stock price over the last few quarters "very frustrating to all of us," but said the company will continue focusing on making the best products it can.
  • Apple is the same company that brought the world the iPhone and iPad, Cook said, and there are "a lot more surprises in the works."
  • Apple plans to use its cash pile mostly for share repurchases. "We concluded that investing in Apple was the best," Cook said.
  • More iPad mini units were sold in the March quarter than in the December quarter with expanded inventory. Most of the devices sold were to customers who did not previously own an iPad.


Apple's $100B reinvestment and dividend boost



Apple plans to spend $100 billion through the end of calendar 2015 on share repurchases and a dividend increase to $3.05.

Regarding the dividend, Oppenheimer said the Apple Board of Directors will reassess the amount on an annual basis.

The bulk of Apple's $100 billion efforts will go into share repurchases, which Oppenheimer said reflects Apple's confidence in its business. He also said it's the largest share repurchase in corporate history.

Apple plans to pay for these efforts with domestic cash, including existing reserves, future cash collected, and money that will be borrowed.

Apple has more than $144 billion in cash and reserves, but most of it is held overseas. Repatriating that cash would be too costly, Oppenheimer said, which is why Apple will instead borrow.

Shrinking margins



iPhone average selling prices were down sequentially about $28. This was driven primarily by mix, as the iPhone 4 proved to be a popular option.

"As you get farther from a previous product launch, there's a general lower mix than where it starts," Cook said. "All things being equal, you would expect to see that with most of our products."

Oppenheimer said Apple is willing to trade off short-term losses in profits for long-term success. He noted that when the first iPod was introduced, it was one of Apple's lowest-margin products before it and iTunes ended up accounting for the bulk of Apple's revenue ? a shift that helped drive the company's interest in developing the iPhone.

Apple's iPad business



iPad sales saw a big year over year boost in the quarter, growing from 11.8 million in 2012 to 19.5 million in 2013.

The latest IDC data suggests that the tablet market shrunk 30 percent from December. Apple sequentially declined 15 percent, suggesting Apple had a pick up in market share after the holidays.

Cook highlighted the fact that Apple's iPad has 350,000 applications available, which puts it well ahead of the competition.

Apple's iPhone business



iPhone sales were 37.4 million, an increase from the 35.1 million iPhones Apple sold a year ago.

A year ago, Apple grew channel inventory in the second quarter because it was catching up with iPhone 4S demand.

The market grew by 30 percent, Apple grew less than that. "We do want to grow faster," Cook said. "We don't however, view it as the only measure of our health."

He noted that Apple has the highest customer satisfaction by far among smartphones. Apple also has the highest customer loyalty and repurchase rates, as well as strong ecosystem commerce that attracts developers.

"We've made the iPhone 4 even more affordable, which has made it more attractive to first-time buyers," Cook said, highlighting the strength of Apple in the lower-end of the premium smartphone market. "The phone for the price point that we're offering is an incredible value for people that allows them to get into the ecosystem with a really, really phenomenal product."
post #2 of 15

Apple is DOOMED !!!!  /s
 

post #3 of 15
It may be naive of me to say this, but I think Cook should just say he thinks Wall Street is wrong about Apple and its future. Why should Cook be "frustrated."
This is a buying opportunity for Apple. I own Apple stock and I hope Cook is buying tens of billions of dollars worth of stock at $400.
post #4 of 15
"a lot more surprises in the works."

there had better be and not just incremental updates
post #5 of 15
Quote:
Originally Posted by icoco3 View Post

Apple is DOOMED !!!!  /s
 

/z

post #6 of 15

Apple is frustrated because its executives, and even employees, have lost a tremendous amount of wealth while negatively impacts morale.  It also tarnishes Apple's reputation to where the conversation has moved from how awesome Apple's devices are to people stating the many reasons why Apple sucks - which in the end impacts sales and product opinion.  

post #7 of 15
Quote:
Originally Posted by ash471 View Post

It may be naive of me to say this, but I think Cook should just say he thinks Wall Street is wrong about Apple and its future. Why should Cook be "frustrated."
This is a buying opportunity for Apple. I own Apple stock and I hope Cook is buying tens of billions of dollars worth of stock at $400.

Buybacks of this (unprecedented) magnitude have to be spaced out. As such, they cannot choose the price precisely. As we speak, $AAPL is no longer $400 each.

post #8 of 15
All in all not too bad then - the quarterly financial results that is. New products it seems - only coming out in the fall though, I would of preferred summer announcements. Oh well...maybe something still will?
Edited by 1983 - 4/23/13 at 2:48pm
post #9 of 15
I hope they were buying all day today, since there would be no conflict of interest and the board would have already voted at least last week. I haven't had time to dig into all the information. I wonder what the current share count for Apple is and where it will be after the company buys back more shares in the low 400's?
post #10 of 15
Quote:
Originally Posted by Brian Ward View Post

Apple is frustrated because its executives, and even employees, have lost a tremendous amount of wealth while negatively impacts morale.  It also tarnishes Apple's reputation to where the conversation has moved from how awesome Apple's devices are to people stating the many reasons why Apple sucks - which in the end impacts sales and product opinion.  

I own Apple stock, I bought at $235 and $335.  It doesn't make me happy to see it drop from $700 to $400.  However, people are implicating Cook and Apple.  Wall Street is messed in the head and this stock is ridiculously cheap.  

 

It's bullshit to say Apple products are crap.  The earnings report says Apple improved iPad sales from 11M to 19M y/y.  That is pretty strong evidence that the Cook naysayers are wrong.  Apple naysayers are just like religious fanatics.  They look at the evidence and then provide an interpretation that is the exact opposite of what any rational person would think. Apple sells record numbers of devices and the market thinks their products are crap?  huh?

 

Even Mac products, which underperformed from last year out performed the broader PC market. More importantly, Apple didn't even reduce its prices on its products.  It simply had a shift in the product categories that sold better last quarter (i.e., a shift to iPad mini).  

 

This company is in great shape.  They don't need a stupid new product.  They need to keep focusing on making the iPad the number one computer in the world. 


Edited by ash471 - 4/23/13 at 3:34pm
post #11 of 15
Quote:
Originally Posted by stelligent View Post

Buybacks of this (unprecedented) magnitude have to be spaced out. As such, they cannot choose the price precisely. As we speak, $AAPL is no longer $400 each.

I know....I'm banking on the fact that wall street is going to poo poo Cook's strategy and the bounce tomorrow will be short lived and Cook will be buying shares back at under $400 for the foreseeable future.  I hold my stock for years, so I couldn't give a shit if the stock drops to $200 in the next 6 months. The way I see it, Apple is buying stock "on sale."  

 

...just my wishful thinking.

post #12 of 15
The BEST MARCH quarter which followed the BEST DECEMBER quarter.....

Translation....best two back to back quarters in APPLE'S HISTORY

Wall Street translation.....Profits lower. Profits fall for first time in ten years. Margins lower. Next quarter forecast weak ..

I give up .....time to buy Whirlpool stock..it's up over 60% in past six months. P / E 150% higher thal Apple, lots of debt, no new washing machines, no revenue growth but at 52 high.
post #13 of 15
Quote:
Originally Posted by ash471 View Post

I own Apple stock, I bought at $235 and $335.  It doesn't make me happy to see it drop from $700 to $400.  However, people are implicating Cook and Apple.  Wall Street is messed in the head and this stock is ridiculously cheap.  

 

It's bullshit to say Apple products are crap.  The earnings report says Apple improved iPad sales from 11M to 19M y/y.  That is pretty strong evidence that the Cook naysayers are wrong.  Apple naysayers are just like religious fanatics.  They look at the evidence and then provide an interpretation that is the exact opposite of what any rational person would think. Apple sells record numbers of devices and the market thinks their products are crap?  huh?

 

Even Mac products, which underperformed from last year out performed the broader PC market. More importantly, Apple didn't even reduce its prices on its products.  It simply had a shift in the product categories that sold better last quarter (i.e., a shift to iPad mini).  

 

This company is in great shape.  They don't need a stupid new product.  They need to keep focusing on making the iPad the number one computer in the world. 

I totally agree with the part about "focusing on making the iPad the number one computer in the world." 

post #14 of 15
I find it humorous that analysts blast Apple's "dismal" 38% margin but hail Samsung's 17% and Netflix's... well, pennies. Um, $9bil in profits in one quarter. Thanks.
post #15 of 15
Quote:
Originally Posted by ash471 View Post

I own Apple stock, I bought at $235 and $335.  It doesn't make me happy to see it drop from $700 to $400.  However, people are implicating Cook and Apple.  Wall Street is messed in the head and this stock is ridiculously cheap.  

It's bullshit to say Apple products are crap.  The earnings report says Apple improved iPad sales from 11M to 19M y/y.  That is pretty strong evidence that the Cook naysayers are wrong.  Apple naysayers are just like religious fanatics.  They look at the evidence and then provide an interpretation that is the exact opposite of what any rational person would think. Apple sells record numbers of devices and the market thinks their products are crap?  huh?


Even Mac products, which underperformed from last year out performed the broader PC market. More importantly, Apple didn't even reduce its prices on its products.  It simply had a shift in the product categories that sold better last quarter (i.e., a shift to iPad mini).  


This company is in great shape.  They don't need a stupid new product.  They need to keep focusing on making the iPad the number one computer in the world. 
Boom. You hit the nail on the head. Looking forward, however, it will be interesting to see how Apple responds to Counterfeit Apple... er, Samsung's competition. iPads, however look unstoppable and are likely to begin saturating the enterprise PC market. I know of two large companies who have plans to replace laptops, for some end users, with iPads. I'm watching that space and developing economies for Apple growth.
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