Notes of interest from Apple's Q3 2014 conference call

Posted:
in AAPL Investors edited July 2014
Apple on Tuesday fell just short of Wall Street expectations for its third fiscal quarter of 2014 amid disappointing results for the iPhone and iPad, though the Mac continued to outpace the PC market. Following the announcements, executives from the company participated in a conference call with analysts and the media, and notes of interest follow.




Participating in the call were Apple Chief Executive Tim Cook, and recently-appointed Chief Financial Officer Luca Maestri. Former CFO Peter Oppenheimer announced his retirement in March.

Highlights


  • More than 20 million people watched the WWDC keynote in 2014
  • Earnings per share up 20% y/y, the highest growth rate in 7 quarters
  • iPhone sales up 55% year over year in Brazil, Russia, India, and China
  • Apple ended the quarter with $164.5 billion in cash and cash equivalents, $133.7 billion of which was offshore
  • Apple has completed 29 acquisitions since the end of FY 2013, 5 since the end of Q2 2014
  • $2 billion in commercial short paper obligations outstanding at the end of June
  • Tim Cook says Apple has sold more iPads than even they would have predicted at the beginning
  • Apple sells 2.5 iPads for every Mac in K12 education
  • Revenue growth in China up 26% year-over-year, stronger than Apple's internal predictions
  • Less than 25% of iPhones sold on a traditional subsidy plan last quarter
  • Apple "has the capability" to acquire a sizable company and manage it, if "more like [Beats or IBM] presented themselves"

Apple's iPhone business

35.2 million iPhone sales are the most ever sold in the June quarter

Apple believes new product rumors resulted in purchase delay

Tax and regulatory changes -- scheduled VAT increases and government instruction not to incentivize network switchers -- affected iPhone sales in Japan

iPhone in the enterprise: Medical device leader Metronic has developed more than 175 internal iOS apps deployed to more than 16,000 iPhones. Nestle has deployed more than 25,000 iPhones; NASA has more than 26,000

iPhone growing at 2x the overall mobile phone market in China

Apple believes iPhone trade-ins are "hugely beneficial" for the company's ecosystem, especially as it enables price-sensitive consumers in the same or different countries

Trade-in customers may be more likely to purchase another Apple product, but "difficult to quantify with certainty"

Apple "incredibly bullish" that customers on quick-upgrade plans from U.S. carriers will upgrade to new generations quickly

Apple's iPad business

Tim Cook says iPad sales met Apple expectations, but they "realize they didn't meet yours."

iPad sales were gated by reduced channel inventory, continue to be in the 4-6 week range

iPad in the enterprise: Qantas has deployed more than 15,000 iPads; Sweden has deployed more than 100,000

More than 13 million iPads sold for education globally

iPad's penetration in business is only 20%; Cook believes there is "substantial" room for improvement, which was the driver behind the IBM agreement

"The market is very bifurcated on iPad. In the BRIC countries, the iPad did extremely well. In the developed countries, like the U.S., the market is clearly weaker there," Cook said.

Apple's iTunes and App Store businesses

iTunes billings grew 25% year over year to reach an all-time high

Developers have now earned more than $20 billion on the App Store, nearly half in the last 12 months

iTunes software and services "almost doubling" every quarter in China

Apple's Mac business

Macs saw double-digit growth in K-12 education driven primarily by the MacBook Air

Mac sales up 39% in China year over year
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Comments

  • Reply 1 of 26
    tallest skiltallest skil Posts: 43,399member
    Originally Posted by AppleInsider View Post

    Tim Cook says iPad sales met Apple expectations, but they "realize they didn't meet yours."

     

    That’s the polite way of saying, “Hey, idiots. Maybe we know a little bit better than you about what will and won’t be purchased, yeah?”

  • Reply 2 of 26
    jfc1138jfc1138 Posts: 3,090member
    Quote:
    Originally Posted by Tallest Skil View Post

     

     

    That’s the polite way of saying, “Hey, idiots. Maybe we know a little bit better than you about what will and won’t be purchased, yeah?”


    LOL.

     

    And true.

     

    The one worrisome aspect of their getting a little bit dragged kicking and screaming into the larger screens.... You just know WS is going to expect the biggest one to dominate sales and it might not..

  • Reply 3 of 26
    tzeshantzeshan Posts: 1,965member
    Quote:

    Originally Posted by Tallest Skil View Post

     

     

    That’s the polite way of saying, “Hey, idiots. Maybe we know a little bit better than you about what will and won’t be purchased, yeah?”




    I know better than Tim Cook.  I have criticized the iPad memory pricing since last year.  Apple marketing team was fool. 

  • Reply 4 of 26
    adonissmuadonissmu Posts: 1,772member
    Ha! Well Apple knows an iPad is closer to a computer than a phone so the upgrade cycle won't be every 2 years or every year like the phone. It arguably will compete with a mac in terms of upgrade cycle.
  • Reply 5 of 26
    mdriftmeyermdriftmeyer Posts: 7,259member
    Growth in Macs continues to rebound, despite the claim they were declining just a few weeks prior.

    Growth in the iPad Air will explode this fall, along-side the iPhone 6.

    Cloud Services will explode with iDrive and Continuity driving more sales across the ecosystem, including Enterprise with IBM.

    Macs will steadily continue to grow more rapidly within the Enterprise and Education markets and we are overdue on a few models.

    iBeacon and Airport based products should be imminent
  • Reply 6 of 26
    tallest skiltallest skil Posts: 43,399member
    Originally Posted by jfc1138 View Post

    You just know WS is going to expect the biggest one to dominate sales and it will not..




    Yep.

  • Reply 7 of 26

    Doomed!  Doomed, I tell you!  (and no, I didn't read the article - don't try to confuse me with information)

     

    On a serious note, the one thing that stood out to me was the < 25% subsidized iPhone sales.  I remember reading a Deidu article a while back that discussed subsidies being palatable for carriers because the iPhone was such an effective sales tool, and that iPhone growth was greatly facilitated by the subsidization.  But this makes me think that people just want iPhones even w/o the carrier subsidies.  Guess iPhone is even more desirable than I'd thought (as compared to the alternatives).  Am I interpreting that right?

  • Reply 8 of 26
    allvarallvar Posts: 9member
    Does the fact that Apple have repurchased alot of shares have anything to do with the 20% y/y earnings per share increase?
  • Reply 9 of 26
    macinthe408macinthe408 Posts: 1,050member
    I didn't hear the call, but I am willing to wager $10,000 that Tim Cook, at some point, said, "We have great new products that we just can't wait to introduce this year. We are really excited about what we've been working on. For example, we are about to release the most exciting update our AC adapters have ever seen."
  • Reply 10 of 26
    nagrommenagromme Posts: 2,834member

    “Heeeeeeeeere's Maestri!”

     

  • Reply 11 of 26
    wizard69wizard69 Posts: 12,785member
    jfc1138 wrote: »
    LOL.

    And true.

    The one worrisome aspect of their getting a little bit dragged kicking and screaming into the larger screens.... You just know WS is going to expect the biggest one to dominate sales and it might not..
    We already know that it won't. Large cell phones are a niche market that is already in decline. Just look at the trouble Samsung is having with its bricks

    I'm waiting for Apple to pull a rabbit out of the hat and deliver a large screen cell phone that is a folder. The idea being to make it pocketable.
  • Reply 12 of 26
    dasanman69dasanman69 Posts: 12,980member
    wizard69 wrote: »
    We already know that it won't. Large cell phones are a niche market that is already in decline. Just look at the trouble Samsung is having with its bricks

    I'm waiting for Apple to pull a rabbit out of the hat and deliver a large screen cell phone that is a folder. The idea being to make it pocketable.

    What do you consider large? Right now most phones not named iPhone are bigger than 4 inches. That's not a niche market.
  • Reply 13 of 26
    tallest skiltallest skil Posts: 43,399member
    Originally Posted by dasanman69 View Post

    Right now most phones not named iPhone are bigger than 4 inches. That's not a niche market.



    That sounds incredibly wrong, but only because it is.

  • Reply 14 of 26
    Quote:

    Originally Posted by mdriftmeyer View Post



    Growth in Macs continues to rebound, despite the claim they were declining just a few weeks prior.



    Growth in the iPad Air will explode this fall, along-side the iPhone 6.



    Cloud Services will explode with iDrive and Continuity driving more sales across the ecosystem, including Enterprise with IBM.



    Macs will steadily continue to grow more rapidly within the Enterprise and Education markets and we are overdue on a few models.



    iBeacon and Airport based products should be imminent

     

    Agree with everything you say. Possibly the most exciting time to be an Apple customer!

  • Reply 15 of 26
    philboogiephilboogie Posts: 7,438member
    Completely OT, but I like this "Falling Android" video. Only posting because I read it as 'Failing Android', plus I haven't slept yet, and it's 9.30, so off to bed:



    [VIDEO]



    Oh, yeah, of course I need to make a point on the subject. Uhm, I suppose if I multiply their 13M iPads sold to Education I don't get a full calendar year iPad sales number, correctomundo?
  • Reply 16 of 26
    mnbob1mnbob1 Posts: 262member
    Analysts would be falling all over themselves about how amazing these numbers are for any other company. Since it's Apple the expectation was too high and Apple is happy with its numbers. They know that there is a consumer hold on purchase because of anticipated new product.

    Those speaking about Apple getting into the phablet market to copy others and being too late should remember that Apple doesn't do anything that sacrififcess quality. Display quality, battery life, case size, and most of all app devopment are all issues that need to be addressed first.

    Apple might not be first to market but they are always the best to market.
  • Reply 17 of 26
    icoco3icoco3 Posts: 1,459member
    Quote:

    Originally Posted by AppleInsider View Post

     

    ...


    • Apple "has the capability" to acquire a sizable company and manage it, if "more like [Beats or IBM] presented themselves"

    ...



    iPhone in the enterprise: Medical device leader Metronic has developed more than 175 internal iOS apps deployed to more than 16,000 iPhones. Nestle has deployed more than 25,000 iPhones; NASA has more than 26,000

    ...



    Tim Cook says iPad sales met Apple expectations, but they "realize they didn't meet yours."

    ...


     

    So...Apple has the capability to acquire large companies.  To include IBM in the above statement, since they purchased Beats, does that mean they will purchase IBM?  Will we then start to get Macframe's???? (yes, I know about www.macframes.com)

     

    Bet the company I work at has more iPhones in use than the above quoted numbers.

     

    Tim Cook to media/analysts ... slap slap slap

  • Reply 18 of 26
    macxpressmacxpress Posts: 4,861member
    So Mac sales were up....where are all the whiners from the one thread a couple weeks back bitching about the prices of Macs and thats why Mac sales are down?

    What do you have to say to now?
  • Reply 19 of 26
    macxpressmacxpress Posts: 4,861member
    Quote:
    Originally Posted by sog35 View Post

     

    iPhone sales up 55% year over year in Brazil, Russia, India, and China

     

    I suspect this is directly related to the iPhone 5C.

     

    So Apple was right all along.  Now the media and all the pundits on this forum need to apologize for saying the 5C was a flop...

     

    And I expect even more massive growth when the 5C occupies the bottom level once the 6 comes out.

     

    5C - $400

    5S - $500

    6 - $650

    6X - $750

     

    That's a killer lineup


     

    And everyone else on here who thought it was a stupid idea and that they wouldn't sell. We just didn't give it enough time. I don't see the C model going away anytime soon and I think this just enhances this point. I wouldn't be surprised to see some kind of upgraded 5C at some point. 

     

    I think it just goes to show that ONLY Apple knows whats best and what it seems people wanting. Just because 1 or 2 people don't see it, doesn't mean Apple doesn't know what they're doing. Lets leave Apple to make the decisions down the road here, not the peanut gallery. 

  • Reply 20 of 26
    jfc1138jfc1138 Posts: 3,090member
    Quote:

    Originally Posted by Tallest Skil View Post

     



    Yep.


    Well, I do know that for me anyway the "auto-buy" is the 4.7 unless there's an overwhelming impression when I handle the other one, and I'm not anticipating that.

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