Notes of interest from Apple's Q207 quarterly conference call

Posted:
in General Discussion edited January 2014
Apple, which on Wednesday announced its most profitable March quarter in history, held a financial conference call with analysts and members of the media. In-depth coverage of the topics discussed during that call follow.



Apple's Mac Business



In total, Apple shipped 1.517 million Macs during the quarter, representing 36 percent yearly growth. This included 891,000 notebooks and 626,000 desktop systems.



Demand for MacBooks and MacBook Pros during the quarter was exceptional. Notebook sales grew 79 percent year-over-year and accounted for 59 Percent of Macs sold during the quarter. Notebook sales generated $1.354 billion in revenue.



Desktop sales accounted for about 40 percent of the Macs sold during the quarter, rising only slightly from the year-ago quarter in which Apple sold 614,000 units. Desktops accounted for $914 million of quarterly revenue.



?The Mac is clearly gaining market share, with sales growing 36 percent?more than three times the industry growth rate,? Apple chief executive Steve Jobs said in a statement.



Mac distribution points have grown from 5800 to 8000 on a year-over-year basis.



Apple is still evaluating and plans to make decision on its Circuit City Mac pilot sometime this quarter.



Meanwhile, the company said it plans to partake in some "unique merchandising" as it expands its Best Buy Mac pilot to around 200 stores throughout the year.



Both Mac and iPod margins were quite strong during quarter, benefiting from very favorable commodity environment (particularly memory).



Apple's Music Business



Apple shipped 10,549,000 iPods during the quarter, representing 24 percent growth year-over-year, and accounting for $1.689 billion in revenue.



Apple's "Other Music Related Products and Services" added $653 million in revenue, up 35 percent year-over-year.



iPod shuffle was especially popular during the quarter thanks to the addition of new models in four vibrant colors.



In the United States, iPod commands over a 70 percent share of the digital media player market. It holds over a 60 percent share in Australia and Canada, over a 50 percent share in Japan and Hong Kong, over a 40 percent share in the UK, Switzerland and Denmark, and about a 28 percent share in Germany.



Apple ended the quarterly "comfortably" with iPod channel inventory of 4-6 weeks.



iTunes now has over 5 million songs, 350 TV shows, and 500 movies.



iTunes accounts for over 85 percent of legal music downloads in the United States, according to Nielsen SoundScan.



Both the iPod and Mac were key to Apple achieving its 35.1 percent gross margin.



Apple's Consumer Electronics Business



"We're off to very good start" on Apple TV, the company said. It would provide no further details, likely as sales totals are still low given the device's relatively short time on the market.



Apple did say that it plans to leverage its proven capability in the area of software development to gradually add new software features and applications to both its iPhone and Apple TV products free of charge to customers.



Additional iPhone tidbits are available in a separate report on the aforementioned subject.



Apple's Retail Business



Apple's retail store revenues for the quarter totaled $855 million, up 34 percent from $636 million year-over-year. The stores generated $32 million in profit in addition to $174 million in "manufacturing profit."



The company opened a total of 7 news stores during to quarter to end with 177 stores.



With an average of 172 stores open during the quarter, average store revenue was about $5 million.



Over 21.5 million people visited Apple's retail stores during the quarter, which breaks down to 10,000 customers per store, per week.



The stores sold 275,000 Macs, up more than 75 percent from the year-ago quarter.



Apple maintained that it is on target to launch new international retail stores in Glasgow, Scotland and Sydney, Australia sometime later this year.



In a surprise and much-welcomed announcement, Apple said it will be opening its third Manhattan retail store at 14th Street and 9th Avenue in the meatpacking district. No date was given.



Apple's Business and Mac Sales by Region



Apple Americas accounted for $2.447 billion in revenues, up 15 percent year-over-year. This included the sale of 605,000 Macs, up 22 percent year-over-year.



Apple Europe accounted for $1.249 billion in revenues, up 29 percent year-over-year. This included the sale of 433,000 Macs, up 37 percent year-over-year.



Apple Japan continued to "frustrate" Apple, accounting for just $283 million in revenues, down 8 percent year-over-year. This included the sale of 79,000 Macs, down 4 percent year-over-year.



Apple Asia-Pacific (plus FileMaker Inc.) accounted for $430 million in revenues, up 32 percent year-over-year. This included the sale of 125,000 Macs, up 89 percent year-over-year.



Direct sales -- retail, online, direct to education and enterprise, and the iTunes music store -- accounted for 50 percent of Apple's sales during the quarter.



Other notes



Apple capitalized about $27 million related to software development during quarter.



Capital expenditures for the quarter were $105 million.



Apple's cash stockpile rose over $700 million during the quarter to $12.6 billion.



Apple should be doing something with all that cash, but it isn't -- yet. Although it continues to discusses options such as share buybacks internally, it has "nothing to announce at this time."



The tax rate for the quarter was 32 percent.
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Comments

  • Reply 1 of 39
    MacProMacPro Posts: 19,251member
    Way to go Apple.
  • Reply 2 of 39
    solipsismsolipsism Posts: 25,726member
    What is it about Apple computers does Japan dislike? Is it the non-existence of a sub-notbook, a lack of some wonky port support on the Mac, or something else entirely?
  • Reply 3 of 39
    irelandireland Posts: 17,743member
    If Steve and Co. wants more customers and more money, their number one business priority right now at this point in time should be getting Apple stores to every country in the world outside the US. One country, one store at a time. Pick a country, pick a location, add a store, next counrty do the same, and so on and so fourth. They are being very, very slow in adding Apple stores to Europe, France doesn't even have a store (64 million people), Germany doesn't have a store (82 million people).



    We're not really asking for too much here, they really need to seriously address this issue, they are adding stores all over the US all the time. I just think it's really high time Apple started focusing properly on Europe, Austrailia and Asia. Huge markets go uptapped here, and Microsoft is just winning more new customers everyday in these parts where it's diffucult to see real Apple computers in high numbers, in the flesh in stores.
  • Reply 4 of 39
    amac4meamac4me Posts: 282member
    Nice quarter for Apple ... the portable sales were very strong versus last year Q2. Q3 and Q4 will continue to show strength.
  • Reply 5 of 39
    macgregormacgregor Posts: 1,434member
    What to do with all of that money?!!??



    They need to buy the Seattle Supersonics, change the name to the Washington Apples and build a new state-of-the-art colliseum in Redmond!!!



    Give away free tickets to MS employees and have free videopodcasts of every game!!



    The mascots could be large, fuzzy "I'm a Mac, I'm a PC" guys who play a little one on one during time outs!!!



    The cheerleaders could dance the iPod dances, dressed in the Shuffle colors!!!



    The Sonics are pushing for a new stadium that isn't popular with local taxpayers/officials and the owner wants to move them to Oklahoma City. This would give Apple major local cred and tap into the drizzle segment of the geek culture.



    Or



    They could hire 300 software engineers, get Leopard out by August, buy out Elgato and a few game companies and create a seemless DirectX emulator!
  • Reply 6 of 39
    jimdreamworxjimdreamworx Posts: 1,071member
    Quote:
    Originally Posted by MacGregor View Post


    What to do with all of that money?!!??



    I've wondered this as well... it seems that while Apple does acquire a company here and there, is there something out there that would be worth spending this kind of money on?



    Seems that it's better to integrate smaller companies with kick-ass products into the Apple culture than to take on a well-known company with well-known products.



    Considering they took Computer out of the corporate name, who knows what they'll buy next?
  • Reply 7 of 39
    jasenj1jasenj1 Posts: 922member
    Quote:
    Originally Posted by MacGregor View Post


    What to do with all of that money?!!??



    How about they start paying a dividend on their shares? My AAPL stock just sits there going up in value, but it doesn't DO anything for me. i.e. It keeps gaining potential energy, but it has no kinetic energy.



    - Jasen.
  • Reply 8 of 39
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by jasenj1 View Post


    How about they start paying a dividend on their shares? My AAPL stock just sits there going up in value, but it doesn't DO anything for me. i.e. It keeps gaining potential energy, but it has no kinetic energy.



    - Jasen.



    They plan on buying Microsoft in 5 years.









    PS: your name is already in the left-hand column.
  • Reply 9 of 39
    MacProMacPro Posts: 19,251member
    Quote:
    Originally Posted by jasenj1 View Post


    How about they start paying a dividend on their shares? My AAPL stock just sits there going up in value, but it doesn't DO anything for me. i.e. It keeps gaining potential energy, but it has no kinetic energy.



    - Jasen.



    Nice metaphor I'll take both too please.



    Quote:
    Originally Posted by MacGregor View Post


    What to do with all of that money?!!??



    Chrysler? 'Apple takes over ... not only the living room but also the garage ...'



    Just kidding ...
  • Reply 10 of 39
    jeffdmjeffdm Posts: 12,949member
    Quote:
    Originally Posted by JimDreamworx View Post


    I've wondered this as well... it seems that while Apple does acquire a company here and there, is there something out there that would be worth spending this kind of money on?



    Seems that it's better to integrate smaller companies with kick-ass products into the Apple culture than to take on a well-known company with well-known products.



    Considering they took Computer out of the corporate name, who knows what they'll buy next?



    They do several things with the money. For one, they have a subsidiary, Braeburn, whose main mission is supposed to be to handle Apple's investments. They make considerable money from those investments, even with the previous quarter's record sales, I think income from investments accounted for about 40% of the net income.



    IIRC, Apple was going to do a joint-venture investment of several billion USD with Samsung on a new plant to make flash chips, but the publicity blowback in South Korea basically scuttled the deal. I think Apple has from time to time fronted the R&D or plant construction costs to other companies for certain new technologies in exchange for a short term exclusive on the product. They put down significant deposits with several flash chip makers to secure the quantity of chips that they think they need.



    I think Apple's done a pretty good job of choosing what company or technology to buy.
  • Reply 11 of 39
    melgrossmelgross Posts: 32,954member
    Quote:
    Originally Posted by solipsism View Post


    What is it about Apple computers does Japan dislike? Is it the non-existence of a sub-notbook, a lack of some wonky port support on the Mac, or something else entirely?



    Computer sales in Japan seem to be slow for everyone.
  • Reply 12 of 39
    melgrossmelgross Posts: 32,954member
    Quote:
    Originally Posted by MacGregor View Post


    What to do with all of that money?!!??



    They need to buy the Seattle Supersonics, change the name to the Washington Apples and build a new state-of-the-art colliseum in Redmond!!!



    Give away free tickets to MS employees and have free videopodcasts of every game!!



    The mascots could be large, fuzzy "I'm a Mac, I'm a PC" guys who play a little one on one during time outs!!!



    The cheerleaders could dance the iPod dances, dressed in the Shuffle colors!!!



    The Sonics are pushing for a new stadium that isn't popular with local taxpayers/officials and the owner wants to move them to Oklahoma City. This would give Apple major local cred and tap into the drizzle segment of the geek culture.



    Or



    They could hire 300 software engineers, get Leopard out by August, buy out Elgato and a few game companies and create a seemless DirectX emulator!



    Oh please!



    While I could go with the INTELLIGENT ideas mentioned in your post, you really have no sense of humor at all.



    Hire 300 software engineers? You've got to be kidding?
  • Reply 13 of 39
    melgrossmelgross Posts: 32,954member
    Quote:
    Originally Posted by JimDreamworx View Post


    I've wondered this as well... it seems that while Apple does acquire a company here and there, is there something out there that would be worth spending this kind of money on?



    Seems that it's better to integrate smaller companies with kick-ass products into the Apple culture than to take on a well-known company with well-known products.



    Considering they took Computer out of the corporate name, who knows what they'll buy next?



    There were a lot of things they could have done.



    They could have bought a whole bunch of Mac programs that would move them closer to what they seem to want, and need.



    They could have bought Painter, Poser, Bryce, and a number of others at fire sale prices several times in the past few years.



    They should have also engaged Adobe in a bidding war for Macromedia.



    Flash alone would have been worth it for Apple to acquire. Then they would have controlled that important standard, which would have leveraged Quicktime much further.



    But they seem to be afraid of these types of purchases. It's too bad.
  • Reply 14 of 39
    as they say on fark, quick and dirty...







    bottom row, center pair are doors, others are display windows.

    first floor sales, second floor genius bar and training, like ginza, regent st, etc.



    based on http://www.rkf.com/listings/NEW/401W14St_main.asp seen via tuaw.
  • Reply 15 of 39
    Quote:
    Originally Posted by melgross View Post


    Computer sales in Japan seem to be slow for everyone.



    Japan is one of the most technology-sensitive and gadget-loving markets in the world.

    With ipods being everywhere (and thus not being much of an elite gadget anymore), and there being much smaller computers than the macbook on the market (such as the sony vaio subnotebooks, which have the homefield advantage in Japan) it is to be expected to see apple struggle.
  • Reply 16 of 39
    Quote:
    Originally Posted by melgross View Post


    There were a lot of things they could have done.



    They could have bought a whole bunch of Mac programs that would move them closer to what they seem to want, and need.



    They could have bought Painter, Poser, Bryce, and a number of others at fire sale prices several times in the past few years.



    They should have also engaged Adobe in a bidding war for Macromedia.



    Flash alone would have been worth it for Apple to acquire. Then they would have controlled that important standard, which would have leveraged Quicktime much further.



    But they seem to be afraid of these types of purchases. It's too bad.



    While traditional business schools teach that bigger is better and acquisition is good, more and more evidence is coming out that the added value of any major acquisition or merger is limited at best, and quite often negative.

    It is far from easy to integrate a separate business culture into your own, (re-)train staff and adapt to new managers. Apple is a very lean, very mean, very focused company, and major acquisitions would distract from this.

    It makes much more sense to just buy exclusive licenses, take a major minority share in a company or buy a startup whose main asset is that genius designer that you need than to integrate traditional, bulky, complex companies like macromedia used to be.
  • Reply 17 of 39
    melgrossmelgross Posts: 32,954member
    Quote:
    Originally Posted by HiddenWolf View Post


    Japan is one of the most technology-sensitive and gadget-loving markets in the world.

    With ipods being everywhere (and thus not being much of an elite gadget anymore), and there being much smaller computers than the macbook on the market (such as the sony vaio subnotebooks, which have the homefield advantage in Japan) it is to be expected to see apple struggle.



    Nevertheless, computer sales in Japan have been a bear for everyone the past few years.
  • Reply 18 of 39
    melgrossmelgross Posts: 32,954member
    Quote:
    Originally Posted by HiddenWolf View Post


    While traditional business schools teach that bigger is better and acquisition is good, more and more evidence is coming out that the added value of any major acquisition or merger is limited at best, and quite often negative.

    It is far from easy to integrate a separate business culture into your own, (re-)train staff and adapt to new managers. Apple is a very lean, very mean, very focused company, and major acquisitions would distract from this.

    It makes much more sense to just buy exclusive licenses, take a major minority share in a company or buy a startup whose main asset is that genius designer that you need than to integrate traditional, bulky, complex companies like macromedia used to be.



    That's not the holy grail in business schools, or at least, it had better not be.



    This is a business by business decision. Sometimes it works, and sometimes it doesn't. If the idea was a good one, it should be fine. If it wasn't, then it was a bad decision, period.



    There is no golden rule here.



    Adobe seems to be doing a very good job of integrating the two companies. It gives Adobe a grip in areas it couldn't otherwise control.



    Those same areas are ones that Apple needs to either be able to control, or to be able to keep out of the wrong hands. At least Adobe is somewhat of a neutral party. With MS coming out with a Flash competitor, hopefully Adobe has the funds to be able to fend it off.
  • Reply 19 of 39
    valmadvalmad Posts: 49member
    The purchase of Schemasoft maybe the the most interesting of Apple purchases, could this be the base for a iPhone app that, like Preview, opens many file formats ? Do people want to create a spread sheet or type a word doc on a phone , or do they just want to be able to read them ?
  • Reply 20 of 39
    benroethigbenroethig Posts: 2,782member
    Quote:
    Originally Posted by MacGregor View Post


    What to do with all of that money?!!??



    They need to buy the Seattle Supersonics, change the name to the Washington Apples and build a new state-of-the-art colliseum in Redmond!!!



    Give away free tickets to MS employees and have free videopodcasts of every game!!



    The mascots could be large, fuzzy "I'm a Mac, I'm a PC" guys who play a little one on one during time outs!!!



    The cheerleaders could dance the iPod dances, dressed in the Shuffle colors!!!



    The Sonics are pushing for a new stadium that isn't popular with local taxpayers/officials and the owner wants to move them to Oklahoma City. This would give Apple major local cred and tap into the drizzle segment of the geek culture.



    Or



    They could hire 300 software engineers, get Leopard out by August, buy out Elgato and a few game companies and create a seemless DirectX emulator!



    I would buy companies and technologies that would help further the Mac..



    1. Elgato. EyeTV would fill Apple's greatest hole, lack of PVR capabilities. With PVR capabilities, the Mac, AppleTV, iTunes would be a very strong (and easier to use) alternative to Window's Media center.



    2. Flip4Mac. It's Quicktime windows media and Final Cut codecs would be very useful additions to Apple's portfolio



    3. Purchase Toast from Roxio or enter into an OEM deal.



    4. The snobs among us are going to hate this one, but expand their horizons and user base by purchasing or creating a Mac boutique brand. Velocity Micro could be a relatively inexpensive buy and they already have their own retail channel.
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