Note: Except where linked, these notes were taken from Apple's earnings call, a recording of which is available as a podcast for the next couple of weeks through iTunes. They were written as part of the script for the Wednesday, January 19th, 2011 edition of Mac OS Ken, also available as a podcast through iTunes.
Apple on Tuesday announced financial results for its fiscal 2011 first quarter - AKA “the Holiday quarter” posting record revenue of $26.74 billion and record net quarterly profit of $6 billion.
The company sold 4.13 million Macs for the quarter - a record - and up 23% from the same quarter a year earlier... 16.24 million iPhones - a record - and up 86% from the same quarter a year earlier... 19.45 million iPods - down 7% from the same quarter a year earlier... and 7.33 million iPads, which they weren’t on sale a year ago.
Quoted in the earnings press release, Apple CEO Steve Jobs, saying, “We had a phenomenal holiday quarter with record Mac, iPhone and iPad sales. We are firing on all cylinders and we’ve got some exciting things in the pipeline for this year including iPhone 4 on Verizon which customers can’t wait to get their hands on."
Taking a look at what was said about individual products, services, and segments during the earnings conference call... yes iPod sales were down 7% year-over-year, though sales of the iOS-powered iPod touch were up 27%. The device, which can go on to make Apple more money in App sales, made up over 50% of all iPods sold in the holiday quarter.
The iTunes store brought in $1.1 billion in revenue...
Sales value of iPhones - JUST iPhones - were over $10 billion. Sales of the device doubled in the Asia-Pacific region and in Japan, and - as has been the case since the phone was released over six months ago - they could have sold more iPhone 4s over the holiday quarter if they’d had more to sell.
While this was the first holiday quarter for the iPad, Apple execs seeemed pretty pleased, noting that the 7.33 million sold in the December quarter were roughly three million more than were sold in the September quarter, and that 80% of the Fortune 100 are already deploying or piloting the less-than-a-year-old tablet.
Retail went gangbusters once again, seeing revenue of $3.85 billion - nearly double the 2009 holiday quarter - with each store generating average revenue of $12 million, up 69% from the year ago quarter. There were 75.7 million visitors across the chain, up 49% from a year earlier... the 4 China stores saw the highest traffic and revenue on average... and - as always seems to be the way - 50% of in-store Mac sales were to people who have never owned a Mac before.
And finally... the big number... the number that make people wonder when Apple will build its very own country... or put a bid in on the Moon... Apple is now sitting - like the world’s largest medieval dragon - on $59.7 billion-with-a-"B"-dollars in cash, up $8.7 Billion from the end of the most recent September quarter.
And now... other fun Conference call notes.
What’s Apple spending $3.9 billion on in the next two years? No clue... but they are.
World of Apple eyes the number, mentioned during Tuesday’s earnings call.
While he wouldn’t say what they were getting for the money, COO Cook said the deal was a “fantastic” use of the Apple’s money. “I don’t want to give it out, because I view it as a competitive… something I don’t want our competition knowing...” though he was willing to compare the deal to the one-billion dollars Apple committed to NAND Flash memory back in 2005, when Apple was just starting to put flash into almost everything it made.
This deal, according to Cook, is “similar to flash agreement, focused in an area that (Apple feels) is very strategic...” he didn’t want to say what it was for exactly, but - he said, “it’s the same kind of thinking that led us to those deals.”
Shannon Cross of Cross Research wanted to know how Apple execs thought the Mac App Store was going...
It’s early, in Cook's estimation, though they’re thrilled with the start.
Morgan Stanley analyst Katy Huberty wanted to know how Apple felt about supply and demand on iPads and iPhones...
On iPads, Cook says they ramped up production in a big way last quarter, and were confdent enough in their ability to deliver that they’re adding 15 new countries to the tablet’s itinerary this month.
As for iPhone 4, Cook says a significant backlog still exists... it feels great that demand is so high but he’s not willing to predict when supply and demand will meet, especially with the Verizon iPhone about to come online.
Huberty then shifted gears, asking the COO what’s driving growth in the Asia-Pacific region and Japan growth? Cook says Apple decided China was a place they needed to be years ago and started laying groundwork then. In Japan, revenue for the last quarter was up 83% year-over-year, with which the company is pleased. Apple is aiming more resources at those regions and looking for more avenues of expansion there.
“The art of asking without asking” award goes to Piper Jaffray analyst Gene Munster... while the press and tech press have asked repeatedly how Apple will get along - both short term and eventually long term without Apple CEO Steve Jobs, Munster asked the question without actually asking it.
“How far out do you guys plan?” he wanted to know... “What’s the longterm business plan? One year? Five years?”
Tim Cook’s response... “That’s part of the magic of Apple... I don’t want to let anyone know our magic... I don’t want them copying it.” Cook DID say the Apple team is awesome, having been lead to that level by Jobs. “Excellence has become a habit,” said Cook... which I could so see on one of those motivational posters... Cook says he’s confident about future of Company... they’ve seen 19-quarters of Mac growth and there’s still plenty of growth there... as big as the iPhone is it commands a relatively small share of the total handset market, so there’s huge opportunity there.... the iPad just got started, yet they managed to sell roughly 15 million of them in their first three quarters of availability, so huge potential there... Apple - he says - is in great markets... it’s in fast moving markets... and it’s right now cranking out the best products it’s ever made.
So... would Cook talk about competition for the iPad?
In an exchange reminiscent of Steve Jobs’ appearance on the last earnings call Cook basically put the question back, “what competition?”
There's the [tablets] that use Windows, they're generally big and heavy and expensive. They have weak battery life, they require a keyboard or a stylus as an input device, customers are frankly just not interested in them. Then you have Android tablets, and the varieties that are out shipping today, their operating system wasn't designed for tablets. Google has said this, this isn't just Apple saying this. That means you have the size of a tablet that just isn't reasonable for what we call a 'real tablet experience.' That's just a scaled-up smartphone, which is a bizarre product category. If you do a side-by-side with an iPad, you'll pick an iPad.
Cook did acknowledge that the next version of Android is supposed to be tailored for tablets, but it and they are not here yet... so for now they’re just "vapor."
Sanford Bernstein analyst Toni Sacconaghi did NOT ask about returning money to shareholders, either through dividends or stock buybacks. Rather, he wanted to know about CDMA carriers other than Verizon for iPhone 4... nothing new to report on that.
Brian Blair of Wedge Partners wanted Cook’s thoughts on the Mac side, specifically in face of iPad... or put another way, is the iPad cannibalizing the Mac?
Cook reiterated, the Mac grew 23% worldwide last quarter versus the same quarter a year earlier... eight-times the 3% rate of growth for the PC market as a whole. Is there cannibalization? Probably, according to Cook, though there’s also probably a halo effect. The COO says millions in Asia and Japan meet Apple through the iPhone and the iPad, which is probably leading to more Mac sales. And - if the iPad or tablets in general do cannibalize Macs or PCs in general, Apple has such a low market share worldwide in PCs, they’d be in a much better position than other companies who lean more heavily on computer sales. In the meantime, the iPad group is building the best iPads it can, the Mac group is building the best macs it can, both groups see growth, and Apple believes they’ll see it.
Those were just the bits that caught my ear but there was more said and heard... if you want to hear the whole thing for yourself you can... the entire call is available as a podcast for the next couple of weeks through iTunes.