Money Quotes from the Apple Conference Call

Read the following money quotes from the Apple earnings conference call and be stunned.

…for the quarter was $26.7 billion, an increase of more than $11 billion over the prior December quarter’s result, representing growth of 71%.

We established a new quarterly record with sales of 4.13 million Macs, representing 23% growth over the year-ago quarter… We experienced strong sales growth in each of our geographic segments, with over 50% growth in both the Asia-Pacific region and Japan. The growth was fueled primarily by strong demand for the new MacBook Air, which was launched in October, as well as continued strong sales of MacBook Pro…

What we saw in the Mac this quarter was we grew 23% at the worldwide level, and that is compared to market growth of only 3%. And so we grew almost 8x the market rate of growth, which is, I think, stunning. And every region outgrew the market, so it wasn’t just one region. Asia-Pacific led the growth with a whopping 67% year-over-year increase, and that’s almost 10x what market did there, to put it in context. Japan grew at 56%, which is about 6x the market, and Europe and the United States both grew in double-digits despite both markets contracting overall….

Now was there any cannibalization by iPad? Honestly, I don’t know for sure. But yes, I think there is some cannibalization. But I also think there’s a halo effect. As we’ve seen on the Mac by the iPod some years ago, I think there is a halo effect from Apple product to Apple product. And of course, we have introduced millions of people in Asia to Apple through the iPhone. And we’re now introducing many more through the iPad, and I think some of those decide to buy a Mac. And so when you look at the Mac growth in Asia at 67%, and you look at the Japan growth at 56%, and you look at U.S. and Europe growing in double-digits against shrinking markets, if this is cannibalization, it feels pretty good

We experienced continued strong sales of iPod touch, which grew 27% year-over-year and accounted for over 50% of all iPods sold during the quarter. iPod’s share of the U.S. market for MP3 players remains at over 70% based on the latest monthly data published by NPD…

We were thrilled to have sold 16.2 million iPhones compared to 8.7 million in the previous December quarter. This represents 86% year-over-year growth compared to IDC’s latest published estimate of 70% growth for the global smartphone market overall in the December quarter…

At the end of the December quarter, we had iPhone distributions through 185 carriers in 90 countries. We continue to experience very strong year-over-year growth in all of our segments, with sales in the Asia-Pacific region and Japan both more than doubling year-over-year.

Enterprise customers continue to embrace iPhone, with 88 of the Fortune 100 companies and almost 60% of the Financial Times Europe 100 companies now testing or deploying iPhones.

We continue to have a sizable backlog, and believe we could have sold even more iPhones if we had been able to supply them. And we’re thrilled to begin working with Verizon next month to offer iPhone 4 to its more than 93 million customers, as well as to new customers who want iPhone 4 on Verizon

We sold 7.3 million iPads, a sequential increase of over 3 million, with distribution in 46 countries by the end of the December quarter…

Enterprise CIOs are adding iPad to their approved device list at an amazing rate. Today, over 80% of the Fortune 100 are already deploying or piloting iPad, up from 65% in the September quarter.

I’d now like to turn to the Apple Retail Stores, which had a record-breaking quarter. Retail revenue almost doubled year-over-year to $3.85 billion compared to $1.97 billion in the year-ago quarter, an increase of 95%…

Additionally, our four stores in China were, on average, our highest traffic and our highest revenue stores in the world. We opened six stores during the December quarter, bringing us to a total of 323 stores worldwide at the quarter end, with 87 of them outside the United States…

We hosted a record 75.7 million visitors in our stores during the quarter, compared to 50.9 million visitors in the year-ago quarter, an increase of 49%…

Total company gross margin was 38.5%, which was about 250 basis points higher than our guidance. About half this difference was due to better commodity cost than we had planned. The remainder of the difference was due to the leverage on the higher revenue and lower other product costs, including freight, warranty and phone support.

Cash Holdings
Turning to cash. Our cash, plus short-term and long-term marketable securities, totaled $59.7 billion at the end of the December quarter, compared to $51 billion at the end of the September quarter, an increase of $8.7 billion. Cash flow from operations was $9.8 billion, an increase of 69% year-over-year.

China and Asia
…the BRIC countries, Brazil, Russia, India, China, we, several years ago, identified China as our top priority, and we put enormous energy into China.   And the results of that has been absolutely staggering. To give you some numbers there and some specifics, we look at Greater China as a region. And Greater China, just for clarity, is mainland China, Hong Kong and Taiwan. The revenue from Greater China for Apple for last quarter was $2.6 billion, which was up 4x from the prior year quarter…

Korea has also been a very, very good market for us. We had an outstanding Q1 there, primarily driven by iPhone and iPads. And there are several other Asian countries doing extremely well. Japan is not in the segment that you’re looking out, but Japan by itself, the revenue was up 83% year-over-year… And so we are placing more and more resource in these areas and continue to look for expansion possibilities throughout Asia.

….enterprise, is one of the megatrends that are occurring. I think the most forward-looking CIOs are coming to the realization that the productivity of the person, the creativity of the employees is materially more important than everyone using the same thing.   And the ability to write apps in a simple and straightforward manner for the iPhone or the iPad through the SDK is an incredible thing. And you can wind up, literally, running your whole business off of an iPad or an iPhone. And so I think the list of ideas and places that people can go there were unimaginable just to a few months ago.

…. the iPad started shipping in April, and we’re already up to 80% of the largest companies deploying or piloting the product. This is unheard of, at least, in my dealings with the enterprise over the years.

Long-Term Business Plan
…And I don’t want to let anybody know our magic because I don’t want anybody copying it…. the team here has an unparalleled breadth and depth of talent and a culture of innovation that Steve has driven in the company, and excellence has become a habit….

I would also note to those people that haven’t thought about it is we’ve done outstanding in our Mac business. We’ve had 19 quarters straight of growing faster than the market, but we still have a relatively low share of a very large PC market despite having great momentum there. And so it would seem like there’s enormous opportunity still there.

We have a relatively low share in the handset market. The handset market is well over 1 billion units a year, and the smartphone market is growing faster than a weed. And so there’s enormous opportunity here, and we have incredible momentum in that space.

iPad just got started, it’s a new category. We sold almost 15 million through the first three quarters, and we believe the market is huge. IDC, I saw this morning, is predicting it to quadruple in two years. I don’t know what to predict in terms of specific numbers. However, we believe it’s a huge market, as we’ve said before.

This entry was posted in Apple, Earnings and tagged . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.