MacDailyNews presents live notes from Apple’s Q111 Conference Call

Mac Daily News ^ | Tuesday, January 18, 2011 - 05:00 PM EST

[Swordmaker]

Live notes from Apple Inc.'s Fiscal First Quarter 2011 Conference Call appear in reverse chronological order:• Apple CFO Peter Oppenheimer opens conference call

• Apple today announced financial results for its fiscal 2011 first quarter ended December 25, 2010

• Record revenue of $26.74 billion

• Record net quarterly profit of $6 billion or $6.43 per diluted share

• Versus revenue of $15.68 billion and net quarterly profit of $3.38 billion, or $3.67 per diluted share, in the year-ago quarter

• Gross margin was 38.5 percent compared to 40.9 percent in the year-ago quarter

• International sales accounted for 62 percent of the quarter’s revenue

• 4.13 million Macs sold during quarter, a 23 percent unit increase over the year-ago quarter

• 16.24 million iPhones in the quarter, representing 86 percent unit growth YOY


• 19.45 million iPods during the quarter, representing a seven percent unit decline YOY (if you don't count the iPods built into every iPhone and iPad)

• 7.33 million iPads sold during the quarter - now in 46 countries at end of quarter

• $9.8 billion in cash flow generated from operations during the quarter

• Guidance: "Revenue of about $22 billion and diluted earnings per share of about $4.90.”

• iTunes Store exceeded $1.1 billion thanks to strong music, videos, and app sales.

• iPhone on 185 carriers in 90 countries with $625 ASP

• iPod touch now 50% of total iPod sales

• iPhone = sizable backlog; could have sold more

• 80% of Fortune 500 companies have deployed or are piloting iPad (ASP of about $600)

• 165 million cumulative iOS devices sold through December 25, 2010

• Apple Retail Store revenue 3.85 billion, up 95% YOY

• 851,000 Macs sold in Apple Retail Stores, 24% increase YOY

• 6 new Apple Retail Stores opened during quarter: Now 232 total stores, 87 of which are located outside USA

• Half of Apple Retail Store Mac buyers were new to Mac

• Apple expects tax rate of about 25.5% for Q111
• Oppenheimer's guidance: “Looking ahead to the second fiscal quarter of 2011, we expect revenue of about $22 billion and we expect diluted earnings per share of about $4.90.”

• Tim Cook: iPhone 4 production still ramping. We are thrilled to offer iPhone 4 to Verizon's 93 million customers as well as any new customers who'd like an iPhone. We are working to produce as many units as possible.

• Cook: Very happy to have over 1 billion App Store downloads

• Cook: iPad expanded to 46 countries, +20 in quarter. Will add 15 more this quarter to hit 60+ countries.

• Cook: iPhone supply still not in balance with demand. We think Verizon iPhone will be huge.

• Cook: Our focus on China have produced results that have been absolutely staggering. Korea has also been a very,. very good market for Apple (iPhone and iPad).

• Cook: Japan revenue up 83% YOY in a down Japanese economy.

• Cook: Apple is doing it's best work ever and we are all very happy with the product pipeline. Steve has driven a culture of innovation into the company and excellence has become a habit

• Cook: We still have a relatively low share of the PC market; enormous opportunity for Mac

• Cook: Enormous opportunity in the smartphone market

• Cook: We believe tablets are a huge market, so iPad's opportunity is huge as well

• Cook: DRAM pricing is favorable. Key metals pricing is increasing

• Cook: NAND Flash, LCDS, most other commodities are generally in supply/demand balance

• Cook: In most areas we saw favorable pricing which was a key factor in exceeding our gross margin expectations

• Cook: With A4 chip, we focused on design, not the actual fabbing; design that exceeded what's available on the market

• Cook: We used Apple's cash to secure NAND Flash supply and we have identified other areas similar to the Flash agreements we're focused on specific areas to invest cash to secure supplies (won't name what Apple's securing)

• Cook: Margins consist of a number of different factors. We don't guide on gross margins for specific products.

• Cook: Generally speaking, besides iPad, there are two kinds of groups of tablets on the market today: Windows-based - heavy, big, expensive, poor battery life, no customer interest. Android tablets today are scaled up smartphones, "a bizarre product in our opinion." If somebody does a side-by-side with these tablets vs. iPads, most people will pick an iPad. Apple not worried about that.

• Cook: With iPad, we are not standing still. We have a huge first-mover advantage and an incredible user experience, huge ecosystem. We are very confident entering into a fight with anyone.

• Cook: I don't envision the overall iPhone ASP decreasing from Q111 to Q211. We're always looking and assessing in every country regarding who Apple should be doing business with.

• Where we've moved from exclusive carrier to dual- or multi-carrier, our sales have increased

• Cook: Nothing new to announce regarding CDMA iPhones and carriers other than Verizon (We're very happy to be working with Verizon)

• Cook: We've signed a multi-year, non-exclusive deal with AT&T Mobility about which we're also very happy

• Apple is not under any exclusive carrier deals in any country in the world - "We have moved away from that."

• Cook: Mac grew almost 8X the PC market in Q111. "Stunning." Mac outgrew the PC market in every region of the world

• Cook: Yes, I think there is some cannibalization by iPad on Mac, but there is also an iPad Halo Effect on the Mac, "so if this is cannibalization it feels really good." 

• Cannibalization is not something we are spending one minute on: iPad team working to build the best iPad and Mac team is looking to build the best Mac

• Cook: Part of the magic of Apple is that there are not high walls between product groups. No "not invented here" attitude between groups.

• Good ideas will spread throughout product lines; iPad to Mac and vice versa, etc.

• 175% revenue growth in Asia Pacific; $2.6 billion in China in just 3 months is phenomenal - "We are introducing a lot of people to Apple" which bodes well for all of Apple's product line in the future

• Cook: The tablet market is so large, it's large everywhere (not just in the U.S. or other specific markets).

• Oppy: We are working hard to increase supply of iPhones. It will come over time, not overnight

• Oppy: We are thrilled to be guiding 63% revenue growth YOY

• Oppy: Highest Mac sales, have outgrown the PC market for 19 consecutive quarters

• Oppy: iPad was a hot holiday gift, so we would expect a sequential decline vs. the holiday quarter

• Cook: We could have sold more iPhones if we had them. We are working very hard to increase production

• Cook: Enterprise traction for iPhone is gaining

• Cook reiterates: "We've now sold over 160 million iOS devices. This is huge."

• Cook: We believe integrated beats fragmented. Much better for the end user. Takes out the frustration and complexity

• Cook: "I think we've got a very bright future [with iPhone] and I think the same thing about iPad."

• Oppy: Will not talk about future iPads or any other unannounced products

• Cook: MacBook Air was a phenomenal part of our Mac success during the quarter. We've only been shipping it for less than 90 days.

• Any enterprise barriers? Cook: Consumerization of enterprise is a mega-trend. The ability to write apps for iPhone and iPad is an incredible thing; you can literally run your whole business of an iPad and iPhone. iPad has a huge advantage as each iOS upgrade delivers huge chunk of enterprise features.

• Cook sees enormous enterprise potential. iPad started shipping in April and already up to 80% of large companies deploying or piloting. "We're just scratching the surface."

• End of conference call. Most surprising thing to us? The lack of questions from analysts regarding Steve Jobs.


[Swordmaker]

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[dayglored]

This will be seen, years from now, as the first major outing of Apple without Steve Jobs waving the flag out front, or expected to be back out front soon/again. Steve has retired, but he hasn't announced that yet as such.

He wisely stepped back a day before. I hope he is able to deal with his health issues successfully.

I do not expect to see him actively leading Apple in public again, and that's okay. Apple will do fine.

He and the board have a plan and they are working the plan. It will succeed.

[stripes1776]

Thanks for posting this. I was tied up today and could not monitor the conference call. All the major points listed that I need to be aware of.