15 Amazing Things We Learned On Apple's Conference Call

tim cookTim Cook, Apple’s COO.

Listening to Apple’s quarterly conference calls these days is like watching a once-in-a-generation sports team demolish every other team in the league.As Microsoft, Google, Cisco and other tech companies once were, Apple is absolutely at the peak of its game right now. Each quarter brings astonishing new miracles that leave analysts gasping. Yesterday’s quarter was no exception.

Tim Cook and Peter Oppenheimer did a spectacular job on the call (and, admittedly, had good material to work with). If Wall Street needed a reminder that Apple has a strong hand at the tiller in Steve Jobs’ absence, they got it.

The elephant in the room, of course, was Steve‘s medical leave, and not a single analyst even asked about it. Given the extent to which Apple controls information flow, one wonders if this wasn’t somehow pre-ordained (“Ask about Steve, and we’ll never take another question from you again…”). But if ever there was a quarter that could eclipse the news of Steve’s departure, this was it.

We read through the transcript of the conference call this morning (courtesy of Seeking Alpha).  The first astonishing statistic, which has not yet received enough adulation, is that Apple’s revenue grew 71% year-over-year.

Companies Apple’s size just don’t grow 70% year over year. In fact, we would not be surprised if this were the first time in history that a company this big grew this fast (if you find another example, please let us know). 

Apple is now on a revenue run-rate of more than $100 billion a year. Just as amazing, it is expecting to grow another 60%+ in the first quarter of this year.  This is, in a word, staggering.

We established a new quarterly record with sales of 4.13 million Macs, representing 23% growth over the year-ago quarter. That's almost 8x IDC's most recently published estimate of 3% growth for the PC market.

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 fuelled primarily by strong demand for the new MacBook Air, which was launched in October, as well as continued strong sales of MacBook Pro.

Source: Conference call transcript, via Seeking Alpha

We opened the Mac App Store in January 6, bringing what we've learned from iOS Apps to Mac users to make discovering, installing and updating apps easier than ever.

The Mac App Store is available at 90 countries, and features more than 1,000 free and paid apps in categories like education, games, graphics and design, lifestyle, productivity and utility. We've been very pleased with customer response, with over 1 million downloads on the first day alone.

Source: Conference call transcript, via Seeking Alpha

Apple's dying business, iPods, is still selling 20 million units a quarter, most of which are now the high-end iPod touch (which is basically an iPhone)

We sold 19.4 million iPods compared to 21 million in the year-ago quarter. 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, and iPod continues to be the top-selling MP3 player in most countries we track based on the latest data published by GfK.

Source: Conference call transcript, via Seeking Alpha

iTunes is now a $4+ billion business

iTunes Store generated another strong quarter with revenue exceeding $1.1 billion, thanks for strong sales of music, video and apps...

And as we announced a few weeks ago, iTunes users are now renting and purchasing over 400,000 TV episodes and over 150,000 movies per day.

Source: Conference call transcript, via Seeking Alpha

iPhone sales jumped 86% year-over-year and were constrained by supply (Apple couldn't make enough of them to meet demand). The rest of the smartphone market (namely, Android) is catching up, but Apple is still growing faster.

iPads already account for 7% of all PCs shipped in the quarter (Dear Microsoft: It's time to panic)

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. We continue to see great enthusiasm for iPads from consumer, business and education customers. Employee demand for iPad in the corporate environment remains strong, and the response to the product continues to be significant.

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. Some recent examples include JPMorgan Chase, Cardinal Health, Wells Fargo, Archer Daniels Midland, Sears Holdings and DuPont.

recognised revenue from sales of iPad and iPad accessories during the quarter was $4.61 billion. The sales value by iPads alone was over $4.4 billion, which yields an ASP of about $600. We increased the supply of iPads during the quarter and expanded both the number of countries and the number of channel partners carrying iPad.

Source: Conference call transcript, via Seeking Alpha

Apple's retail store revenue jumped 95%, and the stores are now a $16 billion-a-year business. International stores do even better than US stores.

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%.

iPad sales in our stores were very strong in the first holiday quarter. The stores also delivered a record Mac quarter, selling 851,000 Macs compared to 689,000 Mac in the year-ago quarter, an increase of 24%. And about half the Macs sold in our stores during the December quarter were to customers who had never owned a Mac before. International Retail Store sales were particularly strong with our average international store volume exceeding our very productive average U.S. store volume.

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.

With an average of 321 stores opened during the December quarter, average revenue per store was $12 million compared to $7.1 million in the year-ago quarter, an increase of 69%.

Retail segment margin exceeded $1 billion for the first time and more than doubled from $481 million in the year-ago quarter. 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%.

Source: Conference call transcript, via Seeking Alpha

Apple is destroying the rest of the staggeringly competitive electronics industry... while maintaining super-high product margins!

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.

Source: Conference call transcript, via Seeking Alpha

Apple now has $60 billion of cash

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.

Source: Conference call transcript, via Seeking Alpha

Again:iPhone sales were CONSTRAINED BY SUPPLY. Interestingly, iPad supply is MEETING demand.

Revenue from China is now more than $10 billion a year, up 4X over last year. So much for the risk from Chinese-knockoffs.

The revenue from Greater China for Apple for last quarter was $2.6 billion, which was up 4x from the prior year quarter.

And to further, just an exclamation point by that, we did a little over $3 billion for the entire year, fiscal year 2010. And so we're very, very proud of the team and the results that we've gotten there. 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 if you're familiar with the Japanese economy and the growth there, to grow 83% on the base that we're doing is stunning.

Source: Conference call transcript, via Seeking Alpha

Competition for the iPad? Not really. Just crappy Windows tablets and Android vapor.

Well, and if you're look at what's shipping today, there's not much out there as you know.

And generally speaking, there's two kinds of groups today, that are at least on the market today. The ones that are using a Windows-based operating system are generally fairly big and heavy and expensive. They have a very weak battery life, they require a keyboard or a stylus as an input device. And from our point of view and what we've seen, customers, frankly, just are not interested in them.

Then you have the Android tablet, the variety that are out shipping today, the operating system wasn't really designed for a tablet. And Google has said this, and so this is not just an Apple view by any means. And so you wind up having a size of a tablet that is less than what we believe is reasonable or even one that would provide what we feel is a real tablet experience. And so basically, you wind up with kind of a scaled-up smartphone, which is a bizarre product in our view. Then you've got kind of a third group -- and so those are the two that are shipping today. And frankly speaking, it's hard for me to understand if somebody does a side-by-side with an iPad, I think some enormous percentage of people are going to select iPad there. Those are not tablets that we have any concern on. The next-generation Android tablets, which are primarily what you mentioned in terms of the CES, there's nothing shipping yet, and so I don't know. Generally, they lack performance specs, they lack prices, they lack timing. And so today, they're vapor. We'll assess them as they come out. However, we're not sitting still. And we have a huge first-mover advantage. And we have an incredible user experience from iTunes to the App Store, and an enormous number of apps and a huge ecosystem. And so we're very, very confident with entering into a fight with anyone.

Source: Conference call transcript, via Seeking Alpha

iPhone unit revenue is holding steady at $625--more than the iPad. This is remarkable in the personal electronics business.

I don't envision the overall iPhone ASP decreasing from the December quarter that we just completed to the March quarter that we're currently in...

Source: Conference call transcript, via Seeking Alpha

iPad cannibalising Macs? Sure, a bit. But whatever: Mac sales are growing much faster than the market. And with only a single-digit share of global PCs, enormous room for further growth

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. And so we did significantly better than the market in every major region, and we're very proud of that. 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.

The other point I would make is that if the iPad or tablets do cannibalise the PC market, keep in mind that we have low share of the PC market. And so the other guys lose a lot more, and we have a lot more to win because of that. And so honestly, cannibalization is not something that we are spending one minute on here.

Source: Conference call transcript, via Seeking Alpha

I think that the consumerization that you speak of, of the enterprise, is one of the megatrends that are occurring.

I think the most forward-looking CIOs are coming to the realisation 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. And so I see an enormous potential there. The numbers are already incredible.

And think about this, 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. Generally, enterprise is much slower and much more cautious and uses things that have been in the market for a long time. And I think to everyone's credit, they've seen the value of this from a productivity and creativity point of view, and they're really moving fast. And so I think we're just scratching the surface right now. In terms of inhibitors, the iPad has a huge advantage because as you probably remember, as we went to various different iOS releases, we always put in a huge chunk of enterprise feature. And so this isn't something that we just started focusing on. We started focusing on this before we shipped the first phone. And with the synergy that exists with the iOS between the different products, other products took the advantage of it, not just the product that had shipped on initially. And so I think there's a huge play here for us.

Source: Conference call transcript, via Seeking Alpha

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