Welcome to live coverage of Apple’s Q1 08 financial results conference call.
Notes will be presented in reverse chronological order beginning 2pm PT/5pm ET:
• End of conference call
• Education market has record; grew about 5 times IDC’s market forecast of 6%
• iPhone retail outlets: 2,500 in Europe; 2,100 in U.S. Apple has no comment today on expansion of iPhone in retail
• Mac available at 9,500 retail locations up from 7,700 a year ago
• Desktop Mac business increases? iMac “extremely well-received”
• Most of other component costs should see historical declines
• Apple expects DRAM and NAND flash will remain in oversupply condition
• Apple “very happy with all of the iPhone launches so far” (U.S., UK, France, Germany)
• 4 million iPhones to date; Apple “very happy with iPhone momentum”
• Apple sees iPhone unlocking as a “good problem to have” and is a sign of iPhone’s popularity
• “Significant” numbers of iPhones sold with intention to unlock, but Apple is unsure how to measure as activation waits sometimes for existing contracts to expire, etc.
• Mac was very strong throughout the quarter
• Apple expects to open 35-40 stores in fiscal 2008; 25 are outside U.S. currently; first Apple Retail Stores in China and more stores in 2008 will open outside U.S. than in 2007.
• Retail Stores: 504,000 units up 64% YOY
• Unit sales YOY for iPod flat in the U.S. (due to iPod touch intro; higher-priced line)
• Apple TV take two: “We think we have it right this time.”
• Apple plans to enter Asia and additional Euro countires with iPhone in 2008
• Apple Retail Store traffic up 10 million in quarter vs. year ago quarter
• Apple will focus on mananging the business and leave the economy predictions to others
• Apple will not discuss terms of their agreements with iPhone carriers
• Apple Japan: desktop share went from 6% to 10% YOY on very well-received iMac; iPod touch also very well-received
• Apple shipping Leopard on very MAc; contributing to great MAc sales results
• Apple’s expectations for Mac OS X Leopard in the March quarter? Sales will be down sequentially, unknown if it will follow same trend as Tiger
• MacBook Air orders are “very strong.”
• Apple believes MacBook Air is “very, very, very competitively-priced”
• Apple’s objective is to run iTunes Store just over break even as it helps to sell iPods and Macs
• Current 286 Best Buy stores have added to Mac momentum – to go to 600 Best Buy locations over the next 6 months
• iPod touch sacrificed overall unit growth (higher price), but APple is very pleased with product results
• Apple established iPod touch which has the potential to become “the very first mainstream mobile platform running all kinds of applications”
• iPod sales meet guidance and set new company record
• Some of iPod’s share gains are “stunning” in UK, Asia, elsewhere
• Apple expects normal sequential decline in iPod sales in upcoming quarter vs. holiday quarter
• Will MacBook Air add or cannibalize? Customer reaction great; orders very strong; too early to know cannibalization factor
• Apple gave guidance that they “have reasonable confidence in achieving”
• Very confident in business, strategy, and products; very confident in products; confident going forward
• Share buybacks? Apple prefers to keep strong balance sheet to make strategic moves and/or acquisitions
• Apple business grew 47% YOY outside U.S.
• U.S. revenue grew 27% YOY (higher than last year’s Q1 YOY growth)
• iPod ASP increased due to very successful of iPod touch
• iPod vs. iPhone cannibalization? UK, France and Germany – no evidence; In US, where iPhone has been available longest, cannibalization could have been one factor in iPod growth, but there were other factors (not discussed)
• Oppenheimer: iPod market is bigger than market for just simple music players. iPod will become first mainstream Wi-Fi mobile platform
• Mac channel target 4-5 week of inventory; entered significantly less than range as Mac sales were higher than expected
• Apple “very confident” of hitting 10 million iPhone goal for 2008
• Pro audio up very significantly YOY; Pro video performing very, very well
• Oppenhemier: “Mac business is on fire”
• Macs in channel are below target range
• Apple’s guidance rationale: up 29% year-over-year, sequential declines for Leopard and iWork software expected as we move away from release dates
• Apple “very confident” in product pipeline for the rest of 2008
• Apple “extremely proud” of outstanding results and growth achieved
• $1.4 billion in operating expenses
• Over 300,000 personal training sessions in retail stores
• Apple Retail Stores: over 50% of Mac buyers were new to Mac
• $1.7 billion in Apple retail store revenue; 204 stores now open
• iPod market share growing on Europe and Asia
• Recent iPod touch software upgrade will add functionality
• iPod touch could become first mainstream mobile platform
• iPod channel inventory within target range of 4-6 weeks
• $170 million in Leopard revenue; 19% of Mac users already using Leopard
• iMac sales “robust,” portable sales “strong.”
• Cash generation for quarter was roughly $3 billion
• Apple very please with recent software releases
• CFO Oppenheimer guides Q2 08: “revenue of about $6.8 billion and earnings per diluted share of about $.94.”
• Quarterly iPhone sales: 2.315 million
• 22,121,000 iPods sold during the quarter representing 5% unit growth and 17% revenue growth over the year-ago quarter
• Apple shipped 2,319,000 Macs representing 44% unit growth and 47% revenue growth over the year-ago quarter
• International sales accounted for 45% of the quarter’s revenue
• Gross margin was 34.7%, up from 31.2% in the year-ago quarter
• Revenue of $9.6 billion and net quarterly profit of $1.58 billion or $1.76 per diluted share vs. revenue of $7.1 billion and net quarterly profit of $1 billion, or $1.14 per diluted share, in the year-ago quarter
• Apple financial results for its Q1 08 ended December 29, 2007
• Those in attendance include CFO Peter Oppenheimer, COO Tim Cook
• Awaiting start of conference call
The conference call replay will be available here shortly: http://www.apple.com/quicktime/qtv/earningsq108/
