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Apple Third Quarter Earnings Call
Author: 123jump.com Staff
123jump.com
Last Update: 10:11 AM EDT July 26 2007

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Revenue rose 24% from a year ago to $5.41 billion, while gross margins climbed to 36.9% from 30.3% a year earlier. Apple sold 1.76 million Mac computers during the latest quarter, up 33% from last year’s levels. IPod sales increased by 21% to 9.8 million units. A total of 270000 iPhones were sold within two days. Fourth quarter projections were conservative with revenue at $5.7 billion and EPS at 65 cents.

Investors Question and Answers

 
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Source: Company filings    Q1:December  Q2:March  Q3:June  Q4:September
 
Peter Oppenheimer: It is due to the back-to-school promotion, higher commodity and some product transitions.

Ben Reitzes (UBS): What is the status with respect to sales on the iPhones?

Timothy Cook: We sold 270,000 units in the first 30 hours. A 90% of iPhone owners were extremely with the iPhone. However, we are focused on building a third business over the long term, alongside our Mac and iPod businesses.

Ben Reitzes (UBS): Do you see any shortages for iPhone components?

Timothy Cook: All AT&T stores and Apple retail stores have the iPhone in stock so we have included our view of longer-term supply and demand in our projections.

Shannon Cross (Cross Research): Explain why there are no payments from AT&T this quarter versus the next quarter?

Peter Oppenheimer: We will recognize payments from AT&T as revenue over time as earned.

Shannon Cross (Cross Research): Is there anything else in the deferred revenue line?

Peter Oppenheimer: It is just the hardware revenue for both iPhone and Apple TV.

Gene Munster (Piper Jaffray): Do you think the current run rate is sustainable?

Timothy Cook: We expect to sell the one millionth iPhone by the end of September and we are confident of selling 10 million iPhones in 2008.

David Bailey (Goldman Sachs): Can you clarify on the different pricing in the gross margin commentary?

Peter Oppenheimer: We experienced a more stable pricing environment and more favorable product mix.

Richard Gardner (Citigroup): Can you update us on the Best Buy roll out?

Timothy Cook: It’s going very well and we expect to be over 300 units by year end.

Richard Gardner (Citigroup): How do you see component prices trending for the categories in the third quarter?

Timothy Cook: We see the NAND flash market tightening, the DRAM market stabilizing and on LCDs, an imbalance between supply and demand.

Toni Sacconaghi (Sanford Bernstein): Did the 270,000 iPhone shipments include shipments to the channel?

Peter Oppenheimer: Most of AT & T stores were stocked out during the initial launch. However, there would have been some inventory in transit to AT&T at the end of the quarter.

Richard Farmer (Merrill Lynch): Should we assume that over time you will have a broader line and lower price points and a family of phones to choose from?
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