Apple Inc. (AAPL
Fiscal Third Quarter Earnings Conference Call
July 24, 2012 5:00 p.m. ET
Nancy Paxton – Investor Relations
Peter Oppenheimer – SVP and CFO
Timothy D. Cook – CEO
Kathryn Huberty – Morgan Stanley
Bill C. Shope – Goldman Sachs
Ben Alexander Reitzes – Barclays Capital
Shannon Cross – Cross Research
Toni M. Sacconaghi – Sanford C. Bernstein & Co
Andy Hargreaves – Pacific Crest Securities
Gene A. Munster – Piper Jaffray
Mark A. Moskowitz – JPMorgan Securities
Chris Whitmore – Deutsche Bank Securities
Shaw Wu – Sterne, Agee & Leach Group
Brian Marshall – ISI Group
123Jump.com Quick Overview
Apple Inc reported record quarterly sales and income but there were some cloud on the margin.
Apple did not face the parts shortages it faced in the previous quarter but its channel stuffing in China was ahead of its expectations. The company also battled weaker than expected sales in continental Europe and higher dollar impacted sales in Australia, Canada and Brazil.
What was surprising to most investors was the sequential decline in Apple sales in China. Last quarter the company left the impression that mainland China sales are growing rapidly, but most of that turned out to be selling to carriers for inventories and the follow-on sales were significantly weaker than.
However, most companies will be thrilled to have Apple’s problem where Apple’s latest iPad is selling at the fastest growth rate than any of its other successful products like iPod and iPhone. But, the company did overestimate the demand for iPhone in China and failed to admit it.
- Revenue in the quarter increased 23% to $35 billion.
- The $6.5 billion increase in revenues was driven by strong growth in iPad and iPhone sales.
- Operating margin was $11.6 billion, representing 33% of revenue.
- Net income increased 21% to $8.8 billion.
- The quarterly net income was diluted earnings per share of $9.32.
- Apple sold 4 million Macs, a new June quarter record and represents annual 2% growth, compared to IDCs latest published estimate of 1% contraction of the global pc market in the June quarter.
- Apple last month updated the entire MacBook line with faster processors, graphics, memory, flash storage and USB 3.0 connectivity and introduced the all-new 15 inch MacBook Pro with Retina Display, all flash architecture and quad core processors.
- Apple is enjoying a tremendous momentum for the iPad sales in education channel and also experienced record quarter for U.S. education institution Mac sales with portables representing nearly three quarters of total Mac sales.
- Rutherford County, North Carolina purchased 6,000 MacBook Airs and Pueblo Colorado School District 70 where all high school students and K-12 staff in the 22 School District will convert to MacBook Air.
- Apple began and ended the quarter with between three and four weeks of Mac channel inventory, which is below Apple’s target range of four to five weeks.
- Apple will release Mountain Lion, the ninth major release of OS X with more than 200 features and simplifying content organization across all devices.
- Apple sold 6.8 million iPods compared to 7.5 million in the year ago quarter and iPod Touch continue to account for over half of all iPod sold.
- iPod share of the U.S. market for MP3 players remained at over 70% based on the latest monthly data published by NPD and iPod continue to be the top selling MP3 player in most countries based on the latest data published by GfK.
- Apple ended the quarter within the target range of 4-to-6 weeks of iPod channel inventory.
- The iTunes Store generated very strong results in the quarter with revenue of over 1.8 billion, thanks to continued strong sales of music, apps and other content.
- Apple also launched the iTunes Store in 12 countries including Hong Kong, Singapore, and Taiwan last month with more than 20 million songs.