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Apple Inc Q4 2009 Earnings Call Transcript
Author: 123jump.com Staff
123jump.com
Last Update: 5:26 PM ET October 20 2009

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Apple Inc fourth quarter sales rose 25% to $9.87 billion and net income rose 46.5% to $1.67 billion or $1.82 a share.


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Turning to the details of our results, I would like to begin with our Mac products and Services. We generated outstanding Mac sales of $3.05 million beating our previous record set in the year ago quarter by over $440,000. The Mac is showing fantastic momentum, growing faster than the market is 19 of the past 20 quarters.

We believe this is the result of our unmatched innovation and commitment to providing customers with the best hardware, the best software, and the best user experience in the world. Quarterly Mac sales grew 17% year-over-year and this compares extremely favorably to IDC''s latest published estimate of 2% growth for the market overall in the September quarter.

Customers continue to respond very positively to our Mac portable lineup, which we updated in June. Portable sales increased 35% year-over-year and represented 74% of our Mac mix. Our execution in the quarter was outstanding and we were particularly pleased with the 42% year-over-year growth in our Asia-Pacific segment.

We once again had a very successful back-to-school season and were very pleased with the 12% year-over-year increase in Mac sales to U.S. education institutions, which resulted in the highest quarterly Mac sales ever for our U.S. education business.

The shipments to U.S. education institutions this quarter included 50,000 MacBooks to the state of Maine as part of its ongoing one-to-one initiative. Customer response to the August 28th release of Snow Leopard has been tremendous.

Through the end of the September quarter, we generated consumer box upgrade sales at twice the rate we experienced with the leopard release. Snow Leopard delivers hundreds of refinements, is the only operating system to support exchange out of the box and is successfully introduced Nucor technologies. Snow Leopard allows developers to take full advantage of hardware features including 64-bit technology, multi-core processors, and advanced graphics processing units. We began and ended the quarter with between three and four weeks of Mac channel inventory.

Now, I''ll turn to our music products. We sold almost 10.2 million iPods, which was down from just over 11 million in the year ago quarter. Our latest research indicates that 50% of recent iPod buyers were purchasing their first iPod, including those in our high market share countries such as the U.S., Japan, Australia, Canada, and the U.K. Customers love the recently announced iPod Nano''s new features including the built-in video camera, FM radio, pedometer and larger display.

Sales of iPod Touch grew strongly during the quarter up 100% year-over-year, fueled by a very successful back-to-school season and the continued incredible popularity of the App Store. With the new $199 entry price point for the iPod Touch and the updated features for the iPod Shuffle, Nano and Classic, we believe the iPod line up is attractively positioned for the holiday season.

Our share of the U.S. market for MP3 players remains at over 70%, based on the latest monthly data published by MPD and iPod was the top selling MP3 player, and continued to gain share year-over-year in nearly every country we tracked, based on the latest data published by GFK. We began and ended the quarter within our target range of four to six weeks of iPod channel inventory.

The iTunes Store delivered another great quarter with strong sales of music, video and Apps. Customers are loving last month''s release of iTunes 9 and its many new features including iTunes LP, home sharing and genius mixes, as well as improved syncing and the redesigned iTunes Store. With stores in 23 countries, iTunes is the world''s largest music retailer, now offering over 11 million songs in addition to over 50,000 TV episodes and 7500 films.

I would now like to turn to the iPhone. We are thrilled to have sold almost 7.4 million handsets in the September quarter. That''s a new company record and an increase of 7% over the prior September quarter, when we increased channel inventory by 2 million handsets following the introduction of the iPhone 3G and the dramatic expansion of geographic distribution. iPhone sell-through in the quarter increased 38% year-over-year.

Response to the new iPhone 3GS has continued to be tremendous and we were very pleased with JD Power and Associates announcement earlier this month that iPhone has once again topped the charts for both consumer and business SmartPhone customer satisfaction.

iPhone not only maintained its lead since the last JD Power report was issued six months ago, but it widened over the next closest competitor in both categories. We are looking forward to selling iPhones in China beginning later this month, as this very large market represents a great opportunity to expand iPhone''s reach even more broadly. We also plan to expand our carrier relationship in U.K. and Canada.

The App Store continues to be an unparalleled success with over 85,000 Apps available and over two billion customer downloads to-date, including over 0.5 billion downloads in the September quarter.

In addition to adding more Apps at an amazing pace, we''ve continued to enhance the App Store experience with iPhone OS 3.1, which includes new features such as genius recommendations and a streamlined way to organize Apps within iTunes. Recognized revenue from the iPhone handset sales, accessory sales, and carrier payments with $2.3 billion during the quarter compared to $806 million in the year ago quarter, an increase of 185%. The sales value of iPhones sold during the quarter was $4.5 billion.

I would now like to turn to the Apple retail stores. The stores had a record quarter, posting the highest revenue, segment margins, and Mac sales ever. Revenue in the quarter was $1.87 billion compared to $1.72 billion in the year ago quarter.

Our store sold 670,000 Macs compared to 596,000 Macs in the year ago quarter. About half of the Macs sold in our stores during the September quarter were to customers who had never owned a Mac before.

We opened 15 new stores during the quarter, bringing us to a total of 273. With an average of 262 stores open during the quarter, average revenue per store was $7.1 million, compared to $7.6 million in the year ago quarter.

Retail segment margin was $410 million, or 22%, up from $301 million, or 17.5% in the year ago quarter. We hosted 45.9 million visitors in our stores during the quarter compared to 42.7 million visitors in the year ago quarter, an increase of 7%. We hosted 608,000 personal training sessions and we sold 208,000 memberships to our one-to-one program, an increase of over 120% year-over-year.

Fiscal 2009 was a milestone year for our retail stores. In addition to opening 26 new stores, we remodeled 72 stores to our updated design and for the first time, we opened more stores internationally than in the United States. In November, we plan to open our first two stores in France, including one at the Louvre as well as our fourth high profile store in Manhattan on the Upper West Side.
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