Apple Inc. (AAPL)
Q4 2010 Earnings Call Transcript
October 18, 2010 5:00 p.m. ET

Executives

Nancy Paxton – Senior Director, Investor Relations and Corporate Finance
Peter Oppenheimer – Senior Vice President and Chief Financial Officer
Steven P. Jobs – Chief Executive Officer
Timothy D. Cook – Chief Operating Officer

Analysts

Richard Gardner – Citigroup
Gene Munster – Piper Jaffray
Michael Abramsky – RBC Capital Markets
Benjamin Reitzes – Barclays Capital
Kathryn Huberty – Morgan Stanley
Toni Sacconaghi – Sanford C. Bernstein
Shannon Cross – Cross Research
Christopher Whitmore – Deutsche Bank

Presentation

Operator

Good day, everyone. Welcome to this Apple Incorporated Fourth Quarter Fiscal Year 2010 Earnings Release. Today''s call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Nancy Paxton, Senior Director of Investor Relations. Please go ahead, ma''am.

Nancy Paxton

Thank you. Good afternoon and thanks to everyone for joining us. Please note that some of the information you''ll hear during our discussion today will consist of forward-looking statements, including, without limitation those regarding revenues, gross margin, operating expenses, other income and expense, stock-based compensation expense, taxes, earnings per share and future products. Actual results or trends could differ materially from our forecast.

For more information, please refer to the risk factors discussed in Apple''s Form 10-K for 2009 as amended, the Forms 10-Q for the first three quarters of fiscal 2010 and the Form 8-K filed with the SEC today, along with the attached press release. Apple assumes no obligation to update any forward-looking statements or information, which speak as of their respective date.

And with that, I''d like to turn the call over to Apple''s CFO, Peter Oppenheimer, for introductory remarks.

Peter Oppenheimer

Thank you, Nancy. Thank you for joining us. We''re extremely pleased to report the conclusion of a great fiscal year for Apple with outstanding results for the September quarter. Our innovative product line up is the best ever and customer response has been tremendous. As a result, we set new all-time records for Mac, iPhone and iPad sales in the September quarter. And we are thrilled to report the highest quarterly revenue and earnings in Apple''s history.

Revenue for the quarter was $20.34 billion, an increase of more than $8.1 billion over the prior September quarter''s results, representing growth of 67%. The very strong growth was fueled primarily by record iPhone sales, the tremendous popularity of iPad and our best Mac quarter ever. Operating margin was $5.45 billion, representing 26.8% of revenue.

Net income was $4.31 billion, which exceeded our previous quarterly earnings record by $930 million and represented 70% growth over the year-ago quarter''s earnings. These results translated to earnings per share of $4.64.

Turning to the details of the quarter, I''d like to begin with our Mac products and services. We set a new quarterly record with sales of almost 3.9 million Macs, exceeding the previous record established in the June quarter by over 400,000. This represents 27% year-over-year growth, more than double IDC''s latest published estimate of 11% growth for the market overall in the September quarter.

We experienced strong double-digit growth in both Mac desktop and portable categories, lead by very strong sales of iMac, which was updated in July and the continued popularity of the MacBook Pro and MacBook. Mac growth was strong in each of our geographic segments, lead by Asia Pacific at 56% year-over-year and Japan at 49%. We began and ended the quarter with between three and four weeks of Mac channel inventory.

Moving to our music products, we sold nearly 9.1 million iPods compared to 10.2 million in the year-ago quarter. In September, we announced a great new line up of iPods for the holiday season, including our redesigned iPod shuffle featuring clickable buttons, the re-invented iPod nano with multitouch and the new iPod touch with retina display and FaceTime video calling.

iPod''s share of the U.S. market for MP 3 players remains over 70%, based on the latest monthly data published by NPD. iPod also continued to be the top-selling MP3 player and to gain share internationally in year-over-year in most of the countries we track, based on the latest data we publish by GFK. We remain within our target range of four to six weeks of iPod channel inventory on a look-back basis.