World of Apple

On Monday, Apple reported a $904 million profit on revenue of $6.22 billion for its fiscal fourth quarter, $1.01 per diluted share. The results topped analysts’ expectations, which came in at $.86 per share.

During Apple’s Financial Results Conference Call the following information was garnered:

• Highest September Quarter revenue in Apple’s history
• Record quarterly Mac sales
• 32-percent growth in Desktop Mac segment
• 37-percent growth over previous quarter in Notebook sales
• 10.2 Million iPods shipped in the quarter, 17-percent growth year-over-year
• iTunes Store has sold 3 billion songs and 100 million TV shows
• iTunes Store continues to be third largest distrubtor of music in U.S. behind Wal-Mart and Best Buy
• 1.1 Million iPhones moved in fourth quarter
• iPhone has a positive user reaction with 95-percent saying they’d recommend the device to others
• Retail stores generated record quarterly revenue of $1.25 billion, 42-percent growth year-over-year
• As of the end of fourth quarter Apple had opened 197 stores, exiting the quarter with 12 new stores
• Average revenue per store is $6.6 million
• Apple noted that it will open 40 more stores in the coming year
• New stores in New York, Boston, and for the first time in China.
• For the December quarter Apple is targeting revenue of $9.2 billion with gross margin at 31 percent

Question and Answer highlights - Courtesy Blogging Stocks

• UBS asks. In regard to guidance, they seem more conservative. What are they seeing that makes Apple so confident with that $9.2 billion. Apple replies that with the best products shipping, just eclipsed Mac sales record, iPod sales have accelerated after the transition, and the iPhone is doing well. Apple exited the Sep. quarter really well.
• Piper Jaffrey “congratulations.” Gene Munster is asking about iPhone revenue share. Apple recognizes revenue from handset sales over 24 month period of time on a daily basis. Revenue from iPhone was $118 million in the quarter. Won’t get into detail about carrier agreement.
• Best Buy stores, how many are up and running? 230 operating at the end of Sep. quarter. 270 expected by end of Dec. quarter. The impact it’s had: Apple is pleased, good results, looking forward to expanding.
• Gartner of Citigroup is asking about channel inventory. Likes how low it is.
• David Bailey of Goldman Sachs. What about the pricing strategy in Europe as it goes up as the dollar weakens? Apple says they set the price when they announced, it includes VAT and other duties. Direct sales were 57% of revenue, up from the previous quarter.
• Morgan Stanley: Europe outgrew the US. What’s up there? Apple, year over year Europe has been doing well. It’s 4 times the IDC expected gain.
• Shannon Cross asks about revenue again, and what the biggest drivers quarter over quarter are. Mac, or iPod. Apple replies: the holiday quarter is the big quarter for iPods, and Apple is shipping the best for the December quarter. Apple thinks sales accelerated after the iPhone price reduction, selling 1.1 million, for a total of 1.4 million.
• Bear Stearns: when are we going to hit 3 million iPhones sold? Apple: we’re selling these things faster than iPods, and we’re in Europe, and we’re going to be hitting Asia in ‘08.
• What about Japan, which has been lagging for some time? Japan continues to be Apple’s most challenging market. The only market they’re not growing in. However Mac sales are doing well, best year over year in 7 quarters. iPod had a difficult compare due to a large sale to a telecom company there.
• Lehman Brothers asks about the rebate issue with the iPhone. In regards to the $100 credit it will be accounted when the customers redeem, and charge it to costs of goods sold. Most are expected to be redeemed by the end of December.
• Stanford Bernstein asks about price elasticity in regards to the iPhone rebate. How did the price cut impact sales? Apple: happy with elasticity. Enabled Apple to surpass the 1 million end of quarter goal. Some have been sold to people with intention to unlock, guess that 250,000 of the 1.4 million sold that intend to unlock, many of those after the price cut.
• Apple: saw an acceleration once the price cut happened.
• RBC Capital Markets: can you talk about Mac momentum and shifters? Apple: had an incredible record, breaking record by 400,000 units, and twice as many macs as done in ‘04. Best macs being shipped in history, and incredible reception in the new iMac. Third, 120 million iPods sent mostly to Windows users. Over 50% of Macs sold are to new Mac users. All these lead to momentum that gives 11 quarters of the last 12 that Apple has grown faster than the market.
• iPods shipping to Windows drives Mac sales. In Europe will iPhone and iPod sales help boost Mac sales? Apple: we’ll see. Would point out that European business in the Mac area grew 47%.
• Bank of Montreal: how does Apple think about increasing its sales via channels? Apple: Asia/Pacific is the fastest growing region. Have added over 2,000 retail points.
• 2g versus 3g phone in going into Asia. Apple won’t say anything.
• Pacific West Securities asks about video content on iTunes and whether it’s changed due to the increasing amounts of content out there. Apple: we have the largest library of content available to customers, over 5 million songs, 500 movies, hundreds of TV shows.

Apple has announced Monday that fourth-quarter profits rose 66 percent to $904 million, or $1.01 per diluted share, on sales of $6.22 billion for the three-month period ended September 29, 2007.

Apple shipped 2,164,000 Macintosh® computers, representing 34 percent growth over the year-ago quarter and exceeding the previous quarterly record for Mac® shipments by 400,000. The Company sold 10,200,000 iPods during the quarter, representing 17 percent growth over the year-ago quarter. Quarterly iPhone™ sales were 1,119,000, bringing cumulative fiscal 2007 sales to 1,389,000.

“We are very pleased to have generated over $24 billion in revenue and $3.5 billion in net income in fiscal 2007,” said Steve Jobs, Apple’s CEO. “We’re looking forward to a strong December quarter as we enter the holiday season with Apple’s best products ever.”

“Apple ended the fiscal year with $15.4 billion in cash and no debt,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the first quarter of fiscal 2008, we expect revenue of about $9.2 billion and earnings per diluted share of about $1.42.”

Apple will hold a conference call discussing its fourth quarter 2007 financial results and a look forward at 2008.

The audio webcast which can be listened to online will begin at 2:00 p.m PT / 5:00 p.m. ET (10.00 p.m. BST)

Apple is widely expected to reports of 93 cents per share with sales of iPod being between 9 and 11 million units for the quarter. Mac shipments of 2 million, iPhone shipments are also estimated to be around 1 million for the quarter.

According to Forbes.com Apple has spent $720,000 lobbying the federal government in the first half of this year.

The computer company reportedly lobbied Congress on legislation designed to update the United States patent system. Trade groups for high-tech industries favor legislation that would help weed out bad patents by allowing companies to re-evaluate them after they are granted. The groups say this could help companies avoid financial burden of defending patents in lengthy court cases.

Apple also supported bills that would increase funding for technology in education and provide tax breaks for companies spending funds on research and development.

Apple Chief Executive Steve Jobs increased his stake in Apple Inc. by 120,000 shares when he purchased them on Monday.

Jobs purchased the additional shares on Monday for $5.75 each, making the total purchased worth around $15 million.

Following the transaction, Jobs stake in Apple included 5,546,451 shares. Those shares, as of Monday, were valued at over $700 million.

At this very moment Apple is webcasting its conference call for all to listen. World of Apple will offer a breakdown of this key points and some of the Q and A’s on this page.

Call Notes

• Another record breaking quarter in Apple history
• Highest revenue in June quarter ever
• Highest Mac sales in a quarter ever
• Mac business represents ~60% of Quarterly revenue. 33% Growth year-over-year growth.
• Sales of Mac notebooks grew 42% year-over-year.
• Music Business represents ~40% of Quarterly revenue.
• iTunes is reported to be third largest music retailer in US
• Apple says it sold 270,000 iPhones in first 30 hours of sales
• AT&T had iPhone activation problems at first but all is well now
• Based on surveys, people love their iPhones. 90% of iPhone owners were Extremely or Very satisfied with their phone. 85% Extremely or Very Likely to recommend the iPhone to others
• Apple intends to sell 1 million iPhones by end of 4th quarter (September 29)
• iPhone coming to “select” European countries in Q4
• Apple’s goal is to sell 10 million iPhones in calendar 2008
• Plan on incorporating new Software and Features into iPhone over time.
• Will begin to receive payments from AT&T in the future quarters.
• Subscription accounting on iPhone and Apple TV sales.

Questions and Answers

Q: More details on iPhone sales?
A: We’ve gotten off to a great start. Focus is not on initial sales, but instead a long term business. Our perspective is measured in years, not months. Reward is huge. Apple has the skill that makes us confident to succeed. iPhone in Europe next quarter in a few select countries. It took Apple almost 2 years to sell one million iPods, we expect to sell one million iPhones in the first full quarter.

Q: See any shortages in iPhone components?
A: Almost all AT&T and Apple Retail stores have the iPhone in stock and we are shipping units off of Apple.com in 1-2 days. We’ve included our expectations of long term supply/demand in our projections.

Q: You mentioned no payment from AT&T this quarter, can you clarify that comment?
A: We can’t go beyond it and won’t discuss the terms of the agreement. We will recognize revenue eared from AT&T over time.

Q: How to model AT&T revenue share?
A: Can’t comment on it.

Q: In the near term, how do you think about the initial wave of iPhone sales.
A: 270,000 in the 30 hours laster quarter. What we’ve seen so far gives us a lot of confidence we can sell 10 million iPhones in 2008.

Q: In addition to payments from AT&T are you getting any other payments for placement of applications on the iPhone?
A: We don’t discuss it.

Q: How’s the Best Buy rollout? Did it contribute to Mac sales?
A: Around 50 stores at the beginning last quarter, around 75 at the end. Over 200 by end of this quarter. 300 by end of calendar year.

Q: iPhone price points? Should we assume we’ll have a family of Phones?
A: We believe the iPhone offers tremendous value that customers couldn’t even imagine before. It’s 3 products in one.

Q: Any seasonality in the iPod and Mac?
A: June quarter begins education buying season. June -> September seasonality has been mixed. In terms of the iPod, we’ve learned that what drives the product is innovative new features and holiday seasonality.

Q: You see any slowdown in sales prior to Leopard?
A: We’ll have to see, but last quarter we sold more Macs than ever.

Q: iPod cannibalization from iPhone?
A: Haven’t seen any in the June quarter, but will monitor it.

Q: Are there thoughts about addressing corporate email on the iPhone?
A: We think that the iPhone is a breakthrough product for all customers including business customers. With very little help from the IT department, it will work.

Q: Store Openings?
A: We expect to open 12 stores in the September Quarter to end the year with 197 stores. We’ve not set a target for 2008 openings.

Q: Apple TV Units?
A: We don’t announce that level of product detail.

Q: Is there any high level commentary with regard to the learning experiences with launching the iPhone?
A: We’ve only been at this a few weeks. We’re very much beginners at this, so every day there’s something to learn. We’re interested in building the business to the next level.

Apple today announced its third financial quarter results. Profits of the company rose a staggering 73 percent to $818 million, or $0.92 per diluted share, on sales of $5.41 billion.

The results compare to revenue of $4.37 billion and net quarterly profit of $472 million, or $.54 per diluted share, in the year-ago quarter. Gross margin was 36.9 percent, up from 30.3 percent in the year-ago quarter. International sales accounted for 40 percent of the quarter’s revenue.

“We are very pleased to report strong financial results including cash flow from operations exceeding $1.2 billion for the quarter,” said Apple chief executive Peter Oppenheimer. “Looking ahead to the fourth fiscal quarter of 2007, we expect revenue of about $5.7 billion and earnings per diluted share of about $.65.”

During the quarter APple shifted 1,764,000 Macs representing a 33 percent increase year on year. Apple also sold 9,815,000 iPods during the quarter representing a 21 percent growth over the year-ago quarter.

“We’re thrilled to report the highest June quarter revenue and profit in Apple’s history, along with the highest quarterly Mac sales ever,” said Apple chief executive Steve Jobs. “iPhone is off to a great start — we hope to sell our one- millionth iPhone by the end of its first full quarter of sales — and our new product pipeline is very strong.”

Apple will today release its earnings for financial Quarter 3 of 2007. The results are expected to “wow” wall street but yesterdays iPhone figures from AT&T have shaken up some analysts.

It is important to note that yesterdays announcement from AT&T was based on just 30 hours of sales due to AT&T’s financial quarter ending the day after iPhone sales began.

In an interview following AT&T’s conference call AT&T Chief Financial Officer Rick Lindner said that “Apple will report a larger number than 146,000 for iPhone sales.”

Apple shares fell 6.1 percent yesterday, after analysts said demand was slowing.

Investors may have overreacted, said James Grossman, a fund manager at Thrivent Financial for Lutherans in Appleton, Wisconsin. “I watched firsthand the complete hysteria early on,” said Grossman, who helps manage $65 billion including Apple stock, and waited in line for an iPhone himself. “I find the 146,000 to be shockingly low given what I saw. I don’t think that reflects the sales.”

Apple may have sold 200,000 phones in the quarter, Piper Jaffray analyst Gene Munster said yesterday. That’s in line with his initial estimates and compares with the 500,000 projected by some analysts after weeks of anticipation, said Munster. RBC Capital Markets said today that the AT&T figures may be misleading and Apple may have sold as many as 450,000.

It is widely expected for Apple to announce earnings of $654 million or 72 cents per share, this is up from $472 million or 54 cents per share a year ago. Sales are predicted to increase 22 percent to $5.32 billion.

Apple is being said to have shipped around 1.7 million Macs, but iPod sales are expected to drop to 9.6 million units down from 10.5 million in the second quarter of 2007.

This Wednesday Apple will announce its 3rd Financial Quarter results via a public conference call.

The call will take place at 2:00 p.m. PDT/5:00 p.m. EDT/10.00 p.m. BST.

In the broadcast Apple will announce the results of its third financial quarter of 2007 which runs from April 1st to June 30. Most will note that the iPhone was only on sale for 1 day of the quarter and therefore it is unknown how much Apple will disclose about sales.

The conference call will be available via webcast.

World of Apple will provide analytical coverage before the conference call on July 25, we will also be offering live coverage during the conference call.

Apple had made a last minute decision to snap up the domain name iPhone.com.

Jay Westerdal of Name Intelligence has written on his blog that Apple has purchased iPhone.com from domain owner Michael Kovatch for what could be “at least a million dollar sale.”

Kovatch reportedly bought the domain in 1995 but in recent years has used it for an online mobile phone store called “The Internet Phone Company,” thus giving him the legal write to use the domain and refuse any offers Apple made.

Since January and the inception of the iPhone, traffic to iPhone.com has reportedly skyrocketed.

“That domain was so valuable that Apple just had to own it,” Westerdal wrote on his blog. “The headaches would have just compounded had they not owned the domain.”

Although the exact details of the deal are unknown the domain currently points to Apple’s servers.