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Apple Q2 2010 conference call - live notes

iphone_business_model-400x400

Apple has announced their Q2 2010 financial results, including sales of 8.75 million iPhones, 10.89 million iPods, and $13.50 billion in revenue. We're now listening in to their conference call and updating any particularly relevant iPhone, iPod touch, and iPad news below:

  • Call beginning. Tim Cook and Peter Oppenheimer (Apple COO and CFO are there). No Steve Jobs (CEO)
  • Best non-holiday quarter ever (again)
  • Highest iPhone sales quarter ever. (wow).
  • Almost 3 million Macs. Starting with those. We'll take a nap until iPhone comes up...
  • iPod touch sales 63% year to year. Strong performance. Strongest growth rate in a while. Still over 70% share.
  • iTunes sales 1.1 billion, strong on music, video, apps.
  • 185,000 apps, over 4 billion downloads
  • iPhone grows more than 3x more than smartphone estimates over all.
  • Best quarter ever for iPhone (wow repeat).
  • 151 carriers in 88 countries.
  • IPhone again ranked first in JD Powers.
  • iPhone OS 4 this summer, developers thrilled.
  • iPad 3G on track to ship April 30 US, end of May international
  • Apple Retail up again as well.
  • (Retail results remind us why Apple doesn't need tradeshows anymore).
  • Strong iPhone and accessory mix contributed to results.
  • Over $40 billion in the bank now, up over $1 billion. Still keeping it in the bank.
  • (Going over numbers, we're waiting for the Q&A...)
  • Next quarter will include iPad revenue.
  • Q&A time!
  • What impact has the iPad had on the Mac? Any cannibalization? Cook: No obvious impact last quarter on Mac or iPod. iPad sales have exceeded expectations.
  • March step down due to iPad anticipation? Cook: [Not really.]
  • Any word on mix of iPad Wifi vs. 3G sales? Cook: Too early.
  • Low guidance for next quarter result of product change for iPhone (sneaky!): Oppenheimer: [long list of factors] Not much experience on seasonality of iPhone yet. Will report in July. iPad, thrilled... [yada yada boilerplate....]
  • Why was iPhone so strong? International? Cook: Inventory was flat. Staggering growth rates Asia Pac (474%), Japan (183%), Europe (133%). Added 8 carriers in key countries, Vodafone in UK, Ireland. Existing carriers strong. Greater China (PRC, HK, Taiwan) up year over year, 800 more points of distribution. 1st half 2010 revenue was $1.3 billion up 200%.
  • App Store and higher priced iPad apps? Oppenheimer: thrilled, [yada yada boilerplate]. 3500 iPad apps.
  • Production demand? Can produce, can ramp up? Cook: no production problem per se. Demand stronger than predicted. Had to push out international launch to get iPad 3G out in US. We'll see. Level of demand has shocked Apple.
  • iAd is profit or break even like App Store? Oppenheimer: putting toes in water, learning, building foundation.
  • AT&T network improvement plan? Cook: looking forward to continued improvement.
  • How much of growth came from new carriers? Cook: don't break that out but important.
  • Exclusive carrier thinking? How important is availability to any carrier in any country? Cook: 3 main countries with contractual exclusive US, Germany, Spain. Others have smaller, co-exclusive. Over last year, moved some from exclusive to non, in each case sales of increased and so has market share, but doesn't mean that'll be the same everywhere. Think carefully everywhere, what's in Apple's best interest.
  • iPad has dramatically lower margins than company average? Cook: don't give out specific product margins, but priced iPad aggressively to deliver value. Thinks market size for iPad is very large, want to capitalize on first mover advantage. Good track record of riding out cost curves. That's been their experience.
  • iPad subscription accounting like iPhone or regular like iPod? Oppenheimer: Will discuss that in July quarter when they discuss iPad revenue.
  • New hardware, new products, iPhone OS 4, new distribution, great marketing
  • Apple is more aggressive in protecting patents, legal expenses? Oppenheimer: factored into guidance.
  • International carriers 75% for last quarter? Learned anything about international market ramp-up? Cook: Smartphone market is great market to be in, high growth rate, iPhone outgrew market by 3x, even better outside US. Won't say anymore, doesn't want anyone to copy (zing!)
  • Apple TV, any update? Cook: up 34% year-over-year, still small, still a hobby. Market is much smaller than PC, smartphone, MP3 player. Those are enormous. Apple TV is not in a market that large yet. However, they love product, use it, think something's there.
  • iAd could be source of significant incremental earnings? Oppenheimer: toes in the water, don't expect much this calendar year, learning for future.
  • Will iPad cannibalize iPod touch or competing netbooks? Cook: nothing obvious in iPod or Mac numbers to suggest cannibalization but hadn't started selling yet so don't know yet. Can't answer netbook, to Cook its not brainer, 100 to 0, can't think of a single thing netbook does well. Cook addicted, couldn't live without it.
  • Why is iPad independent market? Why will Apple outpace other tablets, ebook readers? Cook: Steve positioned it extremely well, between notebook and smartphone. His personal use, variety of things he'd put on that list. Email, browsing, music, videos, tv shows, reading books, list goes on. App Store, ecosystem, games, large canvas, serious apps, less serious apps. More room to do cool things. Is new category. Early but really like what they see. Had high hopes, exceeded those.
  • With low end $99 iPhone, can Apple influence carriers on plan costs, TCO? Cook: do everything that they can to try and get best deal possible for consumer. iPhone 3GS mix was high, and that starts at $199. Price is important but people also want innovative product, apps, os, ecosystem, incredible hardware.
  • iPad attach rates for accessories relative to iPhone, iPod? Oppenheimer: accessory portfolio is good for us, 5000 accessories for iPhone, iPod largely work for iPad. Apple has some great ones. Developers rallying as well. Give it a little time.
  • [discussing Apple Store growth]
  • iPad will be reported similar to iPhone, line item on data summary. Revenue will be reported for unit and for accessories, also similar to iPhone.
  • iPad apps being bought differently than iPhone? Oppenheimer: very early days. Getting apps, getting books, great thing. Will talk more in future. Not focused on making a lot of money on App Store, run a bit over break even.
  • iPhone halo in Europe? Oppenheimer: Don't break it down.
  • iPhone is sales value in quarter of sale, no carrier payments, accessories, etc.
  • iPad bringing any new kinds of customers to Apple? Cook: too small a time, not something that could be read into.
  • Other extraordinary products in pipeline, new or updates? Oppenheimer: won't help competitors by answering.

Rene Ritchie

Editor-in-Chief of iMore, co-host of Iterate, Debug, Review, The TV Show, Vector, ZEN & TECH, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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Reader comments

Apple Q2 2010 conference call - live notes

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That ought to be interesting, but I think they should mention something about the iPhone 4G, not only the incident, but the whole thing, this will definitely plant confidence in the shareholders' hearts

Lol they won't answer a damn thing :) and they shouldn't let people go buy the supposed iPhone killers coming out, then in June make them regret it.

Might want to check those times...
Unless the Earth's reversed its rotation, Pacific time is generally earlier than Eastern time.

No doubt Xmas sales will be gang busters, but by that time there will be 9 tablets on the market and at least 6 new android phones.
You can still buy this stock towards Xmas but then you have to sell and take profits.

Two thoughts - one iPhone and one iPad. Based on their comments about ending exclusivity in some markets and the effect that it had almost makes me think that they're waiting for the right time to do Verizon just so they can keep their momentum. You know that adding another network with over 100,000,000 people will allow them to have a blow out quarter.
On the iPad and competitive pricing that's going to be a plus for them in the future. Apple really knows how to lower their component costs over time to improve margins. And what better time to do this then when you have $40 Billion in the bank. No doubt a shrewd move by the executive team at Apple.