Apple today announced their financial results for the second quarter of fiscal year 2013 (the months of January, February, and March). Apple brought in $9.5 billion in profit off of $43.6 billion in revenue. In previous years Apple offered conservative guidance on revenue and profits, though recently they made the switched to publishing a range into which they realistically expect the fiscal results to fall. And Apple's results easily fell within that range.
Those buckets of cash come courtesy of sales that included 37.4 million iPhones, 19.5 million iPads, and "just under 4 million" Macs. Apple historically has not broken down the individual models within these product categories, though reports from carriers indicate that the mix on iPhones has been a little over one half iPhone 5 and the rest split between the less expensive iPhone 4 and iPhone 4S.
“We are pleased to report record March quarter revenue thanks to continued strong performance of iPhone and iPad,” said Tim Cook, Apple’s CEO. “Our teams are hard at work on some amazing new hardware, software and services, and we are very excited about the products in our pipeline.”
While the results might have fallen short of analysts' lofty expectations (or beaten analysts' pessimism), Apple did exceed the results of the same quarter one year ago. For the record, Q2 2013 was up 11% from $39.2 billion in revenue and down 18% from $11.6 billion in net profits. Apple's consistently brought in billions of dollars in revenue and profits for quarter-after-quarter, though it remains to be seen whether today's results will be enough to satisfy investors and analysts. Given the pummeling the stock has taken over the past six months, we wouldn't be holding our breath.
As an added bonus to shareholders, Apple's increased the dividend for this quarter by 15% from $2.65 to $3.05. The company has also added $50 billion to their stock buyback program, which is now projected to spend $100 billion by the end of 2015. Thanks to the additional $9.5 billion in income from this quarter, Apple still has $145 billion in the bank with which to play.
As usual, a conference call with Apple execs is scheduled to kick off shortly. And as usual, we'll be following along to pass along to you any notes of interest that Cook and company drop. While we're waiting, are you satisfied with the latest additions to Apple's cash pile or did Wall Street's relentless hype machine get to you?
Apple Q2 2013 conference call notes of interest
- Tim Cook (TC): We know we haven't lived up to everybody's expectations. We acknowledge that our margins have slowed and our growth rates decreased. Our margins are closer to what they were a few years ago. Our results in 2012 were extraordinary, which makes comparisons difficult.
- TC: These comparisons are made difficult also thanks to the deliberate low margins of the iPad Mini launch.
- TC: Stock price decline has been frustrating to all of us, despite the strengths of Apple's business. Our most important objective will always be creating innovative new products.
- TC: Our teams are hard at work on exciting new products that we can't wait to release this year and through 2014.
- TC: Since we began our stock buybacks and dividends last year we've already returned $10 billion to shareholders. But we're still bringing in capital in excess beyond our needs. Apple is increasing its cash return program to $100 billion through 2015. The current dividend is being increased by 15%. We appreciate the input offered by shareholders.
- Peter Oppenheimer (PO): New March quarter records for iPhone and iPad sales, as well as quarterly revenue.
- PO: 37.4 million iPhones, and increased of 2.5 million over the last year.
- PO: Ended quarter with the target range of 4-6 weeks of inventory in channel.
- PO: Apple doing quite well in Japan. Captured the top sales position all year, the first time a non-Japanese company has done that.
- PO: Nearly 30,000 companies developing in-house corporate apps for their employees.
- PO: Sold 19.5 million iPads in the quarter, up 65% from the year prior.
- PO: iPad sales more than doubled in China and Japan from last year.
- PO: Sold significantly more iPad Minis this quarter than last, Apple was unable to reach iPad Mini demand during the December quarter.
- PO: Overwhelming number of iPad Mini purchasers are new iPad customers.
- PO: Apple sold nearly 4 million Macs over the quarter, down 2% from the year prior. The global personal computer is down 14% globally.
- PO: 5.6 million iPods, compared to nearly 8 million the last quarter. iPod Touch continues to compose the majority of those sales and iPod continues to dominate the dedicated MP3 player market.
- PO: iPad app count is up to 350,000. iOS app developers have been paid over $9 billion from Apple over the life of the iOS App Store.
- PO: iOS devices accounted for 77% of device activations for corporations.
- PO: More than 300 million using iCloud every day, with great new features and capabilities coming.
- PO: $5.2 billion in revenue from Apple Stores, up from $4.4 billion the year prior.
- PO: Expect to open 30 new stores and remodel 20 stores over the year.
- PO: Average revenue per store was $13.1 million.
- PO: Apple is one of the largest dividend payers in the US, paying out more than $11 billion a year.
- PO: Apple is exploring taking on debt to enable bringing in funds from overseas.
- Q: Why did income come in at the low end of projections?
- PO: There were some unfavorable adjustments and Apple had to spend significantly to get iPad Mini inventory up to desired channel levels of 4-6 weeks.
- Q: Is Apple hitting a wall in China?
- TC: We just had our best quarter ever in China, bringing in revenue of $8.8 billion. That's up 11% year-over-year. iPads grew 138% year-over-year with new records for sell-through for iPads and iPhones. We have 11 stores in China, and expect to double that in two years.
- Q: Why are iPhone average sale prices down?
- PO: It's due to mix, with more iPhone 4 sales in the sales mix and aggressive priced in developing markets. Average selling price for iPhones was down $23.
- TC: As you get further from a previous product launch there's a general lower mix than where it starts. All things being equal you'd expect to be seeing that on most of our products.
- Q: The smartphone market grew around 30%, while Apple's iPhone sales are up in the single digits. Is Apple focused on that expanding market share, and why is there a disconnect between Apple's products and the market data?
- TC: The numbers that we've seen from IDC would indicate that the tablet market in March decline 30% from the December holiday quarter while Apple only declined 15%. We did much better than the market.
- TC: On the phone side, we did grow channel inventory over the year ago quarter because we were "catching up" from the iPhone 5 launch. Normalized, if the smartphone market did grow 30% and we didn't measure up to that, we want to grow faster. What's important in addition to market growth is customer satisfaction, loyalty, and repurchase rates. We see an enormous market of potential smartphone buyers coming to market, so we've made the iPhone 4 even more affordable to make it more attractive to new buyers. "We believe that the phone for the price point that we're offering is an incredible value for people."
- Q: Has anything changed on your views of the 5-inch smartphone market?
- TC: My view continues to be that the iPhone 5 has the absolute best display in the industry. Some customers value large screen size, others value resolution, color quality, brightness, portability, and app compatibility. Our competitors have made some significant trade-offs in many of these areas. We will not launch a larger screen iPhone while these trade-offs exist.
- Q: You said something about new categories?
- TC: I did! We're very excited for new growth in potential new categories.
- Q: Is that in the next quarter or year?
- TC: I didn't say when. awkward silence
- Q: What are you hearing from your customers on why they're not buying a new Mac?
- TC: I think the reason that we were down 2% last quarter is that the market for PCs is incredibly week, it was down 14% year-over-year. At the same time we sold almost 20 million iPads. It's certainly true that some of those iPads cannibalized some Macs. What's likely happening is people are extending their upgrade cycles. I don't think this is a dead market - it has a lot of light in it, we're going to continue to innovate in it. The growth in iPads may end up benefiting the Mac. Our strategy of making the best computers isn't changing.
- Q: Have you considered spreading out product launches?
- TC: I would have pushed back the new iMac launch to the new year. But the iPad Mini launch I would not have changed because we were able to send millions and millions to customers who wanted them for the holidays.