Apple 3Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

26% growth in iPhone

“Demand for iPhone was strong across all geographies with global unit sell-through growth of 26% and we exited the quarter with significant backlog for both iPhone 6 and 6 Plus”

18% growth in Mac thanks to portables

“We established an all-time quarterly record for Mac sales with revenue growing 18% year-over-year, thanks in particular to the very strong performance of our portables”

Contraction in PC market means highest market share since 1995

“We’re especially proud of our Mac results considering the overall contraction of the global PC market this year and we achieved our highest quarterly market share since 1995.’

App store revenue grew 36%

“App Store revenue grew 36% over last year and cumulative app downloads have now topped 85 billion.”

Made 7 acquisitions last quarter

“We brought tremendous new talent and technology into Apple through 20 acquisitions in fiscal ’14 including seven alone in the September quarter.”

Mac sales driven by back to school

“We saw great demand in the back-to-school season for both desktops and portables with especially strong growth for MacBook Pro and MacBook Air.”

Particularly strong mac sales in emerging markets

“We achieved double-digit Mac growth across most markets around the world, with particularly impressive performance in emerging markets where Mac sales were up 46%.”

Cash declined by 10B

“We ended the quarter with $155.2 billion in cash plus marketable securities, a sequential decline of $9.3 billion. We are continue to execute our capital return program aggressively with the total spend of over $20 billion in just the September quarter.”

Returned $94 B so far

“e’ve already taken action on over $94 billion of our $130 billion capital return program including $68 billion in share repurchases with five quarters remaining to its completion.”

Apple watch sales aren’t going to be broken out on their own. Will be included in the same line item as beats

“we will begin to include iPod sales in the other products category and we will also reflect sales of Apple Watch in this line item once it begins shipping in early calendar 2015.”

Privacy is a big concern

“many people that have entered mobile payments are doing still in a way that they want to monetize the data that they collect from the customers and we think customers in general do not want this that they’d like to keep their data private. And so, we wanted to have ease of use, security and privacy and maximize all three.”

There are commercial terms between apple and the banks

“we do not charge the customer for the benefit. We do not charge the merchant for the benefit. However, there are commercial terms between Apple and the issuing banks, but we’re not disclosing what they are, like any other contractual arrangement those are private things.”

Stronger dollar didn’t have a huge impact on Q4 but is becoming a significant headwind in q1

“When we looked at our Q4 results actually the impact was fairly limited combination of the hedging program and the fact that the dollar really strengthened towards the very end of the quarter.

Not much impact in Q4. It is becoming a significant headwind in Q1 both on a year-over-year basis and on a sequential basis.”

USD strength creates headwinds

“it’s a fact of life if the U.S. dollar strengthens, that creates a headwind for us both in revenue and margins for our business outside the United States.’

The protection from hedging is temporary

“As you know, we have a comprehensive hedging program in place that mitigates the impact of foreign exchange. Over time, of course, these hedges roll off and get replaced by new hedges at new spot levels, and so the protection that you get from hedging program is temporary.”

Thinking we’ll get favorable margin impact from iPhone mix

“e think we’re going to be getting favorable impact from iPhone mix.”

We sold 2x more iPads than iPhones in the first 4 years

“If you look at, instead of looking at this thing each 90 days, if you back up and look at it, we’ve sold 237 million in just over four years. That’s about twice the number of iPhones that we sold over the first four years of iPhone”

50-70% of people buying iPads are still first time buyers. People hold onto an iPad longer than they hold onto an iPhone

“n the last market research data we have is in the June quarter, and let me give you some of this — the real data that we’ve got. is that if you look at our top six revenue countries, in the country that’s sold the lowest percentage of iPads to people who had never bought an iPad before that number is 50%.

And the range goes from 50 to over 70. And so when I look at number, our first time buyer rates in that area, it is saturated, that’s not a saturated market. You never have first time buyer rates at 50% and 70%. What you do see is that people hold on to iPad longer than they do a phone.”

I’m sure there will be cannibalization, but I’m fine with that

“There are obvious cannibalization; things that are occurring. I’m sure that some people looked at the Mac and iPad and decided on a Mac. I don’t have research to demonstrate that, but I am sure that will be just looking at the numbers and I am fine with that by the way.

I am sure that some people will look at an iPad and an iPhone and decide just to get an iPhone and I’m fine with that as well”