Apple FY 2Q15 Earnings Call Notes

Along with everything else, was able to defy trend in PC market

“We also continue to defy the trend of declining global PC sales, with double digit Mac unit growth in a market that IVC estimates contracted by 7%.”

Sold 135m iPhones so far this fiscal year

“We’re now halfway through fiscal 2015 and our year to date results have been simply staggering. We sold over 135 million iPhones, 34 million iPads, and 10 million Macs in the first six months of the year. Our revenue has grown by 28% to over $132 billion, net income has increased 36% to over $31 billion, and EPS has grown by 44%.”

Cedars linking up with HealthKit

“Just this past weekend, Cedars-Sinai in Los Angeles turned on the largest HealthKit integration to date, giving more than 87,000 patients the ability to share their health and fitness data seamlessly with their MyCS link app, which syncs with their electronic medical record.”

Heavily using renewable energy

“The two data centers we’re building will run on 100% renewable energy from day one. This is just part of the work we’re doing to protect the environment and leave the world better than we found it.”

193B in cash, 171 of which is overseas. Borrowed in Swiss franc

“Let me now turn to our cash position. We ended the quarter with $193.5 billion in cash, plus marketable securities, a sequential increase of $15.6 billion. Over $171 billion of this cash was offshore. In the March quarter, we issued 6.5 billion U.S. dollar denominated notes and 1.3 billion Swiss franc denominated notes as we continue to diversify our global debt investor base.”

Big dividend payers

“We also understand that the dividend is very important to many of our investors and we’re raising it for the third time in less than three years. The quarterly dividend will grow from $0.47 per share to $0.52 per share, an increase of 11%. This effective with our next dividend, which the board has declared today and is payable on May 14, 2015 to shareholders of record as of May 11, 2015.

We believe this is a meaningful increase for those shareholders who value income, and we continue to plan for annual dividend increases going forward. With over $11 billion in annual dividend ”

FX impact was as expected. Will be another negative impact next Q

“And I mentioned during the call in January that we were expecting FX to have a negative impact on a sequential basis of about 100 basis points after the effect of the hedges.

And that is exactly what happened in our actual results. So that was pretty much in line with what we were anticipating. Of course, we expect this headwind to continue. And on a sequential basis, when we look into the June quarter, we expect to see another 40 basis points of negative impact from currency.”

Lots of switchers and first time buyers of iPhone

“we continue to see a higher rate of switchers than we have seen in previous cycles, and so we’re extremely excited about that. We also continue to see a reasonable percentage of first time buyers, particularly in some of the emerging markets. ”

Demand is greater than supply of the watch

“Right now, demand is greater than supply. And so we’re working hard to remedy that. We’ve made progress over the last week or so, and we were able to deliver more customers an Apple Watch over the weekend than we had initially anticipated.”

What’s driving R&D spend ahead of revenue

“When you look at our current product portfolio, it is much broader than it used to be. We’ve now developed two new iPhones over the year. We were not doing that a few years ago. Developed two iPads. And of course now we have the Apple Watch.

We’re also developing some core foundational technologies more in house now than we were in the past. And of course we’re also spending ahead of some of the products that will generate revenues in the future. So when you combined all these factors, that is the reason why you see these research and development increases year over year. Research and development is the core of the company. Innovation is the core of the company.”

About 1/5 of installed base has upgraded so far

“Our current estimate is that about 20% of the active installed base has upgraded to a 6 or 6 plus. And so as I look at that number, that suggests there’s plenty of upgrade headroom in addition to we want to keep inviting over as many switchers as we can. So between both of those and the first time buyers as well, it seems really, really good right now.”

I’m thrilled with how the watch has done so far

“I’m thrilled with it, Tony, so I don’t want you to read anything I’m saying any way other than that. So I’m not sure how to say that any clearer than that. And in any situation, whether it’s the watch or in the past on iPad or on iPhone, when demand is much greater than supply, it’s difficult to gauge exactly what it is.”

Probably gained 9 points of share in China

“the current estimates from Kantar are that that would mean that we would gain more than 9 points of share on a year over year basis. And so by everything I can see, we did extremely well.”

There has clearly been cannibalization of iPad, but we wont worry about that

“have we had cannibalization? The answer is yes. We’re clearly seeing cannibalization from iPhone and on the other side, from the Mac. And of course, as I’ve said before, we’ve never worried about that. It is what it is. That will play out, and at some point, it will stabilize. I’m not sure precisely when, but I’m pretty confident that it will.”

The iPad is still a very good business over the long term

“I think still I believe the iPad is an extremely good business over the long term. When precisely it begins to grow again I wouldn’t want to predict, but I strongly believe that it will.”