Apple FY 3Q13 Earnings Call Notes

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. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“We sold 31.2 million iPhones compared to 26 million in the year ago quarter, an increase of 5.2 million, or 20%”

“We had a sequential decrease of about 600,000 iPhones in channel inventory in the June quarter translating to iPhone sell-through of about 31.8 million units.”

“we were particularly pleased with very strong year-over-year growth in iPhone sales in a number of both developed and emerging markets including the U.S., UK, Japan, Brazil, Russia, India, Thailand and Singapore.”

“iPhone unit sales in the U.S. increased 51% compared to the year ago quarter and based on research recently published by comScore, iPhone once again achieved the number one spot in the U.S. smartphone market for the three months period ended in May with over 39% share. ”

“We built 1.2 million units of iPad channels inventory in the June quarter last year whereas we reduced channel inventory by 700,000 units in the June quarter this year. Factoring in this 1.9 million unit channel inventory swing, iPad unit sales were down 3% year-over-year.”

“Turning to Mac, we are pleased with sales of 3.8 million Macs, which is a 7% decline from the year ago quarter, but higher than our expectations. IDC estimates that global personal computer market contracted by 11% during the June quarter, indicating that Macs gained share.”

“The quarter’s iTunes billings translated the quarterly revenue of $2.4 billion, up 29% from the year ago quarter with strong growth in revenue in both content and apps.”

“We are on track to have a very busy fall. I would like to leave it there and go into more detail on October.”

“And I don’t subscribe to the common view that the higher end if you will the smartphone market is at it’s peak.”

“as I said on last quarter’s call, we expect that our margins to be down sequentially primarily for two reasons. The first is the low sequential revenue, so we lost leverage going from March to June, and we expected a different product mix. And as you can see, we reported very near the top end of that and feel good.”

“We were down 4% year-over-year on the iPhone ASP about $27, and that was primarily due to the mix of the products that we are selling and FX headwinds. As we anticipated iPhone 4 sales accelerated as we offered more affordable pricing in emerging and other markets, so that’s on a year-over-year basis”

“our sell-through in China was only down 4% from the year ago quarter when you normalized for channel inventory. Hong Kong was actually down more significantly. Mainland China was actually up year-over-year. It was up 5%, but that is the lower growth rate than we have been seeing and are attributed to many things including the economy there clearly doesn’t know help us or nor others.”

“What we have seen is that the number of first-time smartphone buyers that the iPhone 4 is attracting is very, very impressive. And we want to attract as many of these buyers as we can”

“both LCDs and HDDs have, the prices have fallen and we would expect further reductions in these areas and if you look at other commodities they appear to be in supply for an imbalance and so we would expect the pricing to decline on these sort of historical levels.”

“I think Peter alluded to earlier, we saw significant growth clearly in the lower price point year-over-year which for us is iPhone 4, it’s still a great product”

Apple FY 2Q13 Earnings Call Notes

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. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“We know that [our results] didn’t meet everyone’s expectations and though we’ve achieved incredible and scale financial success, we acknowledge our growth rate have slowed and our margins have decreased from the exceptionally high level we experienced in 2012.”

[the decline in Apple’s stock price] “over the last couple of quarters has been very frustrating to all of us”

“The most important objective for Apple will always be creating innovative products and that is directly within our control.”

“We will continue to focus on the long-term and we remain very optimistic about our future. We are participating in large and growing markets we see great opportunities in front of us”

“the smartphone market for example IDC estimates that this market will double between 2012 and 2016 to an incredible 1.4 billion units annually”

“iPhones garnered the number one spot in the U.S. smartphone market for the three-month period ended in February with 39% share, up from 35% in the previous (inaudible) period.”

“It’s also for the first time, a non Japanese company has achieved the number one spot [in the Japanese smartphone market] for an entire year.”

“We experienced strong year-over-year growth in desktop sales following the December quarter launch of our stunning new iMacs offset by a decline in portable sales given a [slow] personal computer market overall.”

“We see two factors impacting gross margins sequentially. First and the largest of the two is the loss of leverage around sequentially lower revenue, and second a different product mix.”

“I don’t want to be more specific, but I’m just saying we’ve got some really great stuff coming all in across all of 2014.”

“The iPhone ASPs were down sequentially…as you noted. And this was driven primarily by mix.”

“we see an enormous number of first time smartphone buyers coming to market particularly in certain countries around the world. And so what we’ve done with that is and we started last quarter is we’ve made the iPhone 4 even more affordable and has made it more attractive to first time buyers”

“We believe that if anything the huge growth in tablets may want of benefiting them back. It pushes people to think about the product of buying in a different manner and people maybe more willing to buy a Mac (inaudible) buying a PC. And so we are going to continue making the best personal computers, our strategy is not changing…So this is an area we are continuing to invest there.”

Apple Now Worth Just Slightly More Than Samsung, Microsoft, Google

With $AAPL now trading at just a little over $400 per share, the enterprise value of the company (market cap less net cash) has shrunk to levels which value the company at around the same price as three of its most comparable competitors: $GOOG, $MSFT and Samsung.  On a market cap basis, Apple still looks like it’s worth significantly more than its competitors, but that’s mostly because the cash pile is so unfathomably large that it skews the whole market value of the company.

Does Apple the enterprise deserve to be worth less than Google, a company that does 1/3 of it’s revenue?  Only time can tell.  Mathematically though as cash becomes a larger and larger percentage of Apple’s market value, each additional percent decline in the share price means a bigger and bigger discount to the value of Apple’s business.  Apple’s share price is down 6% today, but the enterprise value is down nearly double that.

Tech Enterprise Value

Comparing Apple’s Decline to the ’08 Crash Redux

This is an update to a piece I wrote about six weeks ago comparing Apple’s decline to the ’08 crash of the S&P 500.  Since the last post $AAPL has continued to decline at a similar rate to the one that the S&P 500 did between September and March of 2008-2009.

It might seem like there shouldn’t be much of a connection between the ’08 crash and Apple’s decline (maybe there’s not), but the ’08 crash is a decent proxy for a time in which retail investors came to the market determined to sell at any price.  Those were arguably people with similar motivations to the ones selling Apple today.  In 2008, it took six months for these investors to exhaust themselves.  If Apple’s decline unfolds over a similar timeframe, the sellers should be starting to get exhausted.

AAPL vs. S&P 500