Apple 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.

“[for the fiscal year] We generated record total company revenue of $171 billion, earnings of $37 billion and operating cash flow of $54 billion.”

“The smartphone category is expected to grow significantly in the next few years from about 1 billion units per year this year to over 1.7 billion in 2017. And the tablet market is growing at an even faster way from about 225 million units this year to over 400 million in 2017.”

“the number of unique listeners who have tried iTunes Radio is now 20 million and growing.”

“We are projecting a total of approximately 30 new store openings in fiscal year ’14, about two-thirds of which will be outside U.S”

“$111.3 billion or 76% of our total cash was offshore at the end of the September quarter”

“given that our capital return program must be funded from domestic cash, and as a result of our payments to date, the cash that we can net domestically and return to shareholders to stop accumulating. In fact we give return to shareholders who invested essentially all of the increase in available net cash generated since the beginning of our capital return program in 2012.”

“we’re pleased to be guiding gross margin about flat sequentially given all the new products that we have launched in the last few weeks. During the quarter we expect gross margin to benefit from the leverage on the substantial sequential increase in revenue. Offsetting these benefits we see a few factors including the higher deferred revenue relating to the software that I talked about in my prepared remarks. And as I said we expect the sequential increase in our deferral which is not only revenue but affects margin as well to be $900 million. Second, a richer mix of new iPad’s with higher cost structures and lower pricing. Third, FX headwinds primarily from the Yen and fourth, the new lower priced MacBook Pro and iMac which have higher cost structures and credit structures.”

“I realize that some people were reading rumors about that the entry phone would be the 5c, but that was never our intent obviously. Our entry iPhone is the iPhone 4s and as you know from comments that I’ve made previously we were selling the iPhone 4 in very good volumes and as we began to experiment in different regions at somewhat lower price points we saw a fair amount of price elasticity and so we’re hoping and thinking that, that will continue with the 4s.”

“I have said that you would see some exciting new products from us in the fall of this year and across 2014. And I obviously stand by that and you’ve seen a lot of things over the last couple of months.”

“we were able to launch in our first round this time in China and that was a big change in the result of a close work relationship with the carriers in China and the government”

“We have been deferring revenues for the sale of each iOS device and Mac given that we have been providing updates to software. Given the announcements that we made last week and that I went through it in my prepared remarks, we have actually increased those deferrals. iPhone and iPad, we are differing between $15 and $25. That’s up as much as $5 per device and Mac has been some $20 to $40, so up an additional $20…We will then record that revenue that we’ve deferred for iOS devices across a two year period of time ratably and for Max over a four year period of time.”

“I feel really good about the way the MacBook Pros have gotten off last week. They’ve gotten off to a huge start. I feel great about Mac growing year-over-year this quarter. I feel great about iPad growing year-over-year this quarter as well. You can tell that from the strong guidance numbers that Peter gave earlier.”

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