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Liveblog: Apple's Q2 2013 Earnings

Liveblog: Apple's Q2 2013 Earnings Call

Apple is set to reports its Q2 2013 earnings at 10pm GMT today. Will we see a repeat of last years quarter with shares tumbling 10% or maybe we are just in for a surprise.  Apple Fan Site will be live blogging the earnings call below and will start at 2:00 p.m. PT / 5:00 p.m. ET / 10:00 p.m GMT.


Jordan Crosby
April 23, 201310:03 pm

and thats a wrap! Stayed tuned to http://www.MacReviews.com for more coverage of Apple’s Q2 2013 earnings


Jordan Crosby
April 23, 201310:00 pm

because we were able to get iPad mini out to millions of customers who really wanted that product for the holidays


Jordan Crosby
April 23, 201310:00 pm

for the iPad mini, which was in shortage during Dec. quarter, I would not have done that differently


Jordan Crosby
April 23, 201310:00 pm

Tim Cook: if we could run it over, I’d announce the iMac after the turn of the year because we felt customers had to wait too long for that product


Jordan Crosby
April 23, 201310:00 pm

Q: You talked about Dec. quarter had a big & broad product refresh. Were there any learning points from that? Maybe it’s better to stage and stagger out launches?


Jordan Crosby
April 23, 20139:59 pm

iPad now is being used in 95% of the fortune 500 and what’s even more impressive is that the global 500, we’re now at 89%


Jordan Crosby
April 23, 20139:59 pm

honestly I don’t see the recent announcements changing that at all


Jordan Crosby
April 23, 20139:58 pm

Tim Cook: we’re doing really well. iOS accounted for 77% of activations for corporate customers (Good Technologies). That doesn’t include Blackberry but it does include all the other guys


Jordan Crosby
April 23, 20139:58 pm

Question regarding the Tablet market: competitors are talking about wins in the enterprise. What have you heard from customers? Have you seen much displacement?


Jordan Crosby
April 23, 20139:58 pm

We delivered some incredible innovation last year with the retina display in the MacBook Pro


Jordan Crosby
April 23, 20139:57 pm

we’re going to continue to make the best personal computers


Jordan Crosby
April 23, 20139:57 pm

We’re going to continue to innovate in it. We believe that the huge growth in tablets may end up benefitting the Mac


Jordan Crosby
April 23, 20139:57 pm

that said, I don’t think this market is a dead market or a bad market by any means


Jordan Crosby
April 23, 20139:56 pm

In that time we sold almost 20 million iPads and it’s certainly true that some of those iPads cannibalized some Macs, but I personally don’t think it was a huge number


Jordan Crosby
April 23, 20139:56 pm

Tim Cook: I think the reason we were down last quarter (down 2%) was that the market for PCs is incredibly weak


Jordan Crosby
April 23, 20139:56 pm

Q: Can you talk about what you’re thinking in the Mac market versus the PC market? You outperformed the competition but still not by much. What are you hearing from customers in terms of reluctance to buy a new Mac?


Jordan Crosby
April 23, 20139:53 pm

Peter: Nothing specific, but we’re very fortunate to have the largest and broadest ecosystem in the world. We have App Stores in 155 countries and iTunes stores in over 110 countries


Jordan Crosby
April 23, 20139:53 pm

Q: You mentioned new services and improving existing services. Are there any other key apps that you guys have that you’ll leverage into new services?


Jordan Crosby
April 23, 20139:53 pm

Tim Cook: I didn’t announce a specific time frame but…..


Jordan Crosby
April 23, 20139:53 pm

I did mention. I said one of our areas for growth is a potential new category


Jordan Crosby
April 23, 20139:52 pm

Q: You mentioned about new product categories?


Jordan Crosby
April 23, 20139:52 pm

we will not ship a larger display iPhone while these tradeoffs exist


Jordan Crosby
April 23, 20139:52 pm

our competitors have made some significant tradeoffs in many areas in order to ship a larger display


Jordan Crosby
April 23, 20139:52 pm

Tim Cook: my view continues to be that iPhone 5 has the absolute best display in the industry. We always strive to create the best display for our customers.

Some customers value large screen size. Others value other factors, such as resolution, color quality, light balance, brightness, reflectivity, longevity, power consumption, compatibility with apps, many things


Jordan Crosby
April 23, 20139:51 pm

Q: What is your reaction to the 5″; phone market at this time versus 3 months ago? Has anything changed in your view about its place in the smartphone world versus your 4″; product?


Jordan Crosby
April 23, 20139:50 pm

We remain very confident


Jordan Crosby
April 23, 20139:50 pm

we were thrilled to receive $4 billion in revenues for our services for the first time


Jordan Crosby
April 23, 20139:50 pm

some of our revenues & profits occur after we ship our products


Jordan Crosby
April 23, 20139:50 pm

we’re willing to make short-term tradeoffs in profits where we see long-term potential


Jordan Crosby
April 23, 20139:49 pm

looking back, we’ve made very good business decisions balancing units, revenues, and the bottom line


Jordan Crosby
April 23, 20139:49 pm

another one is iPad mini. We priced it aggressively and its margins are significantly below the corporate average but we believe in the tablet market and think we’ve made a great strategic decision


Jordan Crosby
April 23, 20139:49 pm

which then inspired us to build the iPhone


Jordan Crosby
April 23, 20139:49 pm

four years later, that and iTunes comprised half of Apple’s revenues


Jordan Crosby
April 23, 20139:49 pm

iPod is a great example. Margins were very low when it was launched in 2001


Jordan Crosby
April 23, 20139:49 pm

we’re managing the business for the long-term and are willing to trade off short-term profits for long-term potential


Jordan Crosby
April 23, 20139:49 pm

Peter: it has been our long-term practice to not provide specific gross margin guidance past the June quarter there are many factors that could influence gross margins for the quarter


Jordan Crosby
April 23, 20139:48 pm

Peter: it has been our long-term practice to not provide specific gross margin guidance past the June quarter there are many factors that could influence gross margins for the quarter


Jordan Crosby
April 23, 20139:48 pm

Q: Can you comment on gross margin beyond next quarter? What does it say about long-term gross margins if 36-37% is the margin you’re calling for when your highest-margin product is at a trough for the year is there an implied margin philosophy here with the margin guide? Does it get better from there? Is there nothing we should imply on how the company views gross margins?


Jordan Crosby
April 23, 20139:47 pm

We believe the phone for the price-point we’re offering is an incredible value for people which allows them to get in to the eco system


Jordan Crosby
April 23, 20139:47 pm

what we’ve done with that is that we’ve made the iPhone 4 even more affordable


Jordan Crosby
April 23, 20139:46 pm

we see an enormous number of first-time smartphone buyers coming to market particularly in certain countries around the world


Jordan Crosby
April 23, 20139:46 pm

we see an enormous number of first-time smartphone buyers coming to market particularly in certain countries around the world


Jordan Crosby
April 23, 20139:46 pm

If you then look at our usage stats they’re staggering


Jordan Crosby
April 23, 20139:45 pm

the things that are very important to us include customer satisfaction, customer loyalty and repurchase rates


Jordan Crosby
April 23, 20139:45 pm

the point is not lost. We do want to grow faster. We don’t view it as the only measure of our health


Jordan Crosby
April 23, 20139:45 pm

however, I take your point though, if the market went up 30%, after normalization we grew less than that


Jordan Crosby
April 23, 20139:45 pm

we were catching up on the rollout of the iPhone 4S


Jordan Crosby
April 23, 20139:44 pm

sell-in comparisons year over year, you really have to look at the sell-through


Jordan Crosby
April 23, 20139:44 pm

On the phone side …..


Jordan Crosby
April 23, 20139:44 pm

obviously on iPad we continue to have an ecosystem story that is unbelievable. 350,000 apps optimized for iPad versus a few hundred for our competition


Jordan Crosby
April 23, 20139:44 pm

so if that holds, we did much better than the market and had a very nice pickup in March


Jordan Crosby
April 23, 20139:44 pm

As you can see we declined 15%


Jordan Crosby
April 23, 20139:44 pm

the numbers we’ve seen from IDC show they believe the market in March declined by 30% from December


Jordan Crosby
April 23, 20139:44 pm

Let me start with tablets


Jordan Crosby
April 23, 20139:43 pm

Tim Cook: you mentioned both smartphones & tablets


Jordan Crosby
April 23, 20139:43 pm

Q: you talked earlier about how you were excited about the large addressable markets that you have, and how strongly & confidently you feel about competitive advantages. If I step back and look at the data for this quarter on the phone side, adjusting for inventory, iPhone was up low-to-mid single digits it appears very unlikely Apple will grow at the market rate of 30% or more. Can you comment on A) whether a loss in market share is something Apple is focused on as a principle financial objective, and if so, why is there a disconnect between very attractive products and the market data?


Jordan Crosby
April 23, 20139:39 pm

I have incredible confidence. We exited march quarter with no shortages


Jordan Crosby
April 23, 20139:38 pm

Q: Can you talk a bit about supply chain? Some concern about product limitations late last year. What’s your confidence level in the supply chain as you move to new vendors over time?


Jordan Crosby
April 23, 20139:38 pm

A: I don’t want to be more specific, but I’m just saying we’ve got some really great stuff coming in the fall and across all of 2014


Jordan Crosby
April 23, 20139:37 pm

Q: You alluded to fall announcements of products. Does that indicate there are no substantial new products until September?


Jordan Crosby
April 23, 20139:37 pm

Peter: We plan to begin buying shares under the authorization this month


Jordan Crosby
April 23, 20139:37 pm

Q: how are you thinking about the pace of your buyback program? what factors are you going to consider to determine purchase timing?


Jordan Crosby
April 23, 20139:36 pm

we have the best ecosystem by far


Jordan Crosby
April 23, 20139:36 pm

we feel really confident about our product pipeline in hardware, software, and services


Jordan Crosby
April 23, 20139:36 pm

we feel really confident about our product pipeline in hardware, software, and services


Jordan Crosby
April 23, 20139:36 pm

we feel we have the best products by far


Jordan Crosby
April 23, 20139:36 pm

Tim Cook: The smartphone market has always been competitive the names have changed. In the beginning, RIM was the strongest player because the smartphone really got going in the enterprise area. Today, our top competitor in hardware is Samsung married to Google on the OS side


Jordan Crosby
April 23, 20139:35 pm

Q: Can you comment on the competitive landscape: how has it changed, how has it surprised you, etc.?


Jordan Crosby
April 23, 20139:35 pm

we’ve seen a significant interest in iPhone 4 there and have recently made it even more affordable to make it attractive to those first-time buyers


Jordan Crosby
April 23, 20139:34 pm

We are currently adding different functionality to our online store for China


Jordan Crosby
April 23, 20139:34 pm

We expect to double the amount of retails store in china in the next 24 months


Jordan Crosby
April 23, 20139:33 pm

a year ago, we launched the iPhone 4S with China Unicom in January and China Telecom in March this year, iPhone 5 launched in December


Jordan Crosby
April 23, 20139:32 pm

Tim Cook: we had our best quarter ever in greater China with
revenue came in as $8.8 billion that includes our retail stores in that region which is up 11% YOY. The highlights for the quarter in China is that iPads grew 138% year on year


Jordan Crosby
April 23, 20139:32 pm

Question to Tim, growth slowed this quarter. What’s your perspective on Apple hitting a wall in China? Any thoughts around the stickiness of customers in China ?


Jordan Crosby
April 23, 20139:30 pm

Q: Given gross margins were on the low end of guidance and you have another downtick in June, what are the biggest factors that are limiting margin recovery?

A: In the march quarter, our gross margin was 37.5 percent, at the low end of our range, we had a few items that, on balance, resulted in us reporting the low end


Jordan Crosby
April 23, 20139:30 pm

Q: Given gross margins were on the low end of guidance and you have another downtick in June, what are the biggest factors that are limiting margin recovery?

A: In the march quarter, our gross margin was 37.5 percent, at the low end of our range, we had a few items that, on balance, resulted in us reporting the low end


Jordan Crosby
April 23, 20139:30 pm

The call is now open to questions, time for things to get interesting


Jordan Crosby
April 23, 20139:29 pm

proud of our ecosystem, and new all-time record for iTunes sale also fortunate to more than double our capital returns program


Jordan Crosby
April 23, 20139:29 pm

In closing: we are pleased with revenues and iPhone & iPad sales


Jordan Crosby
April 23, 20139:29 pm

ONIE to be about $300 million and tax rate about 26%


Jordan Crosby
April 23, 20139:29 pm

OpEx expected to be between $3.85 to $3.95 billion


Jordan Crosby
April 23, 20139:28 pm

we expect gross margins to be 36 to 37 percent


Jordan Crosby
April 23, 20139:28 pm

Revenue between $33.5bn – $35.5 billion


Jordan Crosby
April 23, 20139:28 pm

Now to review the outlook


Jordan Crosby
April 23, 20139:27 pm

We are continuing to generate significant cash offshore


Jordan Crosby
April 23, 20139:26 pm

very proud that Apple is one of the largest dividend payers in the world


Jordan Crosby
April 23, 20139:26 pm

Now talking about dividends, share repurchases, etc. More information here: http://www.mac-reviews.net/100bn-to-be-returned-to-shareholders-by-the-end-of-2015-as-apple-more-than-doubles-capital-retrun/


Jordan Crosby
April 23, 20139:24 pm

cashflow from operations was $12.5 billion


Jordan Crosby
April 23, 20139:24 pm

paid $2.5 billion in dividends


Jordan Crosby
April 23, 20139:24 pm

over $102 billion of total cash was offshore at the end of this quarter


Jordan Crosby
April 23, 20139:24 pm

ended the quarter with $144.7 billion in cash and marketable securities


Jordan Crosby
April 23, 20139:24 pm

Now talking about cash


Jordan Crosby
April 23, 20139:24 pm

average revenue per store was $13.1 million


Jordan Crosby
April 23, 20139:23 pm

17,500 visitors per store per week (average)


Jordan Crosby
April 23, 20139:23 pm

average revenue per store was $13.1 million


Jordan Crosby
April 23, 20139:23 pm

expect to open 30 new stores total in FY2013


Jordan Crosby
April 23, 20139:23 pm

We are now talking about retail stores


Jordan Crosby
April 23, 20139:21 pm

Good Technologies found iOS devices account for 77% of all activations by its corporate customers


Jordan Crosby
April 23, 20139:21 pm

In enterprise iOS devices have a strong lead over Android


Jordan Crosby
April 23, 20139:21 pm

Annual app store sales approaching $100 million


Jordan Crosby
April 23, 20139:21 pm

$4.5 billion in the most recent four quarters alone in developer revenue


Jordan Crosby
April 23, 20139:19 pm

Developers have created more than 850,000 iOS apps


Jordan Crosby
April 23, 20139:19 pm

The iBookstores has 1.75 million iBooks for sale


Jordan Crosby
April 23, 20139:19 pm

Music stores in 119 countries


Jordan Crosby
April 23, 20139:19 pm

new quarterly revenue records for music, movies, and apps


Jordan Crosby
April 23, 20139:19 pm

The quarter’s iTunes billings translated to record revenue of $2.4 billion


Jordan Crosby
April 23, 20139:18 pm

$16 billion annual run rate


Jordan Crosby
April 23, 20139:18 pm

Our iTunes Store offers the broadest combo of geographic reach and content depth in the industry


Jordan Crosby
April 23, 20139:18 pm

This sunday marks the 10th anniversary of the intro of the iTunes Music Store


Jordan Crosby
April 23, 20139:18 pm

The Apple ecosystem continues to grow and thrive


Jordan Crosby
April 23, 20139:18 pm

iPod touch continues to make up more than half of iPods sold


Jordan Crosby
April 23, 20139:17 pm

sold 5.6 million iPods compared to 7.7 million a year ago


Jordan Crosby
April 23, 20139:17 pm

Now talking about iPod


Jordan Crosby
April 23, 20139:17 pm

ended the quarter with 4-5 weeks of backchannel inventory


Jordan Crosby
April 23, 20139:17 pm

strong YOY growth in desktop sales


Jordan Crosby
April 23, 20139:17 pm

IDC estimates the global PC market contracted by 14% during the march quarter


Jordan Crosby
April 23, 20139:17 pm

sold just under 4 million Macs, a 2% decline from a year ago


Jordan Crosby
April 23, 20139:17 pm

Now talking about Mac


Jordan Crosby
April 23, 20139:17 pm

I was really surprised to see my local car service using iPads in all their cars


Jordan Crosby
April 23, 20139:16 pm

We are delighted with the number of companies choosing iPad for their important business tasks


Jordan Crosby
April 23, 20139:15 pm

this sequential increase places us within our target range of 4-6 weeks of iPad channel inventory


Jordan Crosby
April 23, 20139:15 pm

we were not able to meet demand for iPad mini in the December quarter


Jordan Crosby
April 23, 20139:15 pm

majority of iPad mini users are first time buyers


Jordan Crosby
April 23, 20139:15 pm

customers love the experience, performance, and size the iPad mini offers


Jordan Crosby
April 23, 20139:15 pm

sell significantly more iPad minis in the march quarter than during the holiday quarter


Jordan Crosby
April 23, 20139:14 pm

both iPad & iPad mini continue to be very popular


Jordan Crosby
April 23, 20139:14 pm

that’s an increase of 65%


Jordan Crosby
April 23, 20139:14 pm

19.5 million iPads this quarter


Jordan Crosby
April 23, 20139:14 pm

Now on to iPad


Jordan Crosby
April 23, 20139:14 pm

Now talking about corporate iphones


Jordan Crosby
April 23, 20139:13 pm

last month we were pleased to receive #1 ranking in customer ratings


Jordan Crosby
April 23, 20139:13 pm

A 95% loyalty rate among iPhone owners


Jordan Crosby
April 23, 20139:13 pm

IDC ranked iPhone #1 or #2 in over half the countries IDC tracks


Jordan Crosby
April 23, 20139:12 pm

Net income was $9.5 billion


Jordan Crosby
April 23, 20139:12 pm

sold 37.4 million iPhones


Jordan Crosby
April 23, 20139:11 pm

Strong growth in iPad and iTunes sales


Jordan Crosby
April 23, 20139:11 pm

Tim Cook is now speaking out about giving capital back to investors more info here: http://www.mac-reviews.net/100bn-to-be-returned-to-shareholders-by-the-end-of-2015-as-apple-more-than-doubles-capital-retrun/


Jordan Crosby
April 23, 20139:09 pm

Tim Cook: We have a lot more products in the works


Jordan Crosby
April 23, 20139:09 pm

Our teams are hard at work on some amazing new hardware, software, and services that we can’t wait to introduce.


Jordan Crosby
April 23, 20139:08 pm

Tim Cook: We have a lot more products in the works


Jordan Crosby
April 23, 20139:08 pm

We have a focus on making world changing products


Jordan Crosby
April 23, 20139:08 pm

Decline in Apple’s stock price over the last couple quarters had been very frustrating to all of us


Jordan Crosby
April 23, 20139:07 pm

Tim Cook: “We strategically priced the iPad Mini at a lower price range”


Jordan Crosby
April 23, 20139:06 pm

average weekly growth has slowed to 19%


Jordan Crosby
April 23, 20139:05 pm

We have sold 85m iPhones and 42m iPads


Jordan Crosby
April 23, 20139:04 pm

Cook: We have a lot of news to talk with you about


Jordan Crosby
April 23, 20139:02 pm

The call has now started, we are on standby.


Jordan Crosby
April 23, 20139:02 pm

APPL earnings call is currently 2 minutes behind and should begin soon.


Jordan Crosby
April 23, 20138:53 pm

Welcome to our Liveblog for Apple’s Q2 2013 Earnings Call


Jordan Crosby
April 23, 20133:00 am

The Liveblog will start at 2:00 p.m. PT / 5:00 p.m. ET / 10:00 p.m GMT

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