Apple fourth quarter earnings conference call (live blog) | CNET

Apple fourth quarter earnings conference call (live blog)

Join CNET for live coverage of Apple's fourth fiscal quarter conference call.

  • Roger Cheng 10/25/2012 9:21:10 PM
    The iPad Mini will also be added, and is priced "aggressively," he says.
  • Roger Cheng 10/25/2012 9:21:29 PM
    Oppenheimer says the gross margins on the iPad Mini is significantly lower than corporate advantage.
  • Roger Cheng 10/25/2012 9:21:58 PM
    He notes margins on new products are lower than predecessor, iPhone 4S and iPhone 4 have lower costs, the anticipated volume will generate greater deferred revenue.
  • Roger Cheng 10/25/2012 9:22:16 PM
    Apple defers revenue on products like iPhone, and amortize the revenue over the life of the product.
  • Roger Cheng 10/25/2012 9:22:30 PM
    The favorable items that benefited margins in the last quarter won't repeat in the next quarter, he says.
  • Roger Cheng 10/25/2012 9:22:38 PM
    We'll work hard to get costs down as we have in the past, he says.
  • Roger Cheng 10/25/2012 9:23:01 PM
    To be in a position to anticipate more than $50 billion in revenue is incredible, he says.
  • Roger Cheng 10/25/2012 9:23:22 PM
    CEO Tim Cook chimes in, says he won't cut corners on Apple's products. That's the driving force behind the company.
  • Roger Cheng 10/25/2012 9:23:28 PM
    "We're managing the company for the long run."
  • Roger Cheng 10/25/2012 9:23:35 PM
    "We remain confident in our strategy," he says.
  • Roger Cheng 10/25/2012 9:23:46 PM
    Cook says he'll use expertise to "delight customers."
  • Josh Lowensohn 10/25/2012 9:24:00 PM
    Next question from Goldman Sachs. How are you thinking about the supply ramp for the iPhone 5 in the quarter, and how's the demand?
  • Josh Lowensohn 10/25/2012 9:24:12 PM
    Cook: The demand for iPhone is extremely robust. We're thrilled with what we see.
  • Josh Lowensohn 10/25/2012 9:24:55 PM
    Cook: We are in a significant amount of backlog right now. Output has improved significantly since last month. I am pleased with the current level of output with what has been the biggest production run in Apple's history.

    I'm feeling confident on our ability to supply a lot of iPhones.
  • Roger Cheng 10/25/2012 9:25:48 PM
    Next question: A follow-up to rampup of iPhones. Do you continue anticipating rolling out to all 100 countries as previously announced? Can you comment on whether the supply constraints have had a material impact on cost of goods sold?
  • Roger Cheng 10/25/2012 9:26:16 PM
    Cook: We still continue anticipate rolling out to 100 countries, which is the faster roll out ever. We anticipate hitting that goal.
  • Roger Cheng 10/25/2012 9:26:49 PM
    Cook: With each new product, we see learning curves when ramping up production. This isn't any different with our new products. The difference is that there are so many different products launching at once.
  • Roger Cheng 10/25/2012 9:27:13 PM
    Cook: I don't see those costs accelerating on a per-unit basis. I see it as a production ramp across many new products.
  • Roger Cheng 10/25/2012 9:27:48 PM
    Follow-up question: Over time, do you see tablet market evolving to larger tablets going forward to address different needs?
  • Josh Lowensohn 10/25/2012 9:28:08 PM
    aka "hey Tim, are you making a bigger iPad too?!"
  • Roger Cheng 10/25/2012 9:28:22 PM
    Cook: We don't comment on future views on products.
  • Roger Cheng 10/25/2012 9:28:46 PM
    Cook: We continue to be confident the tablet market will surpass the PC market. There's incredible development in ecosystem and products in tablet.
  • Roger Cheng 10/25/2012 9:28:53 PM
    "It's already extremely compelling," he says.
  • Roger Cheng 10/25/2012 9:29:24 PM
    The PC market is an enormous opportunity for Apple, Cook says. We do think the iPad mini, iPad, and iPad 2 will be all extremely attractive offerings in lieu of PCs.
  • Roger Cheng 10/25/2012 9:29:37 PM
    Cook: We will continue to focus on future of iPad, and confident with what we have in the pipeline.
  • Roger Cheng 10/25/2012 9:29:46 PM
    Cook: We can't wait to start selling the first units.
  • Josh Lowensohn 10/25/2012 9:30:03 PM
    Next question comes from Cross Research: Whats going on in China?
  • Josh Lowensohn 10/25/2012 9:31:10 PM
    Cook: In terms of what we've seen in China, revenue was $5.7B, Mac was up 47 percent. We launched portables for the first time there in July a month after U.S. launch. iPhone was up 38 percent for the quarter. That brings us to a full fiscal year revenue number of $23.8b in China, up $10b year over year, and now represents 15 percent for the fiscal year.
  • Josh Lowensohn 10/25/2012 9:31:50 PM
    Cook: We're continuing to invest in our own retail stores there, and extending our channel distribution., and continue to see it as a more exciting market.

    Follow up question: Hey, Microsoft Surface -- how does Apple compete with that?'
  • Josh Lowensohn 10/25/2012 9:32:08 PM
    COok: I haven't personally played with a Surface yet, but what we're reading about it, is that it's a failrly compromised, confusing product.
  • Josh Lowensohn 10/25/2012 9:33:04 PM
    Cook: One of the toughest things you do with what product to make is to make hard trade-offs and decide what a product should be, and we've really done that with the iPad, so the user eperience is incredible. I suppose you could design a car that flies and floats, but I don't think it would do all of those things very well.

    So when people look at the iPad vs. competitors, they're going to say they want an iPad, and that's what they've done today and I think they'll continue to do that.
  • Roger Cheng 10/25/2012 9:33:33 PM
    Next question: Can you go through a bit more on tablets and how the iPad Mini will do? How do you want to differentiate it from the iPad? Will it sell better than the original?
  • Roger Cheng 10/25/2012 9:34:00 PM
    Cook: We don't have old products, just new ones, referencing the new fourth-gen iPad.
  • Roger Cheng 10/25/2012 9:34:36 PM
    Cook: We've learned over the years to not fear cannibalization. We'd rather do it ourselves than let someone else do it.
  • Roger Cheng 10/25/2012 9:34:58 PM
    Cook: The big opportunity is the PC market. A great number of people buying a PC are better off buying an iPad or Mac.
  • Roger Cheng 10/25/2012 9:35:23 PM
    Cook: I don't look at it as cannibalizing ourselves, but the broader market as an opportunity.
  • Roger Cheng 10/25/2012 9:35:32 PM
    Follow-up on Apple TV
  • Roger Cheng 10/25/2012 9:35:43 PM
    Cook: We sold 1.3 million Apple TV units.
  • Roger Cheng 10/25/2012 9:36:05 PM
    It was almost double the previous year, he says. The business continues to do well, but the revenue size is quite small.
  • Roger Cheng 10/25/2012 9:36:14 PM
    Cook still labels Apple TV as a hobby, but a beloved one.
  • Roger Cheng 10/25/2012 9:36:26 PM
    We still believe there's something there and sees where it takes us, Cook says.
  • Josh Lowensohn 10/25/2012 9:36:54 PM
    Next question from Gene Munster from Piper Jaffray. Asks about the iPad slowdown.
  • Josh Lowensohn 10/25/2012 9:38:10 PM
    Cook: The first thing to note there is that the June quarter contained 1.2M increase in channel inventory, so the actual sell through sequentially looks very different than the sell-in numbers.

    But the actual result actually beat out what we thought it would do. Normally we would see a seasonable reduction in the Sept. quarter versus the June because K-12 typically buys in June but not September because it's a higher education buying habit (they buy mostly notebooks, Cook says).
  • Josh Lowensohn 10/25/2012 9:38:52 PM
    Cook: All that's versus the quarter right after we announce the new product in March. Also, it's clear people delayed purchases due to new product rumors, and these intensified in August and September. SOme of that was anticipated, and some of that I wish would not occur, but it did occur. So that would explain the sequential difference.
  • Josh Lowensohn 10/25/2012 9:39:35 PM
    Cook: Year over year, with the channel inventory build as we stock everything to the proper level, it actually grew 44 percent year over year. We continue to feel great about how iPad has done, and with announcing the 4th gen iPad this week and adding iPad mini to the family we think it's going to be an incredible holiday season.
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