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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 9:28:53 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.
  • Josh Lowensohn 10/25/2012 9:39:52 PM
    Follow up on margins: as these devices become more expensive, would you be okay with passing on increases to customers?
  • Josh Lowensohn 10/25/2012 9:40:20 PM
    Cook: It's a hypothetical question. We think we made great choices on the products and the prices, and our longstanding customary practice is to just guide for this quarter, so I wouldn't want to talk about what we'd do beyond that.
  • Roger Cheng 10/25/2012 9:40:51 PM
    From JP Morgan: How does iPad revenue growth work with sequential revenue growth forecast?
  • Roger Cheng 10/25/2012 9:41:17 PM
    Oppenheimer again focuses on that extra 14th week for next quarter.
  • Roger Cheng 10/25/2012 9:41:44 PM
    Oppenheimer: We have just announcement amazing new products, and we expect huge sequential increases. We are thrilled about the outlook.
  • Roger Cheng 10/25/2012 9:42:26 PM
    Follow-up question on how the devices will be launched.
  • Roger Cheng 10/25/2012 9:42:46 PM
    Cook: We planned a roll out initially across 30 initial countries with two different dates.
  • Roger Cheng 10/25/2012 9:43:23 PM
    Cook: As we go on, we plan the launches in advance, but it's not a precise science. We plan those with several weeks of notice. Occasionally, it can be different than what we think (in regards to product roll outs across different countries).
  • Josh Lowensohn 10/25/2012 9:43:33 PM
    Next question comes from UBS on iPad pricing. Can you talk about pricing philosophy?
  • Josh Lowensohn 10/25/2012 9:44:18 PM
    Oppenheimer: When we set out to build the mini, we didn't set out to build a small, cheap tablet. We set out to build a smaller iPad that delivered the full iPad experience. The result is that the difference is "profound"

    Now going over specs like the 7.9-inch screen, dual cameras....
  • Josh Lowensohn 10/25/2012 9:45:12 PM
    And other specs like A5 chip, dual-band Wi-Fi, and "fit and finish" of the "breathtaking" unibody enclosure.

    "So that's what we've done," he says. It has a higher cost, and the gross margin is "significantly below" and "at the height of the cost curve," however that's something the company is trying to bring down.
  • Roger Cheng 10/25/2012 9:45:44 PM
    As Apple works to lower the costs associated with the iPad Mini, you can expect a more aggressive discount over time.
  • Josh Lowensohn 10/25/2012 9:46:32 PM
    Cook adds: One of the things we try to do is create a product that people will love for months and years and continue using it in a robust way. SO that's what iPad mini has been designed to do. You can see that more broadly on the iPad by looking at the usage stats. Like I said earlier this week more than 90 percent of the Web usage comes from the iPad. That's versus competitors tablets where people buy it and stop using it.

    I would encourage you to use an iPad mini, and I don't think you'll use anything else than an iPad mini after.
  • Josh Lowensohn 10/25/2012 9:47:16 PM
    Follow up question about enterprise. Cook says Apple has almost all of the Fortune 500 using iPads, and is pushing for the Global 500. Above 80 percent for both iPhone and iPad, Cook says. "There's clearly much more to do,but I'm feeling pretty good about it."
  • Roger Cheng 10/25/2012 9:47:41 PM
    Bank of America: Wants details on the component environment and possible constraints.
  • Roger Cheng 10/25/2012 9:48:08 PM
    Cook: On iPad and iPhone, I don't see a component shortage that would hurt numbers given in the guidance.
  • Roger Cheng 10/25/2012 9:48:25 PM
    Cook: We solved some challenges there and feel good about it.
  • Roger Cheng 10/25/2012 9:48:34 PM
    Cook: The iMac will be constrained.
  • Roger Cheng 10/25/2012 9:48:58 PM
    There will be a short amount of time in the quarter to manufacturer and ramp up the iMac, he says, warning of significant shortage.
  • Roger Cheng 10/25/2012 9:49:13 PM
    We are extremely bullish on demand with our guidance, he says.
  • Josh Lowensohn 10/25/2012 9:50:50 PM
    Next question from ISI group's Brian Marshall about iPhone growth versus iPad.
  • Josh Lowensohn 10/25/2012 9:51:44 PM
    Oppenheimer says iPhone average sale price were flat in the quarter. They were down for the iPad, but this was due to the iPad 2.
  • Josh Lowensohn 10/25/2012 9:51:54 PM
    Follow-up on international sales being so big.
  • Josh Lowensohn 10/25/2012 9:52:19 PM
    Cook says: We launched the iPhone 5 in the U.S. during the quarter, but the bulk of the world did not get the launch. I would have expected to see bigger growth in the U.S. versus the rest of the world.
  • Roger Cheng 10/25/2012 9:52:47 PM
    Bank of Montreal: Clarification on iPhone 5: Will it launch in mainland China in December? Cook: Yes.
  • Roger Cheng 10/25/2012 9:53:03 PM
    Follow-up: Will you end December quarter with a back log?
  • Roger Cheng 10/25/2012 9:53:39 PM
    Cook: I feel great about manufacturing ramp, and output is much higher. I'm confident we'll supply quite a few. In terms of when that balance occurs, I can't tell at this point. "Demand is very robust," he stressed again.
  • Josh Lowensohn 10/25/2012 9:54:12 PM
    Next question comes from Chris Whitmore and it's about the iPad. What's your feel around the emerging model where vendors can subsidize their hardware with advertising, content or services?
  • Josh Lowensohn 10/25/2012 9:54:52 PM
    Cook: We've seen low cost challengers before, and iPad continues to beat every other tablet on the market at any price. We think customers are very smart, and have very high expectations, and want a device that can do more. We are confident that our vision of making the best product will win at the end of the day.
  • Josh Lowensohn 10/25/2012 9:55:14 PM
    Follow up on supply -- you've made some changes on your supplier list, perhaps for strategic reasons . Is that adding complexity, and cost structure?
  • Josh Lowensohn 10/25/2012 9:55:45 PM
    Cook: I'm not sure what you're trying to get at there, but I Wouldn't say there's been a significant change in our supplier partners. There's been some change, but I wouldn't describe any of them as significant, and I wouldn't say any of them changed costs.
  • Josh Lowensohn 10/25/2012 9:55:53 PM
    Whitmore: I was specifically asking about you and Samsung.
  • Josh Lowensohn 10/25/2012 9:56:12 PM
    Cook: I wouldn't say that LCD changed any costs, and Samsung, we continue to be a customer of Samsung, and continue to have a commercial relationship.
  • Roger Cheng 10/25/2012 9:56:45 PM
    Next question: What did you learn over the last couple of years that led you to believe the time was right for iPad Mini?
  • Roger Cheng 10/25/2012 9:57:37 PM
    Cook: We would not make a 7-inch tablet. We don't think they're good products. We would never make one.
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