Rob LeFebvre (1:30 pm PDT, Apr 23rd)
Tim Cook will put his iPhone on speaker this afternoon to tell the world how much money Apple has made selling us insanely great gadgets, and we’ll be liveblogging the call.
During the quarterly earnings report, which starts at 2 p.m. Pacific, Cook and company will share details about Apple’s Q2 financial performance with investors and the rest of the faithful.
Some analysts predict a yawn-inducing “business as usual” earnings report, but you never know – Cook might have to sing some fancy arpeggios if the numbers don’t jibe with predictions made last year, when he crowed about exciting products in the Apple pipeline.
Whether Tim’s talk leads to boos or a standing ovation, Cult of Mac will brave the recital of all the mind-numbing money-speak to help you tune in to the true meaning behind it all. Keep this page open as we post all the interesting bits.
Thanks for sticking with us today – we hope you had as much fun reading along as we did writing it.
For further follow up analysis, check out our post here.
A lot of Android users are switching to iPhone, according to Cook. 62% of iPhone 4s buyers (yeah, Apple still sells the 4s believe it or not) came from Android last quarter. 60% of 5c buyers were switchers too.
Despite selling 28 million units since 2007, Apple TV has been labeled a “hobby” for years until Tim Cook finally bumped it up to a full product last year. During today’s call investors asked why Apple the change in title, so Cook spilled it all out – it’s making so much damn money Apple has to take it serious.
“When you look at the sales of the Apple TV box itself and the content bought off the Apple TV, for 2013 that number was over 1 billion dollars. It didn’t feel right to me to call something that’s making $1 billion a hobby.”
Cook also explained that they’ve made the product better over the years to make it a viable contender in the living room. Plus there’s a big updated rumored to be coming out soon. In regards to content compared to Amazon – which just scored a deal to stream HBO shows – Cook says Apple TV “compares extremely favorable to the content that is on the Amazon FireTV.”
Cook jumped in to answer a question about emerging markets, including a follow up on China.
“Hopefully this quarter will demonstrate that we can do well from emerging to developing markets,” he said. “Vietnam is up 265 percent, for example.”
“There’s a number of markets out there where we’re beginning to really catch on to a number of customers,” said Cook. “I am particularly proud of the results in these markets. These have not been historic strongpoints for Apple. ”
“China grew 13 percent year-over-year,” he said.
“We did have an all time revenue record in greater China of 9.8 billion,” he shared. “iPhone sales up 28 percent – IDC 20 percent growth. Mac units were up 13 percent, far outpacing IDCs PC market prediction.”
“The iTunes services revenue more than doubled year-over-year.”
“If you look at iPad, and look at demand instead of sell-in, we grew by 6 percent, which is above IDC’s prediction of flat tablet growth in China.”
“I feel like there’s still loads of opportunity there,” said Cook.
Cook is all about iPad today. During the call’s Q&A, Cook said that the iPad is the “fastest growing product in Apple’s history.”
Apple has sold 210 million iPads since it was introduced four years ago, which is amazing.
Cook noted that its the only product that Apple has seen became in an instant hit in its three key markets: consumer, business, and education.
Virtually all of the Fortune 500 companies are using iPad, according to Cook. Companies are building proprietary apps that run on the iPad for business management. Right now 91% of tablet activations in enterprise are iPad.
“I am very bullish on iPad,” said Cook.
Office for iPad became a point of conversation on today’s earnings call and while Tim Cook says that he whole heartedly welcomes Microsoft and Office for iPad onto the Apple Store, he says they should have done it sooner.
“If it had been done earlier it would have been even better for Microsoft, frankly,” Tim Cook told investors.
Microsoft released Office for iPad last month after years of rumors that it was in the works. Cook noted that Office for iPad topped the App Store charts as soon as it was released, but by waiting on the iPad, Microsoft has squandered its lead to a host of other productivity apps.
Everybody loves Luca. The general sentiment is that the new CFO, who hails from Rome, either sounds soothing or like Dracula. Maybe soothing Dracula?
I used to love listening to Jony Ive talk, but I have a new favorite foreign accented Apple executive to hear: Luca Maestri.
— Peter Cohen (@flargh) April 23, 2014
Things got a little sentimental during today’s call when Cook paused to recognize the retirement of Peter Oppenheimer, Apple’s CFO for the last decade.
Oppenheimer’s retirement was announced last month, and he will be bowing out of his role officially in September.
Apple has grown 20 times over since Oppenheimer became CFO. Cook noted that Oppenheimer “never missed guidance in his 10 years as CFO, which must be a record.”
That feat is impressive, although Apple is infamously modest with its earnings forecasts. Better to under-promise and over-deliver.
iPad sales have slowed, but Apple is still all in on the tablet dream.
“We continue to believe the tablet market will surpass the PC market in the next few years, and we believe Apple will be a major beneficiary of this trend,” he said.
Two thirds of registered iPads during the last quarter were completely new iPad owners.
Maestri just walked through the company’s guidance for the following quarter. Apple is expecting:
- revenue between $36 billion and $38 billion
- gross margin between 37 percent and 38 percent
- operating expenses between $4.4 billion and $4.5 billion
- other income/expenses of $200 million
- tax rate of 26.1 percent
New Apple CFO Luca Maestri (above) is now walking through the numbers from the report, pointing out strong Mac sales, and noting that iPad is still outselling all other tablets, and is the main driver of tablet web traffic.
“iPad accounts for four times the web traffic of all Android tablet users combined,” said Maestri.
Super-vocal investor Carl Icahn is super excited about the buyback:
Agree completely with $AAPL's increased buyback and extremely pleased with results. Believe we’ll also be happy when we see new products.
— Carl Icahn (@Carl_C_Icahn) April 23, 2014
And veteran financial reporter Arik Hesseldahl is more surprised than usual:
I've followed $AAPL for 18 years. Rarely been as surprised by an earnings report as I was today.
— Arik Hesseldahl (@ahess247) April 23, 2014
Tim Cook is talking about the Capital Return program now, saying that Apple’s top priority is creating amazing products and investing in retail, marketing, new markets, and supply chain. “We are not going to under invest in this business,” he said.
Cook said that Apple needs to maintain financial flexibility and the Board re-evaluates the Capital Return Program every year.
Tim Cook is kicking off the call, which is being streamed on Apple’s website. He calls Q2 “our strongest non-holiday quarter ever.” iPhone sales were also the strongest ever during the quarter.
These are the numbers of products Apple sold during the most recent Q2 quarter compared with Q1 2014 , and Q2 of 2013. As you can see, more of everything was sold during Q1, but that’s because that quarter accounts for the Christmas season.
What’s more interesting is comparing Q2 2014 with the same time last year. iPhone sales are actually up, while iPad sales are down. Given what has been reported about the iPhone’s stalling growth, you think it would be the opposite.
In addition to the unexpected stock split, Apple’s Board of Directors is also creating another significant increase to its program to return capital to shareholders. The board announced a plan to use a total of $130 billion in cash via this program by the end of 2015.
To do so, the Board has bumped up its share repurchase authorization to $90 billion, up from the $60 billion announced last year. They also approved an increase to the quarterly dividend of about 8 percent, which will give current shareholders a dividend of $3.29 per share by May 15 of this year. They also plan to increase the dividend yearly.
Apple has already spent $66 billion in cash via this program between August 2012 and March 2014, and it looks like it’s only going to get better.
Holy Moly – Apple’s stock is splitting 7 to 1.
From the press release:
The Board of Directors has also announced a seven-for-one stock split. Each Apple shareholder of record at the close of business on June 2, 2014 will receive six additional shares for every share held on the record date, and trading will begin on a split-adjusted basis on June 9, 2014.
Last time Apple stock split was 2005, with previous splits happening in 2000 and 1987.
The current 7-to-1 split will change Apple’s current share price of about $525 per share to around $75 a share, making this a great time to get into AAPL stock.
Investors apparently are thinking the same thing, with a huge bump in after hours trading—AAPL is up 36 points to 7.1 percent.
Apple has released its numbers for the second quarter ahead of the earnings call with Cook and co. And like last time, it’s a record quarter.
The company’s own expectations were beat with $45.6 billion in reported revenues and $10.2 billion in net profit. 43.7 million iPhones and 16.35 million iPads were sold.
“We’re very proud of our quarterly results, especially our strong iPhone sales and record revenue from services,” said Tim Cook in the press release. “We’re eagerly looking forward to introducing more new products and services that only Apple could bring to market.”
Yeah, we are eagerly waiting too.