Image of CFO Oppenheimer and CEO Cook

Image of CFO Oppenheimer and CEO Cook

Apple has announced its earnings for Q4 2013, including $37.5 billion in revenue and sales of 33.8 million iPhones, 14.1 million iPads, and 4.6 million Macs. As usual, Apple will be holding a conference call to discuss the results, provide some additional information, and take questions from analysts. Below, we’ll be holding a live blog of the proceedings:

- Awaiting the call to begin
- $AAPL down over 2% after hours:
Screen Shot 2013-10-28 at 4.43.20 PM
- Tim Cook giving introductory remarks: “I’m happy to tell you that Apple’s business is stronger than ever.” Cook talking about integration of hardware, software and service. Cook also discussion “vibrant” developer community. Apple is winning with its products in all the most important ways: customer usage, loyalty, and satisfaction.
- Tim Cook discussing recent announcements: iPad Air, iPad mini with Retina display, iOS 7 redesign, iTunes Radio, iMacs, MacBooks, OS X Mavericks, new iLife/iWork for iOS/OS X.
- Tim Cook says Apple is very pleased with its accomplishments for fiscal 2013, with 150 million iPhone sales and 16 million Macs. Cook going over revenue for iTunes.
- Apple opened or remodeled 49 new stores. 50 million dollars in revenue per store.
- Apple completed 15 strategic acquisitions during the year, one every 3 weeks.
- Apple reviews its capital return program often with its board. Apple is also seeking input from its shareholders.
- Apple is very confident in its future, and Apple sees opportunity in current and new product categories.
- Cook discussing smartphone and tablet growth in the future.
- Apple is proud to be a force for good in the world beyond products: standing up for human rights, helping to eliminate AIDs.
- Apple thanking shareholders for their loyalty, and thanking employees for making products and enriching people’s lives.
- Oppenheimer now on the call. CFO is discussing and reiterating the revenue and product sales stats from the press release.
- iPhone sales ahead of Apple’s expectations. Apple was particularly pleased with sales growth for iPhones in Russia, India, Middle East, and Latin America. Apple iPhone sales remain strong and robust in the United States.
- 14.3 million total iPhones in channel inventory at end of quarter. 4-6 weeks of iPhone channel inventory on a look-forward basis.
- Oppenheimer saying 96% satisfaction rate for the new iPhone, saying that iPhone users spend an average of 53% more time on their phones than Android users.
- Oppenheimer discussing in-house app development for iOS Devices, including companies in China.
- Oppenheimer discussing iPad. “iPad sales exceeded our expectations for the September quarter.” Apple also pleased with strong back-to-school demand. Interest in iPad remains incredibly strong. 99% satisfaction rate for iPad.
- Talking about iPad in the enterprise. Companies around the world are using iPads to reinvent their businesses.
- Oppenheimer discussing iPad usage in school systems.
- Discussing the new features in the iPad Air and iPad mini with Retina display.
- Apple happy with MacBook Air sales (updated in June). Oppenheimer talking the iMac update in September, and MacBook/Mac Pro updates this month.
- Oppenheimer talking about Mavericks and its new feature (and free).
- Oppenheimer says iOS 7 launch was successful. Going over iOS 7 features. 20 million iTunes Radio unique listeners.
- Oppenheimer talking about security of iOS devices with iOS 7. Especially in businesses/enterprise.
- Oppenheimer now discussing Apple Retail. 8 new stores opened in Q4, 2 remodeled. 416 stores, 162 outside US total.
- Apple retail 2014: 30 new store openings (2/3 outside of the U.S.). Remodel 20 stores during the year.
- Oppenheimer now talking about revenue deferrals for free software.
- $55-$58 billion revenue estimate for Q1 2014.
Q/A has begun:
- Oppenheimer discussing why gross margin is lower this year, even with the new iPhone mix and other new devices.
- Cook asked about innovation, why iPhone 5s has a fingerprint sensor, M7 etc. Cook says these are part of a big, future roadmap.
- Question about iPhone 5c pricing. Cook says iPhone 4s is entry-offer, iPhone 5c is mid-tier, and iPhone 5s is top-tier offering. Apple’s goal overall is to have growth, and Apple is pleased with the iPhone lineup. This is how Apple partly measures success, most important thing is to make a great product. Apple is happy with current iPhone growth. Cook realizes that people believed 5c would be the entry-phone, but that was never Apple’s intention.
- Question about new product categories: Cook says he never said there would be new product categories in fall 2013 and/or first half of 2014.
- Oppenheimer reiterating the revenue and gross margin deferral process. Oppenheimer seems excited about this.
- Gene Munster asking about iPad pricing and growth rates around tablets. Cook enters: Apple believes tablets is a huge opportunity, Apple does believe last week’s announcement was Apple’s largest iPad announcement ever, and will continue to grow. Apple will start iPad sales with the Air on Nov. 1, reiterates iPad mini now at $299, Retina model at $399. “iPad Air is the best iPad we’ve ever done.” Tim Cook says its going to “be an iPad Christmas.” Apple will report it did in January.
- Cook asked about the thinking behind making Mavericks, iWork, and iLife free. Cook says Apple wanted to make the free software as being a key element of owning the Mac and iOS Device hardware. Saw iWork was top-selling mobile productivity suite, wanted all customers to have access to latest software so they have the best features. It was a “bold move” to make them free. Cook says Apple wanted to make the software a complete “part of the experience.” Cook thinks it was a “great decision” for customers.
- Cook asked about education and software, Chromebooks, Google Apps, Google taking share in education: Cook says Apple had its best Education quarter ever. Up 8% YOY. iPad up 22% YOY. Mac up 8% YOY. $1 billion in Education revenues in a Quarter for the first time. ChromeBooks are seen in some places, but the vast majority of people are buying Macs/PCs/iPads. Apple share of tablets in education is 94% (unheard of, Cook says).
- Question about the supply-side regarding Touch ID manufacturing, Retina iPad mini manufacturing issues, meeting demand for the holidays for the new devices. Cook says iPhone 5s supply ended quarter with very significant backlog, Apple still has a significant backlog. Apple is very confident in its ability to keep ramping, so Apple is rolling it with more countries (30 last week, 16 next week). Apple is where it wants to be with country reach for iPhone this calendar year. Cook says Retina Mini will start shipping in November, but it is unclear if Apple will have enough for the quarter. Cook thinks Apple will do fairly well with iPads for the holiday season.
- Is Apple in a better shape to avoid supply constraints like last year? Or will Apple see a similar situation. Apple is doing well on supply/demand for the iPhone 5s, though Apple is on backlog. Cook is confident about upcoming ramps and doing well for the quarter. iPad mini Retina will start shipping later this month, but difficult to forecast when supply/demand will balance there. Versus last year, iMac was announced early last year then shipped in December.
- MacBook Pros off to a “huge start.” Cook feels great about Mac and iPad growth. Notes the strong guidance numbers from Oppenheimer earlier.
- Question about iPhone ASPs being down 7% YOY. Due to price-drops in entry level iPhones. Also has to do with currency shifts in emerging markets and places like Australia. Oppenheimer does not want to forecast ASPs for the December quarter.
- How are carriers responding to the pricing strategies of the iPhone. Cook says carriers want to sell as many phones as possible and want people on contracts. Cook does not really see this changing. Some carriers have come up with different sales programs that might appeal to someone who wants to upgrade their phone annually. Those programs in general probably reduce the subsidies for some, but customers may view this as a fair exchange for getting to upgrade often. Other than that, Cook believes Apple and carriers have great relationships.
- Call Over.

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