Apple (AAPL) Q3-08 Earnings Call Notes
-Revenue $7.9B vs $8.05B est. EPS $1.26 vs. $1.11 est. Q4 guidance is revenue $9-10B vs. $10.57B est. EPS $1.06-$1.35 vs. $1.65 est. (27% miss at mid-point)
-Adjusted non-GAAP sales is $11.68B (with iphones not deferred) and $2.44B of adjusted net income
-Operating margin 18.3%, gross margin 34.7%
-International was 41% of revenue
-2.611M Mac sold, 21% unit growth and 17% revenue growth
-11.052M iPods sold, 8% unit growth y/y and 3% revenue growth
-6.9M iPhones vs. 1.119M a year ago
-Gross margin was better than expected due to lower component pricing
-October is a “foggy month”. December guidance has a lot of prudence built-in. Visibility is limited given economic environment
-They brought out Special Guest Steve Jobs to sell the new Non-GAAP numbers just for this call (he’s usually not on the earnings calls). He’s so good at this and can sell ice to eskimos
-We have the best customers in the world. They may post-pone purchases in tough times
-We have $25B in cash and zero debt. We can invest our way through the down-turn
-When asked about stock buy-backs, they are very comfortable with cash position (basically no)
-Mac Education K-12 sales down 7% y/y. California down 28% y/y.
-Customers delaying purchases due to the portable transition. Saw considerable rebound in sales post the refresh
-For iPod, during the final weeks of September to early weeks October, sales went from +7% y/y to flat
-Won’t make a $500 computer that is a piece of junk (no Mac netbook)
-Apple TV is still a hobby. The category will continue to be a hobby in 2009 due to economic conditions
-Have significant backlog on the new Macs, but it is hard to forecast trajectory of demand
-Software is the differentiating technology of the phone product category. Extremely comfortable with iPhone product strategy and approach it as a software platform (Could mean no cheaper iPhone SKU)
-1/2 of iPod sell-through occurs in December
-Mac inventory 3-4 weeks (below normal), iPod 4-6 weeks (normal), and iPhone in 44 countries less then 6 weeks, no data on remaining 7 countries
Summary
-Macs a bit light, iPhone number was amazing, and iPods in-line. Guidance is very bad, however people may not care and focus on the new non-GAAP iPhone driven revenue and EPS numbers
-Management is worried about Mac and iPod visibility in current economic environment and built a lot of prudence in the guidance