1:29 - Jason Snell: Hi everyone. Jason Snell here. The earnings are just coming out now, at the close of market.
1:30 - JS: You can see the SEC release here.
1:31 - JS Apple reports 15.7B in revenue. That's a record by a huge amount.
1:31 macjournals (Matt Deatherage): These numbers are way above what anyone expected. Gene Munster now live on CNBC.
1:33 - macjournals: AHA! Apple is NOT using subscription accounting for THIS QUARTER, making numbers much larger compared to previous ones.
1:35 - macjournals: Apple press release.
1:36 - macjournals: Jobs: "The new products we are planning to release this year are very strong, starting this week with a major new product that we're really excited about."
1:36 - JS: So basically Apple is going back and rewriting its past numbers to remove subscription accounting
1:37 - macjournals: Apple: 3.36 million Macs sold, up 33%. 8.7M iPhones, up 100%. 21M iPOds, down 8%.
1:40 - Dan Moren: Apple never liked using subscription accounting very much: they always felt it reduced the impact of the iPhone, which obviously has been one of their key products.
1:40 - JS: Mac sales keep accelerating.
1:41 - JS: That's yet another record sales quarter for Macs. And that iPhone number is huge when you consider that in the past, the holiday quarter has NOT been the strongest quarter for iPhone sales.
1:41 - macjournals: I'm waiting for Apple to put its data summary on apple.com so I can update my spreadsheets and the like, but I'll have to revise all the numbers, not just pull past quarter numbers from other sheets. So, more work, but arguably a better result for them.
1:41 - JS: Yes, and taking subscription out of the picture will bring "real numbers" back into play, not the tip of the iceberg, which is what we used to see.
1:42 - macjournals: Jim Goldman is now comparing Apple's new numbers to non-GAAP numbers from previous quarters, which may be valid but I want to hear them say it before I believe it
1:43 - JS: Our initial story is live now.
1:43 - macjournals: It's not completely clear to me that the new GAAP results without subscription are exactly comparable, so I want to be cautious.
1:43 - DM: At least that "major new product" mention in the press release helps assuage my fears that we were all going to line up to hear about new versions of iWork and iLife.
1:44 - macjournals: You'd do it anyway. :-P
1:45 - DM: I *am* a sucker.
1:45 - macjournals: Let's try that avatar
1:45 - macjournals: Ah, cool. :-)
1:46 - JS: This is sort of the pre-game show. The conference call will start at 2 PT.
1:46 - JS: So, 14 more minutes, folks. :-)
1:47 - macjournals: This is a lot of number revising. For example, instead of revenue of $9.870 billion in the last quarter, the new system has revenue of $12.207 billion in the last quarter.
1:48 DM: A billion here, a billion there—pretty soon you're talking about real money.
1:49 macjournals: The year-ago quarter now lists as $11.88 billion in revenue instead of $10.167 billion. Unit sales, thankfully, remain unchanged.
1:51 Jason Snell: Mr. Macjournals, do you know if Apple is making quarter-by-quarter revised revenue data available anywhere?
1:53 - macjournals: OK, here we go:
1:54 - macjournals: Mac unit sales in the Americas region were up 30% year-over-year, though down 5% sequentially. In EMEA (Europe, Middle East, Africa) they were up 34% year-over-year, 40% sequentially.
1:55 - macjournals: The significant hit: retail (!). Mac unit sales in retail down 39% year-over-year, and an eye-popping 53% sequentially. That's even as Apple Retail revenue was up 142% year-over-year and 71% sequentially.
1:56 - DM: Which perhaps suggests Apple selling more high-profit items via the stores.
1:57 - JS: I think if you consider that this is the holiday quarter, and traditionally that's meant a lot of iPod sales, that might make sense. The iPod touch is more expensive but probably does lower volumes.
1:58 - macjournals: It also points to a lot of iPhone sales, since now they're booking the full revenue (including carrier subsidy, I would imagine) at the time of sale.
1:59 - macjournals: In revising spreadsheets, we're seeing small changes to numbers we didn't expect to change. Like small changes to Mac Desktop revenue numbers, though we're not aware that any of the previous numbers had any "subscription" component. This is why we think that the new FASB guidelines affect more than just that one area.
1:59 - JS: I've tuned in the classical music!
1:59 - DM: Welcome to the call, Jason.
2:00 - JS: I love how the financial call gets classical music. I guess it sounds like money!
2:00 [Comment From AugieD369] Do you think the accounting change means that iPhone and iPod Touch software updates pricing could change?
2:00 - DM: I always thought this was Tim Cook's personal playlist.
2:01 - JS: AugieD, my understanding is that the rules have been clarified and now Apple can offer updates without running afoul of that particular accounting snafu.
2:01 [Comment From Richard Baguley] wouldn't "we're in the money" be more appropriate than classical music?
2:01 - DM: More likely it'll mean free iPod touch updates than paid-for iPhone updates, right?
2:02 - macjournals: That would seem more likely, Dan, but that would require that Apple find some merit in having wider adoption of iPod OS updates than in collecting the money.
2:02 - DM: It does allow them to make sure that users on the same page, feature-wise. There were a lot of iPhone 3.0-dependent apps, for example.
2:02 - JS: We are still waiting the arrival of Apple executives.
2:03 [Comment From melgross] What's interesting about the retail figures is that while Mac sales are down 53% sequentially, they are only down by 5% in the USA overall. What's the disparity? Are Mac rtail sales outside the US so much higher? Or, are Apple and other's web sales somuch higher? What about third party sales such as Bet Buy?
2:03 - macjournals: OK. More numbers. Mac desktop unit sales up 70% year-over-year, up 57% sequentially. People like new iMacs.
2:03 - JS: Our story on the results is here. http://www.macworld.com/article/145890/2010/01/firstquarterearnings_2010.html
2:03 - macjournals: melgross: The "USA" geographic figure excludes Apple's own retail stores, and most Mac resellers don't also get to sell iPhones.
2:03 - DM: (Word on the streets is Tim Cook and Peter Oppenheimer are boogying down to The O'Jays' "For the Love of Money" in Cupertino right now. Unconfirmed.)
2:03 [Comment From melgross] If sales in Best Buy and others are up, thats good news, because it means that Apple's sales are moving beyond Apple's limited ability to put up stores here, and especially, overseas.
2:04 [Comment From Robert] Will Steve Jobs be at this conference call?
2:04 - macjournals: Mac portable sales up 18% year-over-year but down 6% sequentially.
2:04 - JS: Robert: Sometimes he appears as a "surprise guest," but as that phrase might suggest, he's usually not there.
2:04 - DM: Okay, here we go.
2:04 - JS: And we're about to begin!
2:05 - DM: Here's Nancy Paxton for introductory remarks, which mainly reminds us that this includes forward-looking information and we'll hear from Peter and Tim.
2:05 - DM: (And Gary, though he's usually very quiet.)
2:05 - JS: Here's what Jobs said in the PR: "If you annualize our quarterly revenue, it's surprising that Apple is now a $50+ billion company," said Steve Jobs, Apple's CEO. "The new products we are planning to release this year are very strong, starting this week with a major new product that we're really excited about."
2:05 - macjournals: Jason: At this time, I do not see Apple having provided revised numbers for past quarters, but we'll see them going forward as past comparison numbers.
2:05 - DM: And here's Peter Oppenheimer.
2:06 - JS: Now they're explaining how they are confusing everyone with their new accounting practices. Thanks, guys.
2:06 - DM: Thrilled to report best quarter ever, posting Apple's highest quarterly revenue and earnings and set new sales records for Mac and iPhone. Reporting current results and historical comparisons under new accounting rules discussed in last call, will discuss more after results.
2:07 - DM: Net income 3.38 billion, up 50 percent over year ago quarter, and almost $850 million higher than prior record.
2:07 - macjournals: Average Selling Prices (ASPs) of Mac units fell on average 6% year-over-year, but iPod ASPs rose 9%. iPhone ASPs were down 5%.
2:07 - DM: Mac's up first. Record Mac sales of 3.36 million beating previous record by over over 300,000. Quarterly Mac sales grew 33% year over year. 17% growth in market overall.
2:07 - JS: I believe that Apple has set a new record for Mac sales 9 of the last 10 quarters. Pretty amazing growth
2:07 - DM: Response to new iMacs introduced in October were very strong, contributing to 70% year over year growth in desktops.
2:08 - JS: As usual, the latest updates drive a lot of sales. And this quarter, that was the new iMac line and the unibody MacBook.
2:08 [Comment From Suman Chakrabarti] Some premature profit taking going on: AAPL was up to 207, but now down to 202. Why not wait for it to rise more before selling?
2:08 - DM: Portable sales increased 18% year over year, based on strong sales of MacBook and MacBook Pro. Very strong demand following October release of new MacBook. Very strong results in education: overall Mac sales increased 16% year over year and set new records for both K-12 and higher ed.
2:08 [Comment From Brian] One would expect Mac sales to dip slightly (*more than this) going from back to school Q into the Christmas Q. Christmas is usually more about iPod than Mac. Mac is red hot though, especially internationally.
2:09 - JS: I was surprised at the Mac increase too, Brian.
2:09 - DM: Sold almost 21 million iPods, but sales declined year over year. But year over year growth of iPod touch sales resulted in revenue growth of 1%. And share of US remains at over 70%. Continued to gain share internationally, based on latest data.
2:09 - macjournals: The holiday quarter is traditionally stronger than back-to-school for Mac, due to both end-of-year purchases and gift-giving
2:09 - DM: iTunes Store also had a record breaking quarter with strong sales.
2:10 - DM: App Store continues to be unparalleled success with more than 3 billion downloads in 77 countries. Ended quarter within target range of 4-6 weeks of iPod channel inventory.
2:10 - JS: Talking about the 100% increase over the year-ago quarter in iPhone sales.
2:10 - DM: iPhone's turn. Sold over 8.7 million iPhones in quarter, which is a new company record and an increase of 100% over previous year over year quarter.
2:10 - DM: Sales value of 8.7 million iPhones was over $5.4 billion.
2:10 [Comment From Jay Martin] I wonder if the lower iPod sales but increased Touch sales indicates a shift in the market..
2:11 - DM: Added a bunch of new carriers, and iPhone distribution in 86 countries.
2:11 - DM: Very strong year over year growth in major markets like Japan, Australia, UK, France, and Germany.
2:11 - macjournals: Jay: Apple certainly argues that that's exactly what's happening.
2:11 [Comment From DEEmery] I agree with Jay Martin, everyone I know who got iPods this year got Touch models.
2:11 - DM: Demand is strong in the corporate world as well, ranking iPhone #1 in customer satisfaction in J.D. Powers' survey.
2:11 - JS: I'm hoping we get some detail on touch sales....
2:11 - DM: Turning to retail stores.
2:12 - macjournals: Jason: Your hope will be denied
2:12 - macjournals: ("Don't ask about specific model sales. They're not going to tell you.")
2:13 - DM: Revenue 1.97 billion. Increase of 13%. Stores sold a record 680,000 Macs. Half of the Macs sold were to customers who had never owned a Mac before. 10 new stores opened, including in Louvre in Paris and Upper West Side in New York. Total of 283 stores in 10 countries. Completed 32 store remodels, bringing to 100 remodels in calendar year. Avenue revenue per store was $7.1 million. Retail margin was $481 million, up from $409 million in year ago quarter. Record 50.9 million visitors in quarter, compared to 46.7 million in year ago.
2:13 - JS: Actually, occasionally they give hints about the composition of unit sales when it serves them, Matt. :-)
2:13 - DM: Also conducted 586,000 personal training sessions. Now have 62 stores outside US and are on track to open 40-50 stores in FY 2010. Half expect to be in international locations.
2:13 - macjournals: But just hints, and they already gave that hint.
2:13 - DM: Total gross margin was 40.9%. Opex $1.69 billion and included $168 million in stock-based compensation. Tax rate was 29%. Better than expected.
2:14 - JS: I think the average selling price of an iPod going up to $161 says a lot about the amount of touches sold vs. other models
2:14 - DM: Cash plus short-term and long-term securities $39.8 billion. Increase of $5.8 billion over previous quarter. Cash flow from ops was about $5.8 billion. Continuing to focus on short-dated high-quality investments.
2:14 - DM: As previously discussed, FASB changed the accounting standards covering iPhones and Apple TV as well as other products with multiple deliverables.
2:15 - DM: Because iPhone and Apple TV both started in 2007, they've retrospectively adopted for all prior periods. Fiscal 2007-fiscal 2009 have been revised. Believe it provides useful information and better reflects economic performance of business.