Our share of tablets in education is 94 percent. I mean, y’know, it’s sort of unheard of; I’ve never seen a market share that high before. So we feel like we’re doing really well here, and feel great to be making a contribution to education.
On iPhone 5S supply constraints
In terms of supply, iPhone 5S ended the quarter with a very significant backlog; we are still—we still have a significant backlog, however our supply is building each week, and we’re very confident of our ability to keep ramping, and so we rolled out 30 more countries, with the iPhone 5S and 5C as of last Friday. And we’ll roll out another 16 this week, and so we’re right on where we would like to be in terms of achieving 100 countries by the end of the calendar year.
In terms of the retina, or the iPad mini with retina display, we’ll start shipping later in November. It’s unclear whether we will have enough for the quarter or not. We know how many we will have, but you really don’t know the demand until after you start shipping, and so we’ll see how that goes. But I think we’ll do fairly well with iPad; as I had mentioned before, we feel like it’s going to be a really great holiday season.
In terms of component costs, both DRAM and NAND were up last quarter from the previous quarter, DRAM we believe will continue to be up in this quarter; we think NAND will be flat, and other commodities will fall sequentially.
On higher iPhone inventory levels
I think the way—the number one thing to know in the channel inventory is that, you know, our range as you know for iPhone is four to six weeks, and we were at the low end of our range. And so that, to me, is the most important thing I’d look at anyway, I should say; you can choose to look at the thing that’s most important to you.
In terms of it changing from where it’s been in the past, the things that you should consider are that China was in wave one [of the iPad launch] this year, so there was a lot more point of sales there. We added DOCOMO in Japan, and so that’s a large carrier to add, and what probably were not in the opening comments was that of the 14 million [iPhones], 1.8 million of those were iPhones in transit, and therefore not available to sale in the channel. We always count those in channel inventory, because they’re in our sales line. And so that’s how I look at the iPhone inventory.
On navigating supply constraints this year
As I mentioned, on the iPhone 5S, I feel like we’re doing really well on supply. The demand is very robust, and so we are in backlog right now. But I feel confident about us continuing to ramp and do quite well for the quarter.
On the iPad mini, we’ll start shipping later this month, and it’s very difficult to forecast exactly when supply/demand will balance there. And we’ll also see about the iPad Air as we go out this week. I think we’ll have a really good weekend, but it may be that not everyone can find one that wants one.
I think versus last year, one key difference is we announced one of our key Macs, the iMac, but we didn’t begin shipping it until the end of December. And so we went for more than two months with minimal iMac sales, and therefore from a Mac point of view year-over-year, last year, we had our only down quarter—down versus the market, that is—in the last thirty quarters. And so I don’t envision that happening this year. I feel really good about the way that the MacBook Pros have gotten off last week; they’ve gotten off to a huge start.
I feel great about Mac growing year-over-year this quarter. I feel great about iPad growing year-over-year this quarter as well, and you can tell that from the strong guidance numbers that Peter [Oppenheimer] gave earlier.
14 million iPhone channel inventory
The 5S was in huge backlog, and so any kind of 5S that was in the channel was a transitionary—kind of, maybe perhaps in transit, and so forth. We did have, as I mentioned before, we had 1.8 million units of total iPhone units in transit at the end of the quarter. So that’s a pretty substantial number.
On carriers, and subsidies
I think carriers like to sell as many units as they can, and get as many people on their service. And in most regions, locked in to be on service contracts. And so they’re very predictable, and reliable, and I don’t really see that changing.
I think the carriers have come up with some different—or some carriers have come up with different sales programs that might appeal to someone who wants to upgrade their phone annually, instead of every other year; I think those programs, in general, probably reduce the subsidies somewhat in the aggregate for people that take these up, but customers may view that that’s a fair exchange for getting to upgrade more often. And so there’s a customer proposition for it.
Other than that, I think we have great relationships with the carriers, and I think they were, as we were, very happy about the iPhone rollout.