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Apple's Q4 Conference Call - Live Coverage

Apple's Q4 Conference Call - Live Coverage

by , 4:40 PM EDT, October 17th, 2001

We will be covering Apple's Q4 Conference Call live, barring unexpected technical difficulties. The event starts at 4:00 PM CDT (2:00 PM PDT). Keep it tuned here for updates every few minutes.

[5:21 PM CDT] We have finished out edits for this update.

[4:55 PM CDT] The conference call is over, and we are cleaning up our very messy notes.

[4:52 PM CDT] Analyst: Asks about whether Apple would reconsider layoffs. Fred: We are basically shuffling head count positions from infrastructure to retail, but are not planning on massive lay offs.

[4:51 PM CDT] Richard Gartner follow-up: Retail channel sales for Wintel units are back up to pre-9-11 levels. Is Apple not seeing that? Fred: No, we aren't really saying that, maybe you have information we don't have because we are a week behind. Very weird answer.

[4:50 PM CDT] Analyst: Percentage of total units that went through direct channels, how was Europe, and will Apple see unit growth this quarter. Fred: Don't feel confident on positive unit growth in December quarter. Didn't see normal European ramp up in sales from Europe in September. Apple saw 1/3 of sales go through direct channels (like education). About 25% of the 1/3 of direct sales are iBook sales to education.

[4:45 PM CDT] Richard Shoe: Asks about a rebound in sales since terrorist attacks. Fred: It's too early to see any trend. We've seen some rebound since 9-11, but it's not back to where Apple needs it to be.

Follow-up: Revenue question, can you talk about changes in product mix, and what will happen to pro-lines. Fred: Apple expects PowerBook sales will improve in December quarter over September quarter. Expects iBook to do well. Not enough visibility to see much change in PowerMac and iMac lines/

[4:44 PM CDT] Analyst: Asking what are the dynamics of profiting for the retail stores. Fred: You have to get enough stores out there to cover all the costs. The stores are each profiting in and of themselves, but they need more to cover system-wide sales. He also cites sales slowdown from the terrorist attacks, and says that consumer confidence needs to return.

[4:43 PM CDT] Analyst: Asking for numbers to be broken down further. Wants head count. Fred: we don't do that, and I won't give you head count information... Saying that Apple is trimming infrastructure and adding retail employees.

[4:41 PM CDT] Brett Miller of A.G. Edwards: Asks about first time buyers, CompUSA Apple employees and third party apps. Fred: We have 1600 third party apps and other products... We don't have any information on 1st time buyers and Wintel converts. Gary: Apple is very pleased with their new advocacy program (Apple employees in CompUSA). Pleased with sales, higher CPU sales in stores with advocates. Pleased with returns.

[4:39. PM CDT] Analyst: What was education growth for the full year (2001). Fred and Gary: 7% year over year growth in education for the entire year. Also, Apple expects to have majority of Apple Stores open before Xmas.

[4:35 PM CDT] J.P. Morgan: With regards to education: Education and government spending is a lagging economic indicator. In your thinking about this upcoming year, is there any apprehension that your feeling that education could drop off next year. Fred: We really are gaining market share through the iBook. We have a real advantage in that our competitors are competing on the desktop-based computer lab. Apple is putting them on carts so they can be wheeled around wherever they are needed. Wireless also helps, and Apple thinks they are strongly positioned to compete in that space.

Follow-up questions about MS and Office X. Is Apple trying to convince Microsoft into lowering the price of Office X to improve consumer iMac sales. Fred: I don't really know what marketing is talking about with MS. Sorry.

Follow-up question: Are online sales impacting margins. Gary: We do track that, but we don't want to comment on it. Apple is pleased with growth in this area.

[4:32 PM CDT] Our nemesis, Andrew Neff, asking about the new product. Fred: Basically won't answer whether or not it will have an impact or if it is a handheld. Mr. Neff once again shows that he knows nothing about the way Apple does business.

[4:29 PM CDT] Charles Wolfe of Needham & Co.: Asking about visibility and whether home or education saw more iBook sales. Fred: Makes joke about visibility (still refusing to offer further guidance). Gary: The home market saw more iBook sales. Fred saying that July and August were really strong, with September's terrorist attacks killing sales.

[4:27 PM CDT] Analyst asked about online sales. Gary: Apple saw less of a drop off on online sales than it did in the retail channel.

[4:26 PM CDT] Analyst asking about competing with Microsoft spending in the face of MS's planned US$400 million advertising campaign for WIndows XP. Fred: We can't outspend Microsoft and we aren't going to try to do so. Apple relying on positive customer word of mouth reviews on Mac OS X and its products. Apple just need to continue to build momentum on results with Mac OS X 10.1. Fred thinks that Apple will continue to get press for its cool products. The company has increased R & D spending by 16% year over year (That's VERY GOOD!). Fred is again referencing next week's announcement of a new digital device.

[4:24 PM CDT] Fred: We see the early part of next year improving. Apple expects to see positive cash flow generation.

[4:20 PM CDT] Fred: Talking about revenue, we missed the questions he is responding to. Says: As we look to next year and the December quarter, we just don't have a feel for the consumer market. Education has held up very well. Apple is not confident about December consumer confidence.

[4:19 PM CDT] Fred: We are not changing guidance for 2002 Apple Store openings, beyond the 25 scheduled for this year.

[4:17 PM CDT] Richard Gartner asking if Apple is reducing the number of stores because of attacks, asking about whether the company is catching up on its iBook sales. Wants further guidance on the next quarter. Fred: No change in the number of stores that will be opened, Apple catching up on iBook sales. December guidance is very hazy, and Apple has no clue as to what the consumer is going to do (which is natural).

[4:16 PM CDT] Fred: Seeing weakness in Japan.

[4:14 PM CDT] Fred: Going over outlook. Given turbulent world, the visibility for upcoming quarter is NOT good. Seeing 10 cents per share guidance for Q1 2002 (december quarter), but not offering any guidance for the entire year. Revising forecast to sell fewer CPUs in Apple Store retail locations for the December quarter. They no longer expect to profit for the stores for the next quarter. Apple had orignally said it would profit from its retail operations by Q1 of 2002 (the December quarter).

[4:13 PM CDT] Fred: The final highlight of the quarter was Mac OS X 10.1. Fred is going over 10.1 features which we have long documented elsewhere.

[4:12 PM CDT] Fred: Gross margins rose to 31.2%, which is outrageously high and head and shoulder above the rest of the industry. Falling component prices are mostly responsible. Entered the quarter with US$4.3 billion in cash. Exit the quarter with one day of inventory on hand.

[4:10 PM CDT] Fred: On track to open all 25 stores on by the end of the year. 15 by the end of October Software sales are good in stores. Carrying 600 titles per store (double what was panned). Customers are interested in digital hub. Photography, movies, and music are the most popular. Most sales going to higher end CPUs. Retail is hard, but Apple sees it working out according to plan.

[4:08 PM CDT] Fred: Channel sell-through in July was good. The terrorist attacks disrupted the supply chain, but the company got things on track again.

[4:06 PM CDT] Fred: We continue to see momentum in education Grew 14% year over year. US$66 million in profits. US$1.45 Billion in sales.

[4:05 PM CDT] Fred is on stage. Fred: We are pleased to deliver solid results. 850 CPU units. More than 3000 portable units.

[4:04 PM CDT] Introductions, Fred is being announced

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