Apple's Q2 Conference Call Live Coverage Begins Now
Apple's Q2 Conference Call Live Coverage Begins Now
by , 5:30 PM EDT, April 17th, 2002
This report is live coverage of Apple's Q2 conference call, which will begin at 5:30 PM, EDT (4:30 PM CDT), barring unexpected technical difficulties. The oldest posts are at the bottom, with the newest at the top.
[5:21 PM] We are now spell checking this report. The conference call is now over.
[5:20 PM] The two biggest factors in Apple's component pricing increases were LCD and DRAM prices. Surprise. Or not. Says that the original iMac is doing well, especially in education as a sub-US$1000 unit.
[5:18 PM] Analyst asking for clarification on iMac unit sales going forward. Fred says that he expects Apple to continue to supply 4,000-5,000 units per day going forward this quarter. Analyst asking about further cost cutting efforts. Fred says that there are several projects underway in non-commodity areas. Moving manufacturing to cheaper labor countries, and other efforts seem to be in this category.
[5:14 PM] Government sales are growing. In 2001, those sales grew 60%! That's great! Saying that Mac OS X is piquing the interest of government buyers due to security, stability, etc. Analyst asked if Apple can repeat 60% growth in this segment, and Fred says he won't claim that, but that things are looking rosy again this year in that sector. This is big news, in our opinion. Government sales haven't been strong for Apple in a very long time. If Apple can increase its sales in this market, that would mean a market share increase for the platform.
[5:12 PM] Analyst asking about 14" iBooks. Peter and Fred saying that the 14" units did well. No specifics. Analyst asks about shipping iBooks via water instead of air. Apple says "no." This analyst is a bit of a doof, we say respectfully.
[5:10 PM] Steve Fortuna asks if iMac and iPod unit sales were up to Apple's expectations, something about demographics, and can Apple cut costs further. Fred says: The iPod was expected to decline from December quarter. Cites a 71% decrease in MP3 players in general, says that Apple has less of a decline when compared to that. Peter Oppenheimer of Apple saying that Apple is pleased with iMac performance. It was a canned response. More canned response concerning cutting costs. Blah blah blah. Costs should be flat in June compared to March. Demographics: Everything was solid around the world.
[5:08 PM] Analyst asking about guidance for the June quarter (the current quarter). Fred says that Apple was up year over year and sequentially in the unit and dollar sales, saying that most of the industry wasn't. Saying that Apple kicked butt last quarter, and that the year was a good one too.
[5:06 PM] Fred is saying that the company should have open 49 or 50 stores this year. Fred is avoiding a question about whether or not Apple has learned anything from its Apple Stores, but is saying that Apple made the right decision about the way they have gone after this, including upscale locations, stocking the stores with inventory, hiring Mac users, etc.
[5:02 PM] Don Young asking more about component pricing. Asking is Apple is moving with the markets on component pricing. In other words, if prices fall, when will Apple see a benefit. Fred says "very soon." Fred is shooting for 28% gross margins. Mr. Young wants to know if 30% is still a target. Fred says that market share is more important than 30% gross margins. Mr. Young also asked if March saw the Apple Stores turn a profit, with the implication being that iMac sales would have helped. Fred said that the Apple Stores were less back loaded in iMac sales, and that therefore no, March was not particularly better. Extend that out a bit to see that this means that the Apple Stores were stronger throughout the quarter.
[5:01 PM] Analyst asking about percentage of Mac users using the iApps. Fred says they don't have any specific data, but points back to the press release on iPhoto downloads and the press release on how many DVD burners are being used.
[5:00 PM] Fred thinks that non Mac user account for 40% of iMac sales. Analyst: Are you still getting non-Mac visitors in the Apple Stores? Fred says they don't have current data on that. Offering anecdotal evidence to support that the percentage of non-Mac using visitors is high.
[4:59 PM] Apple has shipped 3 million Macs with Mac OS X on it since last May.
[4:58 PM] Analyst asking about education sales. Fred says it's too early to tell, but that things are looking solid. Apple has been focusing on the "1:1 initiative" where every student and every teacher has a Mac. Touting large sales. Says that decreased tax revenues has hurt education sales.
[4:56 PM] Andrew Neff, our least favorite analyst, and one who has consistently shown he does not understand Apple, is asking something inane about gross margins. Fred said that September gross margins should be above the March quarter's.
[4:55 PM] Fred says that May is when Apple should be shipping new units at the new and higher iMac prices. Says that new CompUSA Stores within a Store have increased. Said that Apple is focusing on growing its CompUSA presence.
[4:54 PM] Richard Gardner is asking about component pricing and other issues. Fred: "The key thing about why we are being cautious in the quarter is that we saw dramatic increases in the March quarter." LCD prices have stabilized. Going forward, he thinks that RAM pricing has peaked in Q2. That means that prices might be heading back down. Seeing moderate decreases in RAM in April. LCD prices might be stabilized too.
[4:51 PM] Says that pro sales are coming from video sales, and the new VARs that Apple has added. It seems that many of those new VARs have been in the DV markets. Says that pro business was flat from quarter to quarter, but that any strength in the area was in the DV segment. Further touting the new VARs.
[4:49 PM] Samuel Kuntsler asks about strengths of pro products. Asking about iMac shipments. Fred says that shipments went up at the end of the quarter, up to 9,000-10,000 units per day in the last 10 days of the quarter. Says that constraints in manufacturing are coming not from capacity, but from component shortages. We lost the feed for a moment...
[4:47 PM] Analyst Dan Niles asks about price increase for the iMac working in new quarter, and whether or not education sales are impacting that. Fred says: About mix, June and September quarters are strong education quarters. Says that gross margins on the iMac in the September quarter should move up. Says that "the Ops Group" is working on cost cutting measures for the iMac G4 too. Once again repeating that shipping costs should lower for the units too, and says that gross margins in September should be better.
[4:45 PM] Analyst: What are details on the order backlog, and what kind of people are buying them. Fred says he won't give specifics, but says that Apple has not seen any lessoning of demand for the iMac since the price increase. Fred also says that anecdotal evidence supports the notion that many iMac owners are Wintel users.
[4:44 PM] Touting the success of the iMac. Saying that Apple is increasing investments in R&D, unlike its competition. Touting the acquisitions and financial investments the company has made too. Fred is through with his announcements, opening the floor to the analysts.
[4:42 PM] US$4.3 billion in cash on hand. Saying that gross margins should be a bit less than the current quarter, and that Apple will not be benefitting from the price increase of the iMac during this quarter due to the fact that Apple is still honoring old prices in much of its backlog. Said that the company is air shipping most iMac orders too, until the backlog is erased.
[4:41 PM] Operating expenses were down due to seasonal spending.
[4:40 PM] Unit inventories were down 14% at the end of the quarter. Revenues from retail Apple Stores was US$70 million. Loss for the quarters from those stores is down to US$4 million. Said there 29 stores open now. I think he said that there were some 1.7 million people through the stores during the customer
[4:38 PM] Apple is touting new VARs, new customers, claiming it is Apple's strength, and not part of an industry uptick. Talking about Photoshop 7, "consequentially optimistic about pro sales this year."
[4:37 PM] Expects to meet current quarter results. PowerMac unit sales were flat over last year. iPod shipped 50,000 units. Talking about iPod updates. "Mac OS X transition continues to gain momentum. Today there are 3600 products running on Mac OS X." Fred says that universities and the government, and R&D is increasingly interested in Mac OS X.
[4:35 PM] Fred's here and is going over the results for the year. Revenues and units were up 9% sequentially. Year over year has those percentages up 4% each.
[4:32 PM] Here we go. Nancy Paxton is announcing the basic results. She is introducing Fred Anderson and Peter Oppenheimer.
[4:31 PM] The company posted a profit of US$40 million, in line with recently lowered expectations of US$.11 per share. The company also shipped 813,000 Macs. Check the full report below for more details.
[4:30 PM] Waiting for the conference to begin. Note that we have already posted Apple's basic earnings announcement.
[4:24 PM] This is another test...
[4:00 PM] This is a test...
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