Live Coverage Of Apple's Q4 Conference Call

by , 6:00 PM EDT, October 16th, 2002

Apple will be holding its Q4 conference call today. The conference call will cover Apple's most recent quarter, in which the company projected break even results, as well as the entire fiscal 2002 year. The details from Apple's press release.

Our live coverage will begin at 4:00 PM, Central.

[4:30 PM] That seems to be it. We will be cleaning up this coverage (Note to Fred Anderson: Slow the heck down when you spout this stuff off), and posting the results from the company's press release. [Editor's Note: We have now done both.]

[4:29 PM] Analyst: Gross margins, were they positively effected by Jaguar? Fred said the company benefitted, for sure, but can't give a hard figure. He says the benefit of Jaguar sales was balanced by promotions, and the like. Peter Oppenheimer says that consumer sales will increase over education sales, and components costs will decrease during the 4th quarter, which is why the company expects gross margins to improve by 100-150 basis points during the quarter.

[4:28 PM] Didn't catch analyst name: Asking about Quark moving to Mac OS X. Fred says that Quark hasn't given a public date for an X version of its flagship product. He declined to offer anything specific, but said that he was "optimistic it will be in the near future." That was a non-answer.

[4:25 PM] Edward Stanley from Prudential Securities: Asking about education sales. Fred says the company is doing well in education, and that unit sales were up. Says Apple is happy with Maine program, and that iBook sales are strong, and many of those sales were to Education. Edward also asked about iPod for Windows. Fred pleased with 54,000 Windows iPod sales. Looking to holiday quarter, Fred even more excited about iPod. Edward asks about which component cost decreases had the biggest impact on Apple's gross margins. Peter Oppenheimer says that RAM and LCD prices were the best for the company.

[4:24 PM] Didn't catch the analyst's name: Asks about being able to meet demand in December quarter if the company is projecting modest growth. Also concerned about the channel's ability to meet demand. Fred says Apple is on top of things, thinks that the company has it planned well. Cites threat of war and the economy as the reason why Apple isn't doing even better.

[4:22 PM] Cynthia, not sure from what brokerage. Asking about component costs going forward, and flat panel iMac sales related to the price decrease from late in the quarter. Fred expects component costs to trend downwards. Peter Oppenheimer said that the price decrease in iMacs has been too recent to know if it has had a positive effect. Cynthia also asked about the iMac product mix, and whether they ate into PowerMac sales. Fred says that slightly over half of iMac sales are 17", says that they don't know whether the 17" iMacs have cannibalized PowerMac sales.

[4:19 PM] Charles Wolfe: Looks like stores exploded in incremental revenue growth. Why? He also wants to know if any other retail chains will be selling iPods other than Best Buy? Fred: Pleased with retail division. Since doors opened, the stores have been good, but the stores are effectively hitting their stride, getting into the groove of things, and he specifically cited getting better at selling products. Also, the Switcher campaign helped. He points out the 40% of sales that are going to non-Mac users as evidence of the success of the Switcher campaign. Also doing well with the out of the box sales (like iPod). Referring to other retail sales outlets for the iPod, Fred is playing coy. He said that Apple is always looking at opportunities in the market place, and would be happy to get the iPod into more stores, but that he won't offer a specific answer.

[4:18 PM] Don Young from UBS Warburg wants to know about inventory reductions. Fred said that Apple met its targets for inventory reduction in one quarter, instead of two, which he says Apple is quite pleased with.

[4:17 PM] (Doing a spell check while analysts start asking questions)

[4:16 PM] Looking at December quarter. Expect higher revenues, gross margins higher by 100-150 basis points. Operations to increase to US$420 million. Other income expected to be flat. Tax rate expected to increase to 28%. Expects slight profit for December quarter.

[4:15 PM] Effective tax rate was 25% for the quarter. Fred says "We remain pleased with our asset management."

[4:14 PM] Operating Expenses were 396 million, slightly higher than the planned 390 million.

[4:14 PM] CPU unit sales were up 4% sequentially, but down year over year. Touting Main iBook sales, saying it is a great success so far. Will ship 18,000 more iBooks to Maine in third quarter of 2003.

[4:13 PM] 2.25 million people visited Apple retail stores. 40% of customers buying Macs from stores don't currently own a Mac, meaning they are new to the platform. 50 stores will be open by Thanksgiving. CompUSA sales were up 80% year over year.

[4:12 PM] Apple Stores doing well. Sales increased year over year. Manufacturing profits from retail sales was 20 million.

[4:11 PM] Jaguar sales have been dandy. Customer love it, blah blah blah. By year's end, some 20% of Mac users (5 million) will be using Jaguar, according to Fred. .Mac exceeded our expectations. 200,000 .Mac subscriptions.

[4:10 PM] iBooks doing quite well. PowerMac and PowerBook G4s were sluggish. Blaming the economy. Shipped a total of 140,000 iPods (that may not be correct). 54,000 iPods for Windows. Touting the fact that all three top selling MP3 players were iPods. Talking about Best Buy. Saying things are dandy with iPods in Best Buy, but Fred declined to offer any specifics.

[4:09 PM] Shipped 734,000 CPU units, down 14% from a year ago. The lowered unit sales were driven largely by a reduction in channel inventory, which Apple had planned. 76,000 iMacs (G3) Education sales down. (more details when we can)

[4:08 PM] Without non-recurring items, profit would have been US$7 million., As it is, US$45 million in losses.

[4:06 PM] Fred Anderson is on. Fiscal 4th quarter, revenues were US$1.44 billion. The company posted a loss of US$45 million, after non-recurring charges. The company posted a 2 cents per share profit, US$7 million, before non-recurring items. Those non-recurring charges included several equity investments write-downs, restructuring charge, inverse process charge from the acquisition of eMagic. The company also reversed a previous charge on an executive bonus, which resulted in a positive gain.

[4:05 PM] Call beginning with Nancy Paxton. The results have been posted. TMO will be posting those results as soon as the call is over (which we have now done).

[4:05 PM] Still waiting.

[4:04 PM] Music is still playing, awaiting conference call.

[4:00 PM] Test

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