Live Coverage Of Apple's Q2 Press Conference Begins Now!
Live Coverage Of Apple's Q2 Press Conference Begins Now!
by , 5:00 PM EDT, April 16th, 2003
Welcome to TMO's live coverage of Apple's Q2 press conference. Today's conference call is for Apple's fiscal 2nd quarter. Please see our advance coverage for information on a Webcast, and analyst expectations.
Please note that Apple CFO Fred Anderson tends conduct these press conferences at a blistering pace. Accordingly, we will be paying attention to such niceties as spell checking and editing after the conference is over. We ask your forbearance (and forgiveness) on such issues until then. The newest posts will be made at the top of the page, which will be updated every few minutes, barring any technical issues.
[2:34 PM] Charles Wolf of Needham is asking about guidance. He suggests that Fred's guidance is aggressive, and wants to know why. Fred is saying that the March quarter is the weakest, so that he expects the June quarter, which often sees a decline, to be flat. To be honest, that answer didn't jive with Mr. Wolf's question, but that's OK. The press conference is over. We are now cleaning up the live coverage below for posterity's sake, and for those researching in the future.
[2:33 PM] Analyst is asking about store-within-a-store performance. Japanese sales are up, apparently, which I missed earlier. Apple is placing some 75 people in Japan retailers, just as it has done in the US with CompUSA. Peter Oppenheimer says that Apple thinks this has contributed to the increased sales in Japan.
[2:32 PM] Jonathan Gerget (??) is asking about percentage of online revenue. Fred's assistant (whom I believe is Peter Oppenheimer) says 46% of revenue was from online revenue. Not sure if I understand that correctly, because that sounds absurdly high. It may have been the percentage of sales for the Apple Store. Mr. Gerget asks about reseller flap, too. Fred refused to comment on changes to retailer agreements regarding the details.
[2:29 PM] Analyst is also asking about plans for cash. For instance, is Apple planning on spending any of that cash. Fred Anderson said that the company is focused on cash, blah blah blah, and that the company might, possibly, buy back some stocks, maybe, but probably not... In other words, he was attempting to not-so-smoothly sidestep the Universal issue, which is what this analyst really wanted to know. The analyst is pressuring for comments on Apple's acquisition policies. Fred is now plainly saying that Apple does acquire companies now and again, but that he will not comment on rumors.
[2:28 PM] Analyst is asking about a press release from Steve Jobs that TMO covered earlier today. The analyst should read TMO if he wants to be up to date, but that's neither here nor there. :-) Seriously, though, Fred is reading verbatim the press release about Apple not making an offer on Universal, and is declining further comment.
[2:25 PM] Rebecca's follow up question is about Apple's retail store sales declining only 9%, which is indeed a modest decline when comparing it to the Xmas quarter. Fred says that most of that difference deals with stores that have been open a year or more. In other words, while Apple only opened up two new stores this quarter, when looking at all the stores that have been open, the company's broader presence as a whole helped the company in the retail space. Fred is now saying that the School Night promotion has been a success. Said that 200 School Nights have taken place throughout the US since its inception in 2002.
[2:22 PM] Rebecca is asking about (education) market share. Fred said that unit sales were down 14%, but has no market share info. Follow up question about education guidance for June quarter. Fred says Apple is expecting a year over year decline, though the quarter itself should get better when compared to the previous quarter. This is a seasonal issue, in that the June quarter is when most education sales take place. So, while Apple expects more education sales in the June quarter, he expects it to be lower than last year. Apple is clearly hurting in the education market.
[2:20 PM] Cynthia is asking about TFT pricing. Flat Panel pricing began to "tighten" in the end of the quarter, according to Peter Oppenheimer. Specifically, he said, it began trending up. He cited a number of factors, particularly the fact that demand for flat panels is increasing in both stand alone displays and laptops as a whole. Cynthia is asking how the price cuts helped PowerMac sales. Fred says that display sales increased with the price cuts, but eschewed directly answering the PowerMac question directly.
[2:17 PM] Rob something from Fulcrum Brothers. He is asking about PowerMac sales, asking if Apple can shift momentum. Fred is blaming PowerMac sales on weakness in the economy. He says that Apple is dominating the creative markets, but that no one is buying. He says Apple needs a boost to the economy in order for this segment to stop delaying purchases. He also says Apple needs QuarkXpress to come to Mac OS X, and that improved G4 performance would help, and that it will help as improvement comes. The implication was that Apple has already seen that improved performance beginning, which would, presumably, mean the dual 1.42 GHz PowerMac models on the market today.
[2:16 PM] A new analyst asked for comment about Apple buying content (in other words, is Apple in the market for, say, a record label?). Fred said "No comment." Analyst followed up with asking if Apple would switch to Intel. Fred said "No comment." A big surprise there, but then the analyst didn't seem to expect much. Fred also says there are no plans for International Apple Stores.
[2:14 PM] Mr. Niles asked for a clarification. Fred says that 42% of Apple's product mix was portable. He is adding that he isn't sure what this means in terms of the industry as a whole.
He also said that the iMac represented 46% of units, PowerMac was 16% (??), PowerBook was 11%, and iBook was 17%. Note that portables don't add up to 42%.
[2:13 PM] Dan Niles asked about how the war might have affected the quarter. Fred says he has no idea how the war might have affected the company's performance, but hooray for the outstanding results of 4 cents per share profit. In other words, he gave what was mostly a non-answer. Fred also says that government budget shortfalls are hurting the company's education results, and that the ad industry is hurting too.
[2:12 PM] Fred's speaking portion of the day is over. He is taking questions now. The first question is from one of my least favorite analysts, Michael Hillmeyer of Merrill Lynch. He understands Apple about as well as Andrew Neff, which is to say, not at all. He is asking about options, and whether or not the conversion of stock options to restricted options was included in this quarter's results. Fred corrects him by saying only Steve Jobs' options were converted to restricted options, and says that everything was included in this quarter's results.
[2:11 PM] The June quarter should be flat, including sales and gross margins. Other revenue (investments, etc.) should decrease significantly. Note that we have posted the press release for the quarterly results from Apple now.
[2:09 PM] Apple has another restructuring charge. Apple has also sold some investments, which contributed to today's profits. Total cash on hand technically increased US$64 million, as opposed to the US$100 million amount we mentioned above.
[2:08 PM] Education sales are down 14% from the year ago quarter. That's bad. Portable sales are doing well within this market, which would suggest that the eMac isn't selling. (TMO offers a clue to Apple: It's because you aren't offering a cheap enough model to this market) Fred says that X for Teachers has been a big hit, as covered by TMO earlier this week.
[2:07 PM] Apple Retail had US$135 million in sales for retail locations (down from the Christmas quarter). Retail operations lost US$3 million. Fred says manufacturing profited US$23 million from those sales. In other words, though the retail operations lost US$3 million, the company as a whole profited some US$23 million from sales going through the retail stores. Fred also said that there were 3 million visitors to the stores, and that the company is targeting 70 stores by the end of calendar 2003.
[2:05 PM] We have begun. Fred Anderson is going over the numbers. PowerMac G4 sales continue to be sluggish. Including servers, 156,000 units were shipped. That's down from the year, but flat from last quarter.
[1:58 PM] Gross margins were a stunning 28.3%. That's remarkable in today's economy, and part of why Apple increased its cash on hand another US$100 million (actually US$64 million) to US$4.5 billion on hand. That too is remarkable.
[1:57 PM] Apple shipped 711,000 units, which is down from last year, but that is off the top of my head, so I could be wrong. We are currently prepping the press release for publishing.
[1:55 PM] The results are out, though the press conference has not begun as of yet. Apple has posted a profit of US$14 million, or 2 cents per share.
[1:48 PM] Testing
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