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Conference Call Recap
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DawnTreader
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Wow!
What a set of results for the quarter and what outstanding questions and info provided in the call!
A couple of points: K-12 institutional sales were down YOY and stimulus funds have not flowed through for education purchases (yet).
This makes the YOY gains in Mac unit sales all the more spectacular.
Supply will not meet demand on 3GS phones anytime soon, meaning demand is high and there’s virtually no opportunity for channel fill until well into the September quarter.
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The last update on music was 6B on Jan 6 5B was in June 2008 so despite the price increase from .99 to 1.29 the sales rate is growing 8B on Jul 21st 2009.
They also threw out the 45M touch devices. Of that total we have 6.124 1st gen, 15.048 2nd gen and 5.2 this quarter = 26.372M Iphone and about 18.6M touch. As a point of reference Sony has sold a bit over 50M PSP and Nintendo over 100M DS series.
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DawnTreader
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arty, good work on highlighting the above snippets. I listed to much of the call but work kept getting in the way. :wink:
[ Edited: 22 July 2009 01:32 AM by DawnTreader ] -
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[ Edited: 22 July 2009 01:32 AM by BillH ]Signature
I don’t mind being wrong…,I just hate being wrong so FAST!
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Specifically, to give you some numbers, almost 20% of the Fortune 100 have purchased at least 10,000 units or more and there?s now multiple corporations and government agencies who have purchased in excess of 25,000 each.
BillH wrote:
This was my favorite moment of the conference call. It will be nice to have this snippet to paste into the comments of those writers who continue to pretend that it’s only suitable as a “consumer device”. Here’s hoping that the RIMM shills on CNBC flinched a bit when they heard this. They can borrow my mantra if they like. “I don’t mind being wrong but I hate to be wrong this fast!”
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I don’t mind being wrong…,I just hate being wrong so FAST!
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capablanca
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I share the consensus happiness. I remain comfortable being 90% in, though I may sell some out of the money calls before the week is over.
Having said this, there are items in the concall and/or earnings release that are cause for concern or at least merit close monitoring:1) Cook’s comment on corporate iPhone sales. Reading between the lines I heard sales are good to higher education and to companies that allow their employees to make the choice, but not good at all companies where the IT department is the decision maker.
2) Only one of our major products (iPhone) registered revenue increases yoy. Mac desktop (-18), Mac portables (-2), and iPod (-11) were all down. Given the macro environment, this is by no means horrible or even unexpected. But these figures do dampen my euphoria, and merit attention.
3) China. I am happy that we have not caved-in to the Chi-coms. But I’d be happier if the their markets were more open and free. It may be a while longer before we see significant iPhone sales from China.
4) The App Store. Until now, I have convinced myself that Apple knew the App Store was an abomination and were working to fix it. I am slowly losing patience, and every time Cook raves about how wonderful it is, my confidence in him wobbles a bit. Just a bit mind you. I was heartened to hear that Charlie Wolf seems to agree with me. And Cook did acknowledge that improvements were possible. Fingers crossed.
5) “Stimulus” money has not resulted in any education sales.
6) The conventional iPod business is in decline.
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6) The conventional iPod business is in decline.
But including a share of iPhones, which are also iPods, Apple’s total music player business is not diminishing.
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DawnTreader
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The standalone music player is a maturing business. Apple revolutionized the digital music player market and will revolutionize the handheld device market with a music player as a component of the product’s features. In other words, Apple has absorbed as much of the market for standalone music players and is moving on to more fertile ground.
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Everything you see as a concern I see as an opportunity. Sales will be even better when the stimulus dollars start trickling down, when the education market starts buying again, when more corporations accept the iPhone, when the App Store is improved, when China opens up, and when the economy improves and more people refresh their laptops. Even in the absence of these things, Apple is printing money. Imagine what happens when just some of these kick in.
To paraphrase Buffet, its all a function of how big can the castle get, and how wide the moat is. None of the concerns you cite have to do with the competitive threat (the moat). Its getting harder to see a near term threat at all. Your concerns all go to how large the opportunity is (the castle). On that score, Apple’s potential castle seems as vast as ever.
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DawnTreader
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Considering the softness in the education and enterprise markets, the results are all the more impressive. Time Cook used the term “delayed purchases” when speaking of the softness in those two markets. AFAIK there isn’t a capital expenditure tax credit currently in place and this compounds the economic challenges faced by for-profit firms considering technology investments.
In the creative pro market (often small businesses), sales will return when the economy regains its footing. As the stimulus dollars work their way to local school districts sales will improve in that market, but it may be 2010 before Apple sees an appreciable improvement in that sector.
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I share the consensus happiness. I remain comfortable being 90% in, though I may sell some out of the money calls before the week is over.
Having said this, there are items in the concall and/or earnings release that are cause for concern or at least merit close monitoring:1) Cook’s comment on corporate iPhone sales. Reading between the lines I heard sales are good to higher education and to companies that allow their employees to make the choice, but not good at all companies where the IT department is the decision maker.
A couple of thoughts regarding this concern. Here’s what Tim Cook said:
He also noted that the iPhone was doing well with small businesses and large organizations that allow people to purchase phones for individual use. Almost 20 percent of Fortune 100s have purchased at least 10,000 units or more, he said, and multiple corporations and government agencies have bought more than 25,000 each.
I don’t know what difference it makes whether the individual purchases the phone or the IT dept. With 10,000 units seeded into 20 percent of the Fortune 100 the viral nature of the product should do the rest. They won’t be hiding inside the marketing departments this time around. The second thought I have is that with this kind of penetration into those types of corporations it’s clear that IT’s role is changing. I think you’ll see another false premise of what todays technology drivers are within corporate walls start to decompose.
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I don’t mind being wrong…,I just hate being wrong so FAST!
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danthemason
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capablanca - 22 July 2009 12:13 AM
6) The conventional iPod business is in decline.iPods are by definition and continuing evolution are unconventional. But the numbers make your point.
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danthemason
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As far as the complaints about the App Store. How do you categorize life and all its possibilities? Where is the library model to capture and divine a once in lifetime phenomenon bigger than any of us have ever seen? The App Store is the marrying of technology with the creative human spirit. In short life is messy. Get on with it and enjoy.
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capablanca
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As far as the complaints about the App Store. How do you categorize life and all its possibilities? Where is the library model to capture and divine a once in lifetime phenomenon bigger than any of us have ever seen? The App Store is the marrying of technology with the creative human spirit. In short life is messy. Get on with it and enjoy.
LOL. You are right of course. But I am spoiled. Apple has provided us products that are decidedly not messy. It is a core competency. And I expect that something as vitally important as the App Store needs to live up to the Apple standard.
Regarding your previous post on “traditional iPods”. I had used the wrong term. I should have written “conventional iPods”; this, I think, is the term used by Cook. It is a credit to Apple that they have had the courage to obsolete a product that has 70% market share and is credited with saving the company and providing the now-famous halo effect. Obsolete is a strong term for a product still selling millions of units per quarter and many of them to new customers. But it is true in the long term that single purpose devices like the conventional iPods will be confined to niches, to be replaced by multi-purpose “wired” platforms like the iPhone and its successors. When the history of SJ is finally written, I expect this will be named as one of his signature accomplishments.
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DawnTreader
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I wouldn’t characterize the iTunes store as “messy” as much as I’d call it “unwieldy.” It’s due for an overhaul. However, any big change to the stores “plumbing” won’t come easy due to the size of the installed base and the cross-platform nature of the product. Stay tuned. I’m sure a big change is already in the plans.
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capablanca
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In the conference call on Tuesday, Mac unit sales up 4% were compared favorably with overall PC forecasts of down 5-7%. This is a useful comparison, but only barely. As has been pointed out many times on AFB, Mac is not in the “overall PC” business.
The MSFT conference call of yesterday sheds additional light on the Mac’s relative performance. And I think shows a glimmer of more relevant comparisons.
In this first excerpt Chris Liddell informs us that large customers have held up better than small. (Of course, it is predominantly the small arena where Mac competes). And in the consumer segment low-priced offerings are not as soft as “premium” offerings. (Mac competes only in what Microsoft calls the premium arena). And finally, enterprise remains healthy; (Mac is a very small player in enterprise).
?[...] small and mid-market customers are still the hardest hit by the economy and as a result we?re seeing lower overall buying activity. In the consumer segment we?re still seeing healthy volumes in our lower-price offerings with softness in our premium offerings. Our enterprise customer segment remains relatively healthy with renewal rates in line with our historical range.?
Liddell is telling one of two things (or maybe both): Microsoft is doing much better where it does not have to compete with Mac, and/or the markets where Mac competes are especially weak.
In this 2nd excerpt he separates the market data for networked and non-networked PCs.
PC sales for the industry as a whole were likely down 5% to 7%, management said, with ?traditional or non-network PCs down 16% to 17%? compared to the year-earlier period.
Since the Mac is primarily in the non-networked segment, perhaps we should be using that as our yardstick for measuring relative performance. If so, then it is +4% vs. -16% or a differential of 20 points.
The more I read, the more impressed I am with the performance of Mac in the 3Q. And I must not be alone; as I pen this, AAPL is pennies away from $160.
