Apple just turned in its Q1 financials, revealing that iPhone sales have doubled in the past quarter compared to last year, Mac sales are up 33 percent, and iPod sales continue to decline with an eight percent dip from a year ago. The company brought in revenues of $15.68 billion, good for $3.38 billion in profit, or $3.67 profit per share. That's up from last quarter's profit of $2.26 billion on $11.88 billion in revenue, and in fact, it's Apple's all-time highest revenue and profits. Steve sounds pretty pleased in the PR, and hints at far more to come
: "The new products we are planning to release this year are very strong, starting this week with a major new product that we're really excited about." We're sure to find out more later on the analyst conference call, so stay tuned.
We're jumping on the call now, we'll update the good parts in semi-liveblog style after the break, since we're sure the real action will come on Wednesday. Let's go.
We're still waiting to start -- and we're testing something. Did it work?
Okay, we're on. CFO Peter Oppenheimer and COO Tim Cook are on the line. Peter's is recapping the quarter: "We're shipping our best products ever and customers love them." Talking about the switch away from subscription accounting.
Laptop sales were up 18 percent, people like the new MacBook. People also like the new iMac, especially education -- edu sales went up 61 percent.
They expected general sales of iPods to go down, but sales of the iPod touch went up 55 percent.
Sold 8.75 million iPhones in the quarter, with 17 new carriers added. iPhones now sold in 86 countries. Sales up in Japan, Australia, UK, France, and Germany.
Surprise, Apple retail stores are also doing well. Half the 8.9 million Macs sold were to people who'd never owned a Mac before. 283 stores open in 10 countries.
In sum: The Apple Stores are not just a party in the USA. They are also a party in other countries.
Apple's main priority with its huge cash reserve is primarily "preservation of capital," which means they're mostly trying to hold on to it.
Talking about how the FAASB changed the rules and now they don't have to use subscription accounting. That means the numbers reported today are slightly higher than they were in the past -- if we're understanding this correctly, the true comparison with last quarter would be with the non-GAAP number they reported. Accountants everywhere are going crazy, there are riots in the street, etc.
Apple estimates that they'll deliver $25 in upgrades to the iPhone over the life of the product and $10 in upgrades to the Apple TV. That's just for accounting purposes, obviously. The true value they deliver can't be measured with human money... or emotions.
Peter sounds absolutely giddy about the new accounting rules. As giddy as any straight-laced MBA who is basically reading numbers can sound, anyway.
Apple's targeting about $2 per share earnings for next quarter -- they're usually pretty conservative, though.
Any reason to think the Mac growth rate won't continue? Tim: Macs are growing at about two times the market rate, so we don't really want to predict. Also, we don't predict anything. But Italy, France, Switzerland and Spain grew at 40 percent, Australia grew at 70 percent, China even higher. We'll see how we do.
AT&T's getting a lot of bad press here, why stick with a single carrier? Tim: AT&T is a great partner, it's important to remember that they have more mobile broadband usage than any other carrier in the world. In the vast majority of places, iPhone customers are getting a great experience. AT&T has acknowledged problems, we've personally reviewed their plans to fix it and we're confident it'll be handled.
Can you address gross margin for the current quarter and next quarter? Peter: This is super boring, who wants to talk about our awesome tablet? Okay, that's not what he's saying at all. He's mostly talking about very dry accounting changes, which were very complex. Pete's proud of his guys in the green hats, basically.
Margins were up because commodity pricing was down, warranty numbers were down, and Apple used all that cash to secure better pricing.
Does your guidance for next quarter include any unannounced products? Tim: Nice try, but stay tuned for Wednesday.
They're expecting a decline in Mac sales next quarter, which is usual, and they're possibly a bigger decline in traditional iPod sales. Also expecting a seasonal decline in iPhone sales.
Do you see anything that would change how you generate "free cash flow?" Peter: We're really good at making cash, and I don't see that changing.
Can you talk about the iPhone in China, did it meet expectations? Tim: We don't disclose units by country, but I'll make an exception for China. Earlier this month we activated over 200,000 units in China. There are 1500 points of sale for the iPhone in China, we're very focused on the quality of point of sale, we're moving slow because we're focused on the building the brand there.
Can you comment on your comfort level with iPhone inventory? Tim: iPhone channel inventory grew by 230,000 units over the quarter. We're comfortable with it, we could have sold more iPhones but we decided not to because we manage inventory very tightly.
Can you talk about the Nokia lawsuit, and can you confirm that there's no risk to Apple from litigation? Tim: We don't talk about pending litigation. (Implied: Shame on you.)
How do we reconcile the notion that gross margins are going down given your product mix? Peter: Here are a lot of words that add up to "no comment."
App approval process has gotten lots of criticism -- is the problem the model itself? Have you received any feedback from iPhone owners? Tim: Important to keep this in perspective. We have 100k apps in the store, over 90 percent approved in 14 days. We created the process to protect consumers and kids, and protect the experience of using the phone. Most of the rejections are bugs in the code itself, and this protects the customer and the developers. The noise on this may be much higher than the reality.
Tim says he hasn't gotten any feedback from iPhone owners, and Apple hasn't seen it in the research.
How do you feel about new product opportunities ahead? Anything coming up that's as big as the iPhone and the Mac, or is that setting expectations too high? Tim: I don't want to take away your joy and surprise on Wednesday, so let's save that. (That's a direct quote, by the way. He said "joy and surprise.")
Is it appropriate to roll out iPhone in the same way across the world, specifically a place like China where incomes are lower? Tim: There's a significant middle class opportunity in China. To do a real analysis you really can't look at the averages, but at the distribution. We're learning a lot from our experiences in Brazil, for example.
(Just an aside: how hilarious is it that this call is happening right before an event? Peter and Tim sound like they're just toying with these poor analysts.)
Can you talk more about the App Store? Is is successful? Peter: I will decline to hit that softball for competitive reasons, but I'd totally smash it if I wanted to, because the App Store is awesome.
70 percent of the Fortune 100 companies and 50 percent of the FT 100 companies are actively piloting the iPhone for enterprise use.
Have you seen any change in the iPhone financial model when you move beyond a single carrier in mature markets? Tim: We mostly see that sales increase as we add carriers. We've added carriers in the UK, you'll see a significant change in marketshare there. Same with France, Scandanavia -- marketshare up with more carriers. We've mostly selected countries we thought that would happen in, so I don't want to imply that would happen everywhere or that we think that would happen.
How should investors think about the long-term strategy and the acquisitions of Lala and Quattro Wireless? Peter: We acquired Quattro because we wanted a seamless way for developers to make more money on their apps, especially free apps.
The iTunes Store and the App Store are runnning at "a bit over break even."
Can you explain this crazy new accounting stuff? Peter: Yes, I can.
It looks like you're selling a lot of machines in Asia, can you talk about that? Tim: iPhone sales in Japan are up 400 percent, Mac growth is up but we can do better. Mac sales in Asia Pacific are up 55 percent, it's our best area. iPhone sales really drove an incredible amount of revenue growth.
(This is super boring, but it's like we started it so now we have to finish. Never say we're quitters, people.)
Can you characterize your relationship with Google in the smartphone space? Peter: We work with Google in some places and compete with them in others. Mobile advertising is in its infancy, and with the great people we've acquired from Quattro, we expect to offer developers a great opportunity for mobile advertising.
Tim says he'd describe pro sales as an "economically challenged area," and he doesn't think that's going to change.
Tim: We really understand teaching and learning at a very deep level, and we think we're the only technology company that gets it. We sell a lot more than just boxes.
6:03PM And that it! Congrats to those of you that have stuck this out -- you're either huge financial nerds or seriously in need of hobbies. Have you considered console gaming?