Apple's Q4 earnings are out, records set for revenue, earnings, and sales (Update: earnings call liveblog!)

Another Apple earnings report, another winner quarter for the company. Apple says its 2010 fiscal fourth quarter results are its "highest revenue and earnings ever," with records set for Mac, iPhone and iPad sales. Some of the highlight numbers include 14.1 million iPhones sold (up 91 percent over Q4 last year), 3.89 million Macs (up 27 percent), 9.05 million iPods (down 11 percent), and 4.19 million iPads. It all added up to an all-time record for Apple of $20.34 billion in revenue for a net profit of $4.31 billion. And of course, Apple couldn't resist stoking the upcoming-event-rumor flames a little bit: "We still have a few surprises left for the remainder of this calendar year." Hit up the press release after the break. The earnings call is starting in a few minutes, we'll be liveblogging it right here!

6:02PM And that's it! Seriously, that was the most insane earnings call we've ever been on. Stay tuned, we're going to grab the full audio and post it -- it's definitely worth listening to in its entirety.

6:01PM Steve: Part of it is because we engineer so much of it ourselves. The A4 chip is ours, everything from battery chemistry to the rest of it. We've learned a lot with the iPod, we're a very large consumer electronics manufacturers. This is a product we've been training for for the last decade.

6:00PM Steve, you've discussed competitors not matching iPad prices. Why do you think you have such an advantage?

6:00PM Tim: We'll be in 89 countries with iPhone 4 by the end of the year.

5:58PM Tim: The pressure is on supply. Everyone we do business with wants more supply. That's the pressure I feel.

5:58PM Any pressure on subsidy as you look to expand distribution on phones?

5:58PM Peter: We don't provide specific gross margins, but we're always trying to lower costs. We were happy with our gross margins, they were ahead of what we thought, and we think they'll go down just slightly next quarter.

5:57PM Can you please talk more about gross margins?

5:56PM Tim: When people are given a choice, they prefer Macs.

5:55PM Tim: This isn't something we take lightly, we put enterprise features in the OS. It's clear that both the phone and the iPad have a tremendous opportunity.

5:54PM Peter: About 2/3 of the Fortune 100 are adopting or piloting iPad. I've never seen adoption like that. There's also interesting in K12, which is also traditionally slower to adopt. So the early numbers look great.

5:53PM How do you think about your positioning from marketing and sales?

5:53PM Steve: We strongly believe that one or more strategic opportunities will come along. We're very responsible with our cash, it doesn't burn a hole in our pocket, we don't make stupid acquisitions.

5:52PM What is your aspiration for your $50b in cash and why aren't you more open to returning that cash to shareholders?

5:52PM Steve: You're thinking about it wrong. You're thinking like a hardware marker that doesn't know about software, and you'll assume the software will come alive. You're thinking about how to make it cheaper -- slower processor, less memory. Most developers will not follow you -- they'll say I'm not going to go back and write a watered down version of my app since you've got this $50 phone and you're begging me to write software for it.

5:50PM So if the market starts to move towards lower price points and you can't make a product at that cost, you'll cede share?

5:50PM Steve: As a software company, we know software developers won't be able to deal well with all these different screen sizes. We're all about making the best products with the best pricing. That's what we've done with the iPod, and that's what we'll do with the iPad as well.

5:49PM Steve: First of all, Nokia makes $50 handsets, and we're not smart enough to figure that out yet -- I'll let you know when we do. Our goal is to make the best products in every industry we compete in while driving costs down. That's what we did with iPod -- it was relentless improvement and lower prices that was able to beat our competition. As you know we have a very low share in the phone market -- single digits if you count all the handsets, and a high share in tablets because we were the first movers. But that's not how we think about it. The reason we don't make a seven-inch tablet isn't cost, but because seven inches isn't big enough for the software people want to put on them.

5:46PM Can I better understand your aspirations for iPhone and iPad. You've said you don't aspire to high Mac marketshare, and it was the opposite for iPod. Is the iPhone more like the iPod, but Steve, you said you don't want to be Nokia, you just want to make good phones. How should we think about it?

5:45PM Steve: One of these days we'll eventually learn the Android numbers, and I imagine we'll compete with them for a very long time. But we have very different approaches -- ours is to make devices that just work.

5:44PM Steve: Our goal is to make the best devices in the world, not to be the biggest -- as you know Nokia is the biggest, and we admire them for shipping as many devices as they do. But we don't want to be like them -- we want to be like us, and make the best devices.

5:44PM Steve, should Apple be able to outship Android if you add up mobile devices over time? What's your biggest risk?

5:43PM Peter: The drop in margins was not a surprise to us, and it had a different gross margin, and we sold more iPads where we very aggressive in its pricing, plus we had the bumper program and some other things. But we ended up doing better than expected.

5:42PM Is the iPhone the product segment that dropped the biggest margin, then?

5:42PM Peter: Just over $100m for the bumper program, and we'll ship more next quarter.

5:42PM How much decline in margins were related to the iPhone and the bumper program?

5:41PM Steve: We don't talk about unannounced products, but we have gone to a streaming model on Apple TV. It's complete streaming, all the content is rented from the iTunes Store or streamed from your computer, or soon your iPhone or iPad with AirPlay. So how is it doing? We've sold over 250,000 of them, and we're thrilled with that. It's a great product and when we get AirPlay in place it'll give people another reason to buy it.

5:40PM Steve, can you talk about how your Apple TV is going? You took the hard drive out, are you moving to more of a streaming model.

5:40PM Peter: We thought about all those factors, and we do see a small decline in iPod revenue. This is due to new models and iPad sales.

5:39PM Can you talk revenue?

5:39PM Steve: As you know, the largest market of phones in the world today are not smartphones. Over the next several years, those non-smartphone will convert to smartphones, and the pie will grow and there will be room for several companies. After a while it will become a zero-sum game. But right now it's a battle for developers and mindshare, and right now the iPhone and Android are winning that battle.

5:37PM Are smartphones a zero-sum game?

5:37PM Steve: I have a hard time envisioning what those strategies you've mentioned are. In terms of pricing, tablets with far less functionality are having a hard time matching us in price, Flash hasn't presented any problem at all, and having the iTunes store and over 35,000 iPads is a big advantage. We're hard to match, and we're not done. We're out to win this one.

5:36PM Steve, you are the tablet market right now, and I'm just wondering just like Apple's approaching RIM's monopoly in enterprise, I'm wondering how you'll approach competitors in tablets.

5:35PM Tim: We had anticipated a high level of demand for the iPhone 4, but it's even higher than that.

5:34PM Steve: Flash memory? We love flash memory. (Laughs)

5:34PM Any update on your stance on Flash?

5:34PM Steve: As you know, we're already shipping more of them than Macs, after just a few quarters.

5:34PM Steve: We've got millions of people trained with the iPhone, and that lends itself to uses small and big. As for timing, we'll see, but it's already happening.

5:33PM Steve: Well, the iPad is clearly going to effect notebook computers, and I think the iPad proves that it's not a question of if, it's a question of when. There's a lot of development and progress that will occur, but we're already seeing tremendous interest from education, and much to my surprise from business. We haven't pushed it real hard in business, and it's being grabbed out of our hands. I talk to people every day who are using it in business, from boards of directors to doctors and nurses. The more time that passes, the more I'm convinced that we've got a tiger by the tail.

5:32PM Steve, can you talk about the iPad opportunity?

5:31PM Peter: Margins came down about half of what we thought they would, and we did a bit better than we thought.

5:30PM Can you talk about gross margins in the quarter?

5:30PM Tim: We've gotten into a balanced situation in September, and we exited the quarter in a way that allows us to plan for the holidays.

5:30PM Supply constraints on iPad -- do you expect it to improve?

5:29PM Q/A time!

5:29PM Whoa. That was intense -- you have to go back and listen to it. Steve went a little crazy there.

5:29PM "The proof of this will be in our competitors pricing, and that's why we think the current crop of seven-inch tablets will be DOA. Sounds like lots of fun ahead."

5:28PM "Even Google is telling vendors not to use Froyo. What does it mean when your software provider is telling you not to use their software?"

5:27PM "Given that tablet users will have a smartphone in their pocket, there's no point in giving up screen size. Seven inch tablets are tweeners -- too big to be a phone, and too small to compete with the iPad."

5:27PM "And this size is useless unless you include sandpaper so users can sand their fingers down to a quarter of their size. We've done extensive testing and 10 inches is the minimum tablet size."

5:26PM "Let's talk about the avalanche of tablets. First, there are only a few credible competitors. And they all have seven-inch screen. This size isn't sufficient to create great tablet apps."

5:25PM "We are very committed to the integrated approach, no matter how many times Google characterizes it as closed, and we believe that it will triumph over the fragmented approach, no matter how any times Google characterizes it as open."

5:24PM "We believed integrated will trump fragmented every time."

5:24PM "We think this open versus closed argument is a smokescreen that hides the real question: What's better for users, fragmented versus integrated?"

5:23PM "You know, even if Google were right, and the real issue is closed versus open, it's worth noting that closed systems don't always win -- look at Microsoft's Plays For Sure model. Even Microsoft abandoned this strategy in favor of Apple's integrated approach."

5:23PM "There will be at least four app stores with Android, which users much search among. This is going to be a mess for users and developers. Compare this with Apple's integrated app store."

5:22PM "The multiple hardware and software iterations presents developers with a daunting challenge. Compare this with iPhone, where there are two versions of the software -- the current and the most recent predecessors."

5:21PM "Google wants to characterize Android as open, and iOS and the iPhone as closed. We think this is disingenuous. Unlike Windows, which has the same interface on every machine, Android is very fragmented. Compare this with iPhone, where every interface is the same."

5:20PM "What about Google? Unfortunately there is no data on how many Android phones are shipped, and we await the number."

5:19PM "Let me talk iPhone for a bit. It handily beat RIM's most recent quarter -- we've now passed RIM and I don't see them catching up in the forseeable future. They must move beyond their comfort area and become a software platform company."

5:18PM "As most of you know, I don't usually participate in Apple earnings calls. But I couldn't help dropping by for our first $20 billion quarter."

5:18PM Whoa! Steve Jobs is on the call.

5:17PM Apple generated almost 5 times the revenue this quarter than it did five years ago at this time. That's pretty wild, if you think about it.

5:16PM Apple now has $51b in cash, up from $48b this time last year. That's a lot of cash, yo.

5:15PM Apple will open 40-50 stores next year, most of them outside the US. Some US stores will be revised to fit the product line better.

5:14PM Apple's four China stores are its most popular locations, and its highest-performing.

5:13PM Retail revenue was up 75 percent, with a record 800k Mac sold. As usual, about half of those were to people who'd never owned a Mac before.

5:12PM You know what's rad? Apps. The iPad has them.

5:11PM 4.2m iPads sold, and enterprise take up is increasing. Proctor and Gamble employees are now kicking out the giant iPod jams, for example.

5:10PM (You can listen along with us right here, by the way: http://www.apple.com/quicktime/qtv/earningsq410/)

5:09PM People in various countries love the iPhone. So do Fortune 500 CIOs. Who knew?

5:08PM 14.1 million iPhones, compared to 7.1m last year -- a 91 percent increase, and a 92 percent increase in revenue. Average iPhone selling price was $629.

5:07PM Apple sold 9.1m iPods, down from 10.2m last year in this quarter. iTunes did over $1b of revenue, which is crazy.

5:06PM Mac sales wew up 27 percent, more than double IDC's estimate for total PC market growth. The iMac was the best seller in the line.

5:05PM Best iPhone sales ever -- guess Antennagate didn't have any effect there.

5:04PM Apple CFO Peter Oppenheimer has taken the line - he's basically reading the PR. New records for the Mac, iPhone, and the iPad.

5:04PM The call is underway! As usual we'll be liveblogging the good bits and making snarky jokes during the dodged questions and nonanswers.

Show full PR text

Apple Reports Fourth Quarter Results

Record Mac, iPhone and iPad Sales
Highest Revenue and Earnings Ever

CUPERTINO, California-October 18, 2010-Apple® today announced financial results for its fiscal 2010 fourth quarter ended September 25, 2010. The Company posted record revenue of $20.34 billion and net quarterly profit of $4.31 billion, or $4.64 per diluted share. These results compare to revenue of $12.21 billion and net quarterly profit of $2.53 billion, or $2.77 per diluted share, in the year-ago quarter. Gross margin was 36.9 percent compared to 41.8 percent in the year-ago quarter. International sales accounted for 57 percent of the quarter's revenue.

Apple sold 3.89 million Macs during the quarter, a 27 percent unit increase over the year-ago quarter. The Company sold 14.1 million iPhones in the quarter, representing 91 percent unit growth over the year-ago quarter. Apple sold 9.05 million iPods during the quarter, representing an 11 percent unit decline from the year-ago quarter. The Company also sold 4.19 million iPads during the quarter.

"We are blown away to report over $20 billion in revenue and over $4 billion in after-tax earnings-both all-time records for Apple," said Steve Jobs, Apple's CEO. "iPhone sales of 14.1 million were up 91 percent year-over-year, handily beating the 12.1 million phones RIM sold in their most recent quarter. We still have a few surprises left for the remainder of this calendar year."

"We're thrilled with the performance and strength of our business, generating almost $5.7 billion in cash flow from operations during the quarter," said Peter Oppenheimer, Apple's CFO. "Looking ahead to the first fiscal quarter of 2011, we expect revenue of about $23 billion and we expect diluted earnings per share of about $4.80."

Apple will provide live streaming of its Q4 2010 financial results conference call beginning at 2:00 p.m. PDT on October 18, 2010 at www.apple.com/quicktime/qtv/earningsq410/. This webcast will also be available for replay for approximately two weeks thereafter.

This press release contains forward-looking statements including without limitation those about the Company's estimated revenue and earnings per share. These statements involve risks and uncertainties, and actual results may differ. Risks and uncertainties include without limitation the effect of competitive and economic factors, and the Company's reaction to those factors, on consumer and business buying decisions with respect to the Company's products; continued competitive pressures in the marketplace; the ability of the Company to deliver to the marketplace and stimulate customer demand for new programs, products, and technological innovations on a timely basis; the effect that product introductions and transitions, changes in product pricing or mix, and/or increases in component costs could have on the Company's gross margin; the inventory risk associated with the Company's need to order or commit to order product components in advance of customer orders; the continued availability on acceptable terms, or at all, of certain components and services essential to the Company's business currently obtained by the Company from sole or limited sources; the effect that the Company's dependency on manufacturing and logistics services provided by third parties may have on the quality, quantity or cost of products manufactured or services rendered; the Company's reliance on the availability of third-party digital content; the potential impact of a finding that the Company has infringed on the intellectual property rights of others; the Company's dependency on the performance of distributors, carriers and other resellers of the Company's products; the effect that product and service quality problems could have on the Company's sales and operating profits; the Company's reliance on sole service providers for iPhone® in certain countries; the continued service and availability of key executives and employees; war, terrorism, public health issues, natural disasters, and other circumstances that could disrupt supply, delivery, or demand of products; potential litigation from the matters investigated by the special committee of the board of directors and the restatement of the Company's consolidated financial statements; and unfavorable results of other legal proceedings. More information on potential factors that could affect the Company's financial results is included from time to time in the Company's public reports filed with the SEC, including the Company's Form 10-K, as amended, for the fiscal year ended September 26, 2009, its Forms 10-Q for the quarters ended December 26, 2009; March 27, 2010; and June 26, 2010; and its Form 10-K for the fiscal year ended September 25, 2010 to be filed with the SEC. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork, and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple is reinventing the mobile phone with its revolutionary iPhone and App Store, and has recently introduced its magical iPad which is defining the future of mobile media and computing devices.