Thanks for joining us here for running commentary and analysis of Apple's Q4 2011 earnings announcement.
We welcome your comments and questions, but please note that questions are moderated and will not necessarily appear in the liveblog content; also please note that TUAW cannot ask the Apple executives questions, as the call is reserved for financial analysts.
You can also listen in on the live earnings call via QuickTime streaming.
6:04PM Thanks for joining us for our liveblog coverage. Apologies for the technical issues at the top of the call!
6:03PM Replay of the call available on http://apple.com/investor for two weeks.
6:03PM In a few countries we dropped the 3GS price a bit early.
6:02PM A: Strong sellthrough.
6:02PM Q: Can you talk about carrier receptivity on the pricing change on iPhones?
6:02PM After selling 40M in first 18 months, more than our wildest dreams & selling 3/4 of all tablets, think we have a pretty good handle on what to do next.
6:01PM We see the tablet market as a huge market. Could not be happier with our position in it. We have some fantastic things in the pipeline.
6:01PM A: Don't want to get into what we might do.
6:01PM Deutsche Bank: Medium to longer term iPad opportunity
6:00PM Technical answer about revenue comparisons.
5:59PM Q: on Japan, disparity year over year
5:58PM Variable expenses for 14th week but fixed costs are fixed.
5:58PM A: 14th week will conclude on 12/31. Strong week for us but not as strong as weeks between Thanksgiving and Xmas.
5:58PM Bank of Montreal: Peter, is the extra week linear on revenues and expenses?
5:57PM The big win is to eat into that handset market at large.
5:57PM Handsets are 1.5B market
5:57PM Smartphone market will eventually absorb the handset market.
5:56PM We want the iPhone to be in as many customers' hands as possible.
5:56PM A: Not one that we publish.
5:56PM Q: Original goal was 1% of market for iPhone in first year, beat it 5x. What's the next goal?
5:56PM A: Repeats answer on cash spend in best interest of Apple.
5:56PM Q: Interrupting -- *would* a share buyback be a white flag on innovation?
5:55PM We believe that we have best products in the world, our customers tell us that, pipeline is amazing.
5:55PM A: Anyone looking at us would not think we are waving a white flag on innovation.
5:54PM Q: Is buying back shares with cash perhaps a philosophical white flag?
5:54PM PO: Of the 81B in cash we have, a bit more than 2/3 was offshore.
5:54PM We will always do what we believe is in Apple's best interest.
5:53PM What we're doing with cash, we're doing well and are very frugal about it. That said, not religious about holding or not holding cash.
5:53PM Also taken money and done things in Apple's best interest, acquired some companies and IP, invest in supply chain and build out stores.
5:53PM Cash: To date we have tried to maintain flexibility. Cash not burning a hole in our pocket, we invest conservatively, don't do crazy things with it.
5:52PM Cannibalization like this, I hope it continues.
5:52PM A: Some cannibalization showing some people buying iPad rather than Mac, substantially larger number choosing iPad vs. Windows PC. Mac had best quarter by far ever.
5:51PM Q: Any cannibalization of PC market?
5:51PM Q: Tim, first call as CEO, any different strategy on cash allocation? Dividends, buyback? [Dumb question.]
5:51PM Everything we do in US we do in China. We would not necessarily use all those tactics in the other countries I mentioned.
5:50PM Basic approach in all countries is the same as it was in China. Matter of the rate and course of the rollout, do we do everything that we did in China (retail, online, APR channel, 3rd party channel, advertising)
5:49PM Some countries have protectionist policies if there's not local content, but I have nothing to report there.
5:49PM Growth in BRIC countries -- already some effort there.
5:49PM "Mindboggling" share for iPad, 97% tablet web usage
5:49PM You can look at the market share numbers that third parties have reported... we couldn't feel any better, honestly, about iPad share.
5:48PM Supply/demand, iPad we reached balance sometime in the quarter and stayed on balance
5:48PM In the iPhone numbers it is crystal clear that there was a slowdown this quarter, not the case on iPad
5:47PM Still countries left to do for iPad but we are in the main countries
5:47PM to put that in context we have about 50K POS for iPod, 120K for iPhone
5:47PM A: We are in 90 countries on iPad, about 40K points of sale WW
5:46PM Q: More on growth
5:46PM Q: Clarification, iPad side where we are in distro rollout (countries/carriers)
5:45PM Looking forward we will continue to offer the best products we can, be innovative, be aggressive, very confident in the product pipeline.
5:45PM PO: December quarter thoughts... we anticipate gross margin around 40% and having op margin of 31%
5:45PM Can you expand operating margins if gross margins come under pricing pressure?
5:44PM It seems that several of the highest-growth products next year may be the elastically priced products
5:44PM Q: I know you don't give operating or gross margin guidance, but...
5:43PM The asterisk is the Thailand disaster.
5:43PM Most other components should track historical trends. Generally a very positive supply market.
5:43PM In terms of general component market, NAND/DRAM, LCDs we generally see in a positive supply situation.
5:43PM Factored supply outlook into forecasts.
5:42PM Q: Unibody casings issues with MBP/MBA supply?
5:41PM Also has the advantage of a lower price in pre-paid market, not free/$99 but lower than previously.
5:41PM Also lowered price of iPhone 4. Both those moves, as we looked at it these are still fantastic products and we think we can do well selling those in post-paid markets.
5:41PM Tim: We did the 3GS price drop to make iPhone accessible to broader market.
5:40PM Q: Can you talk about price drop on 3GS?
5:40PM Tim is deliberately not commenting on court remedies.
5:40PM We spend a lot of time and money coming up with innovation, frustrating when people take advantage.
5:39PM Shockingly, Tim says "don't want to comment on litigation."
5:39PM [File under No Comment.]
5:39PM Sanford Bernstein: Tim wondering if you can comment on patent disputes esp. with Samsung and other Android OEMs -- ultimate objectives from litigation?
5:38PM Virtually certain there will be an overall industry shortage of disk drives, but we placed our assessment in the guidance already.
5:38PM Primary exposure on the Mac, significant portion of worldwide supply of hard drives includes components sourced in Thailand
5:37PM Some factories in Thailand not operable, recovery timeline not known.
5:37PM Cook: Hearts go out to people of Thailand who have suffered flooding.
5:36PM Q: supply chain comment on HDD issues in Thailand?
5:36PM Our guts have been since the beginning of Siri is that it will be substantial.
5:36PM We see this as profound innovation. Over time many people will use Siri in a substantial way.
5:36PM Cook: Siri usage amazing already, questions & personality is incredible.
5:35PM Cross Research: Siri outlook?
5:35PM Macs will outgrow the market Y/Y, expect 23rd consecutive Q outgrowing the market.
5:35PM Peter: December quarter, we would expect new records for iPad and iPhone.
5:34PM Q: With iPad experience, any thoughts about seasonality?
5:34PM iPhone 4S off the charts. 4M vs. 1.7M in comparable timeframe with 4.
5:33PM You can't run the experiment 2x, we can't tell you how many we would have sold if not for rumors/expectation, but believe it was substantial deferral
5:32PM Barclays: Wondering if we could talk iPhone... do you have idea of what total units were deferred into FY12 Q1?
5:32PM Not a guidance number, just a tim cook belief
5:32PM Tim: We thought from the beginning that it would be a huge market, been greater than we thought. Pretty clear to me that forecast shows tablet market eventually larger than PC market.
5:31PM GM: Size of tablet market?
5:31PM [Anyone else feel a wagging finger in their face?]
5:31PM Wanted to launch new carriers with latest product. Greatest impact was rumors being so pervasive.
5:30PM Deferred carrier/country additions for iPhone in Q4
5:30PM Gene Munster!
5:30PM When you look at the ecosystem, I feel very very confident about our ability to compete & our pipeline
5:29PM in fact iPad share went up, in June quarter IDC said iPads were 3/4 of all tablets sold.
5:29PM Seen several competitors approaching over time, different form factors, different price points, but reasonable to say that none of iPad competitors have gained any traction
5:28PM Oppenheimer: We had a record quarter for iPad while also setting a Mac record
5:28PM JPM: iPad, Amazon trying to make tablet market a soapbox derby... thoughts?
5:28PM Approach will always be to do business with as few partners as we can "so we can be really deep with them" and do innovative work
5:27PM As we get larger, have elected to diversify some
5:27PM Tim: We have an outstanding team & track record, but trying to improve all the time. Also used balance sheet to do some strategic deals on key products.
5:27PM JP Morgan: Apple historic strength in supply chain, does multi-sourcing give you margin flex?
5:26PM China the sky's the limit, don't discount other emerging markets.
5:26PM Historically these markets not strong for Apple, but the iPhone has really opened up these areas, iPad will be doing the same.
5:26PM TC: Fully taking advantage of opportunity, additional focus on areas that have shown great promise this FY. Brazil, now over $900M mark. Russia looking more promising, Middle East significant opportunity.
5:25PM How far can it go? "In my lifetime, I've never seen a country with so many people rising into the middle class who aspire to buy products Apple makes... enormous opportunity."
5:24PM 7000 Points of sale for iPhone in greater China.
5:24PM New retail stores there, 6 in greater China
5:24PM Total china revenue for FY11 was 15B, year ago was around 3B
5:23PM Delivered 4.5B of revenue for Q4
5:23PM Tim: "China progress has been amazing... revenue was 2% in FY09, FY11 was 12%, past quarter was 16%."
5:23PM MS: Tim, insights into traction in China? How substantial will China be to Apple over time? As big as US market?
5:22PM Oppenheimer: We expect margins to be flat. Component costs should stay favorable, iPhone should be strong mix. However offset will be from lower pricepoints and higher costs of iPhones, plus stronger dollar.
5:21PM Morgan Stanley: You still hit 40% margin even with product mix shift. Why no better than 40% next quarter?
5:21PM "In our wildest dreams we could not have gotten off to a start as good as the 4S"
5:20PM Tim: Expected iPhone sellthrough dip to be much greater than it was, so revenues beat guidance.
5:19PM Follow-up: was iPhone lower results mostly sell-through? Tim: following up.
5:19PM Tim: We are thrilled with 4S launch. Confident we will have a strong supply, can't predict when supply and demand will balance. Confident we will set an all-time iPhone record this quarter.
5:18PM (Macs in 2011: 17M.)
5:18PM Given that the 4S was launched so close to holidays, can you ramp up to match demand?
5:18PM first question: goldman sachs.
5:17PM $26B in net income. 85% growth year over year.
5:17PM 42 new stores
5:17PM 72M iPhones, 32M iPads in FY11
5:17PM 66% growth in revenue year over year. Wow.
5:17PM Estimating $9.30 EPS for next quarter.
5:16PM This December quarter will be 14 weeks. Expect $37B in revenue, about 40% gross margin.
5:16PM Don't forget to refresh the page?
5:16PM $5.4 B increase in the quarter, but spend on Nortel patents & other items
5:15PM Cash: 81.6B in cash, short and long term investments
5:15PM Margins helped by lower component and operating costs.
5:15PM Replacing higher volume stores
5:14PM Expect to open 40 stores, 3/4 outside the US
5:14PM hosted a record 77.5M visitors in the quarter
5:14PM 357 stores now open
5:14PM RPS $10.7M average
5:14PM Hong Kong store had highest Mac sales at opening
5:14PM Increase of 25% in Mac sales at retail, still to 50% new to Mac.
5:13PM iPhone sales at retail took a hit vs. year ago quarter
5:13PM Retail: $3.6B revenue.
5:13PM Over 500K apps available in the App Store. Now available in 123 countries.
5:12PM iOS 5 introduction, iCloud "very excited" -- "we believe iCloud is the easiest way for customers to manage their content"
5:12PM iOS devices sales now past 250M overall (iPhone, iPod touch, iPad)
5:11PM Mention of airline adoption in cockpit, flight attendant training
5:11PM More than 90% of US Fortune 500 deploying or adopting.
5:11PM iPad introduced 18 months ago, businesses adopting it at an unprecedented pace.
5:11PM Quarter ended with 2.5M iPads in channel inventory, on target
5:10PM iPad available in 90 countries
5:10PM iPad momentum is great. 11.1M iPads sold in quarter, 166% growth.
5:10PM As Peter Oppenheimer mentioned Siri, you could hear a Siri 'bee-beep' in the background. :)
5:09PM L'Oreal, RBS, SAP, Texas Instruments, Jaguar/LandRover, CSX.. and more companies going iPhone.
5:09PM Lowe's home stores introducing custom iPhone app.
5:08PM 93% of Fortune 500 enterprises deploying or testing iPhone, 60% of global 500.
5:08PM For the 6th consecutive time, iPhone ranked #1 in Consumer Reports customer survey. (ha!)
5:07PM Recognized rev from iPhones was up 24% Y/Y
5:07PM As predicted, iPhone sales in 2nd half of quarter slowed down due to speculation of product refresh.
5:07PM Particularly strong growth in Asia/Pacific for iPhone
5:06PM iPhone 17M+ iPhones in the quarter.
5:06PM iTunes store records: $1.5B revenue. Customers have downloaded zillions of media items.
5:06PM 6M+ iPods, iPod touch more than half of all iPods sold. iPod share of music player market US is 70% plus.
5:05PM 4.89 M Macs in the quarter, 26% growth.
5:05PM Portables are 74% of Mac mix, but iMac strong too. Lion 6M downloads.
5:05PM Peter Oppenheimer: Improvements in Mac market performance attributable to Mac portables.
5:04PM Tim Cook: Noting passing of Steve.