Apple Q4 2012 earnings: $36 billion in revenue, $8.2 billion net profit

Just a day after introducing the iPad mini, a revised iMac, a 4th-generation iPad and a retooled Mac mini, the company is outing its Q4 2012 earnings -- and it looks as if it has narrowly fell short of Wall Street estimates. Revenue was pegged at $36 billion (compared to estimates of $35.08 billion), with net profit at $8.2 billion. For the sake of comparison, the outfit's fourth quarter of 2011 saw $28.27 billion in revenue alongside $6.62 billion net profit -- at the time, those comically large numbers were actually not up to Wall Street's comical expectations. If you're looking for a quarter-over-quarter comparison, the company's Q3 2012 report showed $35 billion in total revenue, with $8.8 billion in net profits.

The company is guiding for $52 billion in revenues for Q1 2013, while announcing that it sold 26.9 million iPhones (up from 17.01 million a year ago), 14 million iPads (up from 11.12 million) and 5 million Macs (up from 4.89 million) in this quarter. As for the waning iPod business? Predictably, it sold just 5.3 million of those, representing a 19 percent drop from the year-ago quarter. Naturally, the company is expecting its next earnings report to be the one that blows everyone away, with holiday sales -- combined with a slew of new kit -- to propel things leading into 2013. Apple also announced that shareholders that hold stock as of November 12th will pick up a $2.65 / share dividend.

As for other specifics, we're told that gross margin was 40.0 percent compared to 40.3 percent in the year-ago quarter, while international sales accounted for 60 percent of the quarter's revenue. Peter Oppenheimer, Apple's CFO, proudly boasted: "We're pleased to have generated over $41 billion in net income and over $50 billion in operating cash flow in fiscal 2012. Looking ahead to the first fiscal quarter of 2013, we expect revenue of about $52 billion and diluted earnings per share of about $11.75." As for the outfit's current stash of on-hand cash? $121.3 billion. Yeah. The financial results call will get going at 5PM ET, and we'll be liveblogging it right here!

5:01PM Ah, we're on! Everyone is being welcomed onto the call, and as predicted, Tim and Peter are onboard.

4:52PM We're on the line, listening to some pretty astounding classical music. Expecting CEO Tim Cook and CFO Peter Oppenheimer to kick things off shortly.

5:02PM Peter's on the line: "We established new September quarter records. It's our highest September quarter in terms of revenue, ever."

5:03PM Peter: "Net income increased 24% over the prior September quarter, with EPS at $8.67."

5:03PM Peter's talking up Mac sales: "Portable sales represented an all-time high (80 percent) of Mac sales in the quarter."

5:04PM Peter: "iPod touch continues to account for over half of all iPods sold," and he's quoting NPD numbers to showcase a ~70 percent market share crown in the MP3 player market.

5:05PM Peter's now refreshing us on the most recent Apple hardware announcements: iPods, Macs, etc. Says that the new iPod range should make for "excellent holiday gifts."

5:05PM Peter: "We look forward to looking to launching a redesigned iTunes. The new iTunes has a dramatically simpler and cleaner interface."

5:06PM Turning to iPhone -- remember the iPhone 5 was only on sale for 9 days of this quarter.

5:06PM Peter: "We launched iPhone 5 in 9 countries on September 21st. Demand has been phenomenal. Customers have responded tremendously. Demand for iPhone 5 continues to outstrip supply, and we're working very hard to get more into customer hands as quickly as possible."

5:08PM Peter: "Recognized revenue for iPhone sales was ~$17 billion, an increase of 56 percent from the year-ago quarter. Virtually every type of enterprise is using iPhone, including apps in the App Store and custom, internal apps. Canon has provided its field team with iPhones to access customer information. Amtrak has deployed thousands of iPhones to employees. News organizations are using iPhone to transform the way they capture and report the news."

5:09PM Peter: "We saw 14 million iPads sold in this quarter. They were ahead of our expectations, and we saw growth in every geographic region." He's now talking up the iPad mini as well as the 4th-generation iPad, which were both introduced yesterday at its Special Event in San Jose, California.

5:10PM Peter: "Recognized revenue from iPad and related accessories was $7.5 billion, an increase of 9 percent compared to the year-ago quarter. There are just over four weeks of iPads remaining in channel inventory, which is just about on target for us."

5:11PM Peter's now talking up a number of global outfits that are integrating iPad into everyday functions, including VW's use of iPad throughout its company.

5:12PM Peter's reminding us that there are now 275,000 iPad-specific apps on the App Store. Furthermore, Apple established an all-time revenue record for App Store sales during this quarter, and there has been over 190 million sign-ups to iCloud

5:13PM Revenue was $4.2 billion when looking at retail stores, a new record for the September quarter, in retail stores. There is also a new retail sales record for Mac sales, with 1.2 million of 'em being moved through Apple Retail Store doors. There are presently 140 stores, with average revenue per store at $11.2 million, up slightly from ~$10 million per store a year ago.

5:14PM Peter: "Total company gross margin was 40 percent. Operating expenses were $3.5 billion."

5:15PM Peter: "The tax rate for the quarter was 24.2 percent. Turning to cash, that totals $121.3 billion at the end of the quarter, an increase of $4 billion sequentially. About $48 billion of our cash was offshore at the end of the quarter."

5:15PM He's now talking up the $2.65 / share dividend, that'll pay out to stock holders who own as of November 12th.

5:17PM Peter: "We expect revenues to be about $52 billion in the next quarter, with gross margins at 36 percent. We expect the tax rate to be about 26 percent, and we're targeting EPS of about $11.25." Looks like Apple's aiming high for the holiday quarter!

5:18PM Peter: "We sold a record 18 million Macs, and have expanded the iTunes Music Store to 63 countries during the year. I'd like to open the call for questions."

5:18PM The first question is coming to us from Katie with Morgan Stanley: "If your guidance comes to fruition, your EPS will decline year-over-year. The bears will point out that the price premium is weakening. How would you respond to that? What's driving the gross margin down?"

5:19PM Peter: "The change year-over-year is being driven by a couple of things. First of all, last year included a 14th week; this year will have 13 weeks. That, along with a stronger U.S. dollar and the change in gross margin..."

5:20PM Peter: "Let me talk about gross margin. As you pointed out, this is our most prolific product period for Apple. We have record levels of demand. There are costs associated with change and demand."

5:20PM Peter: "The sheer number of product we're introducing in a short amount of time is impacting this. Additionally, we lowered the pricing on iPhone 4 and 4S."

5:21PM Peter's slipping into scripted notes, he really isn't answering this directly.

5:22PM Peter: "Margins on new products are lower than the predecessors, including the iPhone 5 and iPad mini. We're experiencing transition cost with multiple product ramps. We also defer a portion of our revenue with each device we sell, and with December quarters, that's a lot. We will work hard to get down the cost curve as we have successfully done in the past. We're entering this holiday season with our strongest lineup ever. To be able to anticipate over $50 billion in demand for products in a single quarter is remarkable."

5:23PM Tim Cook is on: "We're unwilling to cut corners when delivering customer experience. This is the reason that customers choose to buy our products. It will always be the force being Apple. We're managing the company for the long run, and will always make long-term decisions."

5:24PM The next question is from Goldman Sachs: "Can you walk through how you're thinking about the supply ramps? How does this compare to past iOS product launches?"

5:24PM Tim Cook: "The demand for iPhone is extremely robust. We're thrilled with what we see. We're in a significant state of backlog right now, but our output has improved significantly since earlier this month. I'm pleased with the current level of output in the largest volume ramp in Apple's history. It's difficult to predict when supply and demand will balance, but I'm confident will can supply quite a few iPhones."

5:25PM The next question: "I want to follow-up on the Q around ramping iPhones. Do you anticipate rolling out to all 100 countries in this quarter, as you said when you announced? Related to that, can you comment on whether the supply constraints you've had have had a material impact on your cost of goods sold. As your supply improves, will your COGS change?"

5:27PM Tim Cook: "We still anticipate hitting all 100 countries with iPhone 5; it's our fastest rollout ever. There will be some large countries in the month of December. In terms of cost, with each new product we see learning curves with ramping production. Our new products are no exception -- the difference is the number of new products we have at once. The past six weeks have been phenomenal in terms of new product introductions. We see costs associated with each of these, but I don't see that accelerating per unit."

5:28PM Here comes a follow-up: "You've talked about the iPad / tablet market being larger than the PC market. Clearly, you've expanded that reach with the iPad mini. Over time, could you see this market evolving into larger tablets? I'm wondering, when you talk about the iPad market being bigger than the PC market going forward, do you see larger form factors in the market going forward?"

5:29PM Tim Cook: "Tony, as you know, we don't comment on future products and roadmaps. We continue to be very confident that the tablet market will surpass the PC market. There is incredible development in the tablet space. It's already extremely compelling for many, many customers to choose a tablet -- particularly an iPad -- over the PC. There's an enormous opportunity for Apple there. We think that the iPad and the iPad mini and the iPad 2 will all be extremely attractive offerings for people in lieu of PCs. We're going to continue to very much focus on the future of iPad; we're confident with what we have in the pipeline. We're extremely pleased to have launched iPad mini."

5:30PM Cross Research has the next question: "Could you talk a little about China? It sounds like it remains strong, but there have been mixed signals from an economic standpoint."

5:31PM Tim Cook: "Revenue is up year-over-year in China. iPad is up 45 percent in Greater China. iPhone was up 38 percent. Overall, that's a fantastic quarter. It brings us to a full year of $23.8 billion for China. We're continuing to invest in our own retail stores there, and we continue to expand via channel partners as well. We see it as an extremely exciting market, with more and more people wanting Apple products."

5:31PM Here's a follow-up: "With the launch of Surface today, could you comment on what you see from a competitive standpoint?"

5:32PM Tim Cook: "I haven't personally played with a Surface, but we're reading that it's a fairly compromised, confusing product. I think one of the things you do with a product is make hard trade-offs. The user experience on the iPad is absolutely incredible. I suppose you could design a car that flies and floats, but I don't think it would do all of those things very well. When people look at the iPad versus competitive offerings, I think they'll continue to want an iPad."

5:33PM Here's our next question, from Barclays: "The iPad mini -- how do you think that'll sell compared to the original iPad form factor? What about cannibalization?

5:35PM Tim Cook: "Heh, we don't really have old products. The way that we look at this, is that we provide a fantastic iPod touch, an iPad, and an iPad mini. Customers will decide which one, two, three or four they want, and they'll buy those. We've learned over the years not to worry about cannibalization of our products. The far bigger opportunity is the 80 to 90 million PCs shipped each quarter. I think a great number of those people would be better off buying an iPad, or a Mac. That's a bigger opportunity for Apple. Instead of looking at cannibalization, I see an incremental opportunity."

5:35PM Here comes a question about Apple TV: "How many have you sold, and what's the strategy for your living room?"

5:36PM Tim Cook: "Well, 1.3 million Apple TVs were sold in Q4, 5 million overall in the fiscal year, which is around double the previous year. The business continues to do very well, but when you look at revenue, it's quite small. It still has the hobby label, however it's a beloved hobby, and we continue to focus on it and believe that there's something more there. We'll continue to pull the string and see where it takes us."

5:40PM Your next question comes from JP Morgan: "Peter or Tim, my first question is around sequential guidance for revenue. How should we think about the iPad and iPhone families?"

5:41PM Peter: "I want to remind everyone, if you're looking year-over-year, don't forget about the 14th week last year. We've just announced amazing new products in both lineups, and we expect large sequential increases going from September to December quarters, and as a result we're thrilled to provide guidance of $52 billion in revenue."

5:42PM Follow-up question related to the iPhone 5 rollout, and how markets are chosen related to supply vs. demand.

5:43PM Tim: "What we did initially was that we planned the first 30 to 40 countries and rolled out in September across two different dates. The balance of the quarter is planned with an eye towards supply. We do plan these in advance, so it's not a precise science. We have to plan those with several weeks of notice, so occasionally it can be different than what we think."

5:43PM Here's one from UBS: "Regarding the iPad, you said you priced it aggressively, but many on the street see it differently."

5:45PM Peter: "When we set out to built the iPad mini, we didn't set out to build a small, cheap tablet. We set out to build an iPad with the full iPad experience. The difference between the iPad mini and the competition is profound. We're shipping two great cameras. Our display offers more viewing area. We're shipping our fastest communications, and included the A5 chip -- which has higher performance than our competitors. That's what we've done. The iPad mini has higher costs, and the gross margin is significantly below our corporate average. We're working on the cost curve as we have with other products."

5:46PM Tim's taking a whack at it: "We try to create a product that people will love for months and years after they purchase it. So, that's what the iPad mini is designed to do. You can see that, more broadly on iPad, looking at usage statistics. Over 90 percent of web traffic from tablets comes from iPad. Apple will not make a product where you feel good at purchase, but when you get home you never use it again. I'd encourage you to use an iPad mini, and I don't think you'll use anything other than perhaps another iPad after that."

5:46PM Here's a question related to supporting enterprise clients.

5:47PM Tim: "We now have almost all of the Fortune 500 testing or deploying the iPad, and penetration will only grow. We've also got numbers about 80 percent on iPhone and iPad when looking at the Global 500. There's clearly much more to do there, but I'm feeling pretty good about it."

5:50PM Here's the next Q: "Looking at iPhone revenue growth vs. unit growth, and then the same with iPad, it looks like revenues are growing three times faster than units."

5:51PM Peter: "I didn't quite follow that. But, iPhone ASPs were relatively flat in the September quarter, and were up slightly sequentially. iPad ASPs were down year-over-year in a low, double-digit way, but this was reflective of the price reduction on iPad 2, the stronger dollar and a little bit of change in mix. That's what drove the ASP change year-over-year."

5:51PM Here's a follow-up Q: "It's the second quarter in a row where the U.S. iPhone activation growth outpaced international -- can you comment on that?"

5:52PM Tim: "It's important to remember that we launched the iPhone 5 in America during this quarter. I would've expected higher growth there in the U.S. versus the rest of the world due to that."

5:53PM Here's one from the Bank of Montreal: "Did you comment that you'd be able to meet supply of iPhones in the December quarter, or that you'd end with backlogs."

5:53PM Tim: "I'm not projecting, actually. Our supply output is significantly higher than it was earlier in October, and I'm confident that we can supply quite a few. As for when that balance occurs, I can't tell at this point. Demand is *very* robust."

5:54PM Here's the next question: "Tim, let's go back to the iPad. I want to get a feel for your view in the emerging tablet market where some are shipping tablets and hoping to make it up with software and media. Is that impacting your business"

5:54PM Tim: "We've seen low-cost challengers before, and iPad continues to beat every other tablet on the market at any price. We think customers are smart, and that they have high expectations. Our focus is making the best product, and that'll win at the end of the day. We'll stay true to that."

5:55PM Another question: "Sounds like you've made a lot of changes to your supplier list. Is that creating a new layer of complexity when ramping new products?"

5:55PM Tim: "I'm not sure what you're trying to get at there, but I would not say that there has been significant change in supplier partners. There has not been a change that would have driven more cost."

5:56PM He followed-up regarding the rumors related to Apple and Samsung regarding their LCD relationship.

5:56PM Tim: "As for LCDs, I wouldn't characterize any change there as having driven any cost. With Samsung, we continue to be a customer of Samsung, and continue to have a commercial relationship."

5:59PM Tim was asked to expound upon his take on the overall 7-inch tablet market.

5:59PM Tim: "The difference in real estate size between the 7-inch tablet and our 7.9-inch iPad mini, the usable size is nearly 50 percent greater. The iPad mini has the same number of pixels as the iPad 2 does, so you have access to all 275,000+ apps that are custom designed to take advantage of the full canvas. iPad mini is a fantastic product; it's not a compromised product, like the other 7-inch products. It's in a different league."

6:01PM And that's a wrap! Clearly, Tim's stirred the pot on a number of levels. He's bashed the Surface without even playing with it, made clear that he thinks those other 7-inch tablets don't stand much of a chance, and that the holiday quarter is going to mean huge revenues for Apple. Hope you enjoyed the play-by-play!