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Liveblogging the Apple earnings call


We're on the line live for the Apple FY07 Third Quarter earnings call, starting up in just a few minutes at 5pm Eastern. Apple is expected to announce some big numbers, and we should get an idea of what they expect from the iPhone in the next quarter or so. More updates as we post them.

If you want to join in, Apple's got a quicktime link, so hit it and let the big numbers hit your ears at the same time they do us.

5:08pm: Welcome to the conference call. Here we go.

5:10pm: Peter Oppenheimer: record-breaking max sales and continued strong demand for iPod. Net income up 73%, huge numbers overall.

5:11pm: Apple's growth rate more than 2 1/2 times the predicted growth rate for the quarter. Mac notebooks up 42%. 9.8 million iPods, 31% growth over the quarter.

5:12pm: 71.5% share of MP3 players are iPods. iTunes surpassed Amazon and Target.

5:13pm: 270,000 iPhones sold, 146,000 iPhones activated. Some problems during the first week, and we would like to apologize. Since then, AT&T has corrected the cause, and we are experiencing high percentage of problem-free activation.

More after the break.

5:14pm: "Customers clearly agree that the iPhone is a revolutionary product." Took iPod 2 years to sell a million, millionth iPhone is expected in September.

5:15pm: Europe gets the iPhone in Q4, Apple wants to sell 10 million total by the end of 2008.

5:16pm: iPhone + Apple TV sales = $180 million in deferred revenue.

5:17pm: Now, about Apple stores...

5:17pm: Lots of accounting information about how Apple considers performance of Applecare at retail-- they're stretching out revenue recognition for applecare sold at retail.

5:18pm: $915M sales at Apple stores, 33% year to year growth, avg. revenue per store $5.1M. 50% of customers were new to the Mac, 21.9 million people in stores total.

5:19pm: $13.8B in cash, crazy.

5:20pm: $5.7B revenue target for the upcoming quarter-- back to school will help. $.65 expected profit guidance for next quarter seems way low.

5:21pm: Quarterly max shipments broke previous company record, and we feel positive about the next quarter.

5:22pm: Time for questions...

5:23pm: Analysts openly laughing at lowball guidance guess. Apparently "higher commodity costs" and "product transitions" are to blame.

5:24pm: "What is demand for iPhones like right now and towards year end?" AT&T said more iPhones sold in the first weekend than first month of any other wireless device in their entire history, customers love the iPhone-- survey says 90% of owners are satisfied. So we've got a great start, but our primary focus is on a third great business for Apple over the long term. So a marathon, not a sprint (or, for that matter, says Mike Rose, a Verizon).

5:26pm: "Any shortages for components?" Almost all stores have iPhone in stock, and we're shipping from in 1-2 days. We've included supply and demand in our projections.

5:28pm: Shannon Cross: "Why no payment from AT&T this quarter?" We did not recognize payments as revenue during June quarter, but will do so going forward.

5:29pm: "Because cash will be so important, have you thought of cash flow guidance per share?" No, we haven't done that traditionally, and we don't see that changing.

5:30pm: Again, commodity costs and "product transitions that I can't go into" are for the low guidance.

5:31pm: They're not getting into the split on subscriptions between Apple and AT&T on iPhone contracts.

5:32pm: We feel like we've given quite a bit out in terms of how confident we are in iPhone demand-- 1 millionth by end of Sept, 10 million in 2008.

5:33pm: "Any other payments from vendors on the main screen of iPhone?" We don't discuss those terms. "You can't even answer if you are or are not?" No.

5:35pm: Richard Gardner: Update on Best Buy rollout? We were around 50 stores at beginning of quarter, 75 by end, almost 300 by end of 2007.

5:36pm: Component prices bottomed in the quarter were more favorable than we predicted this past quarter, and this contributed to higher margins.

5:37pm: "How many iPhones did AT&T stores have left over?" Most of their stores were stocked out, but there were still some in transit to AT&T at the end of quarter. 270K includes some AT&T store iPhones.

5:39pm: AT&T payments will be clarified next quarter as either deferred or earned revenue in October.

5:42pm: "Should we assume that iPhone will get lower price points?" We don't comment on product plan, but we believe iPhone offers tremendous value to customers-- it's 3 products in 1. Customers are clearly seeing that, as witnessed by customer satisfaction ratings. So, no?

5:43pm: Seasonality for iMac and iPod (back to school sales) has been mixed over the past years. But new products drive sales during that time.

5:44pm: Highest Mac sales we've ever had, and Macs we're shipping today are best we've ever shipped. "Any iPod cannibalization from iPhone?" We saw no obvious evidence of that.

5:44pm: "Will iPhone work with corporate email better?" We think the iPhone is a great group product for all customers, including business customers-- the best email client, the best web browser ever, and-- with a little bit of help from corporate IT department [whoops]-- it can work with corporate email.

5:45pm: "Why were Macs so big-- did iPhone help?" The retail stores had a great quarter-- rev up 33%, max shipments up 53%. Very strong traffic, selling a lot of Macs and other products. Tremendous interest in the phones, and stores have benefited from all three products.

5:46pm: Expect to open 12 Apple stores in Sept quarter, have not set a target yet further than that.

5:48pm: It was a blowout quarter for the Mac, both portables and total units. Education market was best quarter we've ever had. Pro business had a nice uptick with Final Cut Studio.

5:49pm: "Will EU like the iPhone? Nokia is very entrenched there." We think it's great for all markets-- later we'll be announcing details about carriers we'll be working with.

5:52pm: We're very focused on building the iPhone business long term.

5:55pm: June quarter back to school is K-12 and Sept is more high end focused.

5:56pm: "Any issues with component availability this quarter or next?" The MacBook Pro didn't have enough inventory this quarter. Upcoming quarter, we've factored our views of supply and demand into the buy.

5:58pm: Any early demographic stats on iPhone buyers? We don't have those yet, but we know they're satisfied and they want to recommend it to others.

5:59pm: The mix of sales skewed to the 8gig iPhone in June, no specific numbers given out. "10M in 2008 only in EU and US, or other places?" We plan to go into a few major countries in Europe next quarter, and also Europe and Asia in 2008.

6:00pm: That's all the time we have for today. Call will replay for a week. That concludes today's Apple Conference Call. Have a good day! You too, random conference call announcer guy!

So here's what we heard:

  • Huge quarter for Apple (so big that they're scared to brag about next quarter)
  • Mac sales are gigantic, best they've ever been. iPod is big, as is iTunes.
  • 270K iPhones sold, 146K activated. Activation problems existed but have been fixed.
  • Million iPhones by Sept (took iPod two years to do that), and 10M by the end of 2008
  • Europe will get the iPhone by the end of the year, and Asia by the end of 2008
  • iPhone business is a marathon, not a sprint
  • "Product transitions" coming in next quarter, along with 12 new Apple stores, and many more Apple stores in Best Buy
  • No to lower iPhone price point, because customers are satisfied right now.
And that'll do it. Thanks for reading!

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