Apple Q2 Earnings - Business Insider

It's a beat on the top and bottom line thanks to better than expected iPhone and iPad sales.

The stock was up 6% after hours, going to ~$429. Then it crashed, and is now slightly down.

Apple authorized a $60 billion share buyback plan, and upped its quarterly dividend to $3.05 per share. To pay for the return, Apple plans to borrow cash.

Apple's guidance for the June quarter is pretty weak compared to sell-side analyst estimates, but that was sort of expected.

Overall, this was a pretty good quarter, judged by the numbers.

However, on the earnings call, CEO Tim Cook revealed Apple has no new products planned until the fall. That means Apple is going to go a long time before producing new stuff.

As a result the company's earnings growth will continue to shrink, and its revenue will go flat.

We'll have a live blog of Apple's earnings call starting at 5 PM eastern.

5:04 PM | The call is about to start.

5:05 PM | Tim Cook starts...

Introduced and ramped new products.

In the first half of the year, $98 million in revenue, $22 billion net income, 85 million iPhones, 42 million iPads, very very large numbers.

Acknowledge growth slowed, and margins fell.

5:07 PM | Cook talking about growth

GM closer to levels of a few years ago.

Fiscal 2012 makes comparisons very hard. Last year, growth, foreign currency, product mix.

Compares are made hard until the anniversary of the iPad Mini.

Guiding to flat revenue + slight decline in GM.

Decline in Apple stock price very frustrating to all of us.

Apple remains strong. We can't control cost pressures, foreign currencies. Our objective is creating great products. Focused on the long term.

5:08 PM | Talking about Apple's big markets

Amazing new hardware, software services we can't wait to introduce this fall and through 2014.

5:09 PM | Cook still...

Same culture that brought iPhone and iPad and we have more surprises in the works.

5:11 PM | Now he's talking about cash.

Annoucing an aggressive plan to $100 billion by 2015. Will be in share repurchases for majority. We concluded investing in Apple was the best. Increasing dividend by 15% to appeal to investors seeking yield. We will access debt markets. We appreciate the input from shareholders. We will review cash allocation strategy each year. We will deploy cash, be disciplined, not underinvest.

5:12 PM | Peter Oppeheimer talking now

5:14 PM | Talking iPhone

11.6 million in channel inventory, up 1 million sequetially.

Based on research from comScore, iPhone #1 in U.S. for 3 month period ended in Feb. In Japan, #1 according to IDC.

Also, first time non-Japanese company done that.

Apple #1 in Nikkei brand survey. Second year in a row, unprecedented.

Around the world, IDC ranked 1 or 2 in all countries IDC tracks.

Kantar found 95% loyalty. Tops in customer experience.

Businesses around the world scale iPhones.

30,000 compnies developing/distributing iPhone apps.

5:17 PM | On iPad

19.5 million versus 11.5 million a year ago, 65% increase.

Did well in greater China and Japan.

iPad and iPad Mini very popular. More iPad MInis in March quarter than December quarter.

Not able to meet demand for iPad Mini in december, so channel inventory was low coming in.

Most recent ChangeWave survey indicates 96% apprecition rate.

iPad and IOS driving innovation across industries. Delighted by the number of companies choosing iPads.

5:18 PM | Turning to Mac...

Desktop sales were up y/y, portables were down.

5:18 PM | iPod

5.6 million ... iPod Touch was half of all iPods, iPod top seller.

5:20 PM | Apple ecosystem

10th anniversary of iTunes coming this Sunday.

iTunes best reach in industry.

Quarterly billings over $4 billion, a $16 billion run rate.

$2.4 billion iTunes revenue, new records.

Helped us achieve $4 billion from iTunes, software and services. Thrilled with the growth of these streams.

We sell movies in 109 countires, bookstores in 55 countries. App store in 155 countires, cover 90% of world population.

350,000 iPad apps.

45 billion cumulative downloads of apps

$9 billion in app sales for developers, $4.5 billion in last four quarters alone

5:22 PM | In enterprise

iOS has a strong lead over Android. iOS accounted for 77% of activations for corporate customers, according to [something we missed, sorry!]

MacAfee found malware on Android.

5:24 PM | Apple retail...

Revenue $5.2 billion, up 19%

Fueled by iPhone and iPad

402 stores, 150 outside U.S.

Average revenue was $13.1 million.

Hosted 91 million, up from 85 million a year ago, 17.5K per store per week.

5:24 PM | Gross margin

37.5% at the low end of our guidance.

5:25 PM | Talking cash

$145 billion, up $7.6 billion sequentially.

$102 billion off shore.

$2.5 billion in divdends for the March quarter.

5:29 PM | Return of capital program

Upping to $100 billion by the end of 2015.

More details...

1. Share buy back to $60 billion, up from $10 billion a year ago. Biggest by any company. We believe in Apple so strongly, we think this is a great investment. Will buy beginning this month.

Will use cash to balance RSUs.

2. Increasing dividend to $3.05, a 15% increase. Our board of directors say May 16, 2013 for shareholders of record. Happy to be largest dividend payer of record.

Continuing to generate cash off shore, to repatriate would cause tax problems.

Expect to fund from U.S. cash, future U.S. cash, and borrowing. Will maintain cash liquidity.

Between now and end of 2015, foreign cash and domestic borrowing to grow.

Capital return to have attractive returns to shareholders.

5:29 PM | Looking at June...

$33.5 billion and $35.5 billion.

GM to be 36% and 37%

OIE $300 million

Tax rate to be 26%

5:30 PM | In closing, we're happy!

5:32 PM | Katy Huberty: What is biggest factor to margin recovery?

Peter: In March q, GM was 37.5% at the low end of range. We had a few items that on balance caused it.

Mix, more iPads than we planned, including iPad Mini in 4-6 week channel range. Change in services policy, unfavorable adjustments.

Looking forward, to be down 50-100 basis points sequentially.

Two factors: Lots of leverage on lower revenue, diff product mix. These headwinds offset by better cost in the quarter.

5:35 PM | Huberty: China growth down to single digits. Stickyness in China? No iTunes there? No apps?

Tim Cook: Best quarter ever, record revenue $8.8 billion. That includes retail stores in that region, up 11% y/y includes retail stores, same as Apple is growing.

iPad grew 138% y/y, new records for sell through for iPad and iPhone.

Some y/y timing w/r/t channel inventory.

If you look at revenue on sell through, up 18%, it's a bit better than it looks.

As I said, in year ago quarter, launched iPhone 4S. This year iPhone 5 in Decvember, diff set of dynamics.

Going forward, still see opp in China, great market, expect to have 22 stores in next two years.

Plan to add more points to sell iPhones.

Innovating in online store, adding diff functionality.

China has an unusually large number of first time smartphone buyers and that's not lost on us.

Have made iPhone 4 more afforadble to make it more attractive to first time buyers.

5:37 PM | Bill Shope: Comments on competition?

Tim Cook: RIM was there initially, now there's Samsung. Tough competitors, but we feel we have the best products. Feel comfortable. We have the best ecosystem.

5:38 PM | Shope, again: Buyback pace?

Peter: We're going to begin buying this month. Expect the rest by end of 2015. Expect to use accelerated repurchase and in the open market.

5:38 PM | Steve Milunovich at UBS: No new products until fall?

Tim Cook: I don't want to be more specific. Some really great stuff in the fall and all across 2014.

5:39 PM | Milunovich: Suppliers?

Cook: No shortages. December quarter largest ever for apple and tech industry. New products, reality is the work we do is very hard, challenges we always face, sure we'll face some in the future with manufacturing partners to execute our roadmap.

5:41 PM | Bernstein: Are you seeing cost curves that you normally do? iPhone ASPs?

Peter: Pleased on getting down cost curves. We have factored these into guidance. iPhone ASPs down sequentially $28, driven by mix. Increase in iPhone 4 mix, result from making more affordable. Mix w/ iPhone 5 in second quarter.

Tim: As you get further from launch, a lower mix than where it starts, expect on all products.

5:48 PM | Bernstein follow up: Apple can't grow at market rate, comment on loss in market share something Apple focused on?

Tim Cook: Start with tablets. Numbers we've seen from IDC, they believe market declined sequentially 30%. We declined 15% sequentially, better than the market. On iPad, we continue to have ecosystem that is unparalleled.

We do want to grow faster, but we don't view as only measure of our health. Customer Sat importance to us.Usage importance ...

Market share important, unit volume important, but other things important.

We see enormous first time buyers coming to market, particularly in other parts of the country.

We made the iPhone 4 even more affordable, making it attractive to first-time buyers. We're continuing to do that in other markets.

The phone for the price point is an incredible value, get into the ecosystem with a really great product.

5:51 PM | Barclays Ben Reitzes: Long term GM?

Peter: Has been our long term practice to no go beyond the June quarter. Many factors can change things. So, let me tell you how we think about GM. Manage for long term, willing to trade short term profits.

iPod ? was below Apple margins. 4 years later, half our profits.

iPad mini another example. Believe in strategic decision. Only make great products, this precludes us from making with a cheap experience.

Some of revenue and profits happen after we ship products. $4 billion in software and services.

Confident in our strategy.

5:51 PM | Apple stock now down ever so slightly ... 405.97 Down 0.16 (0.04%)

5:52 PM | Barclays: 5 inch phones?

Tim Cook: iPhone has absolute best display in the industry. We always strive to build best display. Some customers value large screens, others value other factors, brightness, compatibility with apps, other things.

Rivals made trade offs for a larger display. Apple would not make these trade offs.

5:53 PM | Gene Munster: New products?

Tim Cook: For growth, or new categories.

5:55 PM | Munster: New services, beyond natural evolution of Maps and iCloud, other assets?

Peter: Lucky to have largest ecosystem in the world.

Tim: Because not fragmented, we can update iOS and substantial will update to the latest software. Also, because usage for iOS is so much higher, when we integrate things well, people use them a lot more. Just those concepts are huge from customer experience view.

5:58 PM | Shannon Cross: Cannibalization?

Cook: Market for PCs incredibly weak. Down 14% y/y, largest I can remeber. We sold almost 20 million iPads. Some ate some Macs, don't think it was a huge number. Probably larger thing is people extending upgrade cycle. Don't think this market, dead or bad, think it has a lot of life. We will continue to invest. Tablets could help Mac, pushes people to think about product their buying in a diff manner. More willing to buy a Mac. Continue to make the best personal compiuters. Feel good about it.

6:00 PM | Shannon Cross: Security?

Tim Cook: [Corporate customers activating iOS] More and more custom apps. iPad now in 95% of Fortune 500, what's even more impressive, 89% in Global 500

6:02 PM | JP Morgan: Any learning points from broad launch in December?

Tim Cook: I don't spend a lot of time looking back. If we could run it over, I would have announced iMac at the turn of the year. Customers had to wait too long.

6:02 PM | And that's it folks!

Source: http://www.businessinsider.com/apple-q2-earnings-2013-4

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