Five Key Quotes from Apple's Conference Call

by: David Jackson posted on: July 22, 2008 | about stocks: AAPL    

Here are five key quotes from Apple's conference call. They're taken from the Apple transcript which we published a few hours after the call ended:

1. Steve Job's health

Ben Reitzes - Lehman Brothers: ...a New York newspaper today obviously called into question some issues around Steve and obviously his health, and we get a lot of questions about it and I’m really sorry to ask, because it’s a very private matter, but would you mind addressing the situation and just making it so we can have your official statement? And I apologize in advance for having to ask the question. Peter Oppenheimer: Ben, Steve loves Apple. He serves as the CEO at the pleasure of Apple's board and has no plans to leave Apple. Steve’s health is a private matter.

2. Overall growth

...revenue growth of 38% was significantly above the 24% growth rate we achieved in last year’s June quarter and we continued to see healthy growth in all regions. Sales in our retail stores, most of which are in the U.S., were extremely strong, growing 58% year over year and store traffic was about 32 million, up 10 million from the year-ago quarter...

3. Market share gains

Macs... 41% year-over-year growth and is nearly three times the overall PC market rate of growth for the June quarter based on the latest estimate published by IDC... Mac desktop sales grew sharply at 49% year over year, driven by strong demand for iMac which we updated in April. Sales of portables were up 37% year over year... In the U.S. channels tracked and reported by NPD, Apple's share of total personal computers sold in the month of June increased to 19.5% this year from 15.4% last year...

4. iPods

We sold 11 million iPods, an increase of 12% from the year-ago quarter, with the growth being driven by Shuffle as well as the introduction of the iPod Touch last September... We were pleased with the iPod sales growth of 10% in the United States and 15% internationally. iPod revenue grew 7% year over year, less than the unit rate of growth, due to lower ASPs driven largely by the Shuffle price reduction taken in February. We’re happy with the demand elasticity that we’ve seen for the iPod Shuffle and think the tradeoff between ASP and units was a good one.

5. Disappointing guidance

For the quarter, we are targeting revenue of about $7.8 billion, or approximately 25% growth over the prior September quarter... We expect gross margin to be about 31.5%, reflecting approximately $23 million related to stock-based compensation expense, down from 34.8% in the June quarter. This sequential decline is expected due to three primary factors; first, the full quarter impact of the back-to-school promotion; second, a future product transition, which I can’t discuss today; and third, the one-time true-up of our contract manufacturer deferred margin that we realized in the June quarter... [Later in the Q&A] If iPhone sales were reported as revenue when sold, the September revenue guidance would be significantly higher.

This article has 14 comments! Add yours below...
David Jackson

David Jackson

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This article has 14 comments:

  •  
    hexman
    Jul 22 03:54 PM
    okay...... I see the quotes. I had assumed you'd explain why you thought they are significant. We all read the quotes in the press release. What's the point of repeating them here?
  •  
    Brandon
    Jul 22 03:59 PM
    Notice how Apple drifted up over $10 per share today. I reiterate my statement that nothing Apple said yesterday should have caused the stock to drop like that. Even in a recession, Apple is picking up market share at an accelerating rate.

    Apple has numerous challenges ahead, as does every company. But unlike it's competitors Apple is positioned to succeed on all fronts. Apple could easily be a 300 billion dollar market cap company in a few years.
  •  
    David
    Jackson
    Jul 22 04:10 PM
    My Website
    Hexman, the quotes aren't from the press release -- they're from the conference call transcript, which fewer people saw but contains a lot of key info.
  •  
    optionsgirl
    Jul 22 04:19 PM
    Why is Job's health such a big issue? Do you think the company would collapse or become a rudderless ship without him? And wasn't the statement made after the June 2nd show, that he is OK but had a virus, sufficient? I would like to see knowledgable comments regarding this topic.
  •  
    David
    Jackson
    Jul 22 04:35 PM
    My Website
    optionsgirl, the market took the issue of Steve Jobs' health very seriously; I'm not agreeing with that, but hopefully providing some info on why. Jobs turned Apple around -- it was only when he returned to run Apple that it started its real recovery. So the Street views him as a key element in Apple's success, similar to Mark Hurd at HP and Jim Cramer's involvement with TheStreet.com.
  •  
    Hoxsie454
    Jul 22 04:35 PM
    To: optionsgirl: ~~~ Yes, the fear is indeed, that Steve Jobs as the Captain of this ship is irreplaceable! Of course, we are all replaceable, but Jobs' genius doesn't come very often in the corporate world. I really think the big initial sell off in Apple share price was mostly because of Oppenheimer's response to the Lehman analyst's question re: Steve's health. Frankly, the answer shook me to my roots.
  •  
    Tom B
    Jul 22 04:36 PM
    "Do you think the company would collapse or become a rudderless ship without him? "

    When Jobs was fired by the incompetent Mr.Sculley (Pepsi-man), Apple DID go into decline for years. Had Sculley NOT screwed up, Mac could be the dominant platform today. But, that was then; this is now. Sculley is gone; Jobs is older and wiser; Jobs probably has a top notch successor's name in his personal safe; and, almost as important, MSFT doesn't.
  •  
    Lisa
    Jul 22 04:54 PM
    I wonder how Apple can escape the downward price pressure from netbooks. Asus is now selling an ultra light on Amazon for $299:
    www.amazon.com/gp/redi...
  •  
    Partners in
    Grime
    Jul 22 06:27 PM
    My Website
    Apple is picking up market share at an alarming rate.


  •  
    win
    Jul 22 09:19 PM
    My Website
    Lisa,
    I compared the specs on the most basic Macbook ($1099) to the most Advanced ASUS ($649) on the link you provided above. The MAC blew the ASUS out of the water. Here is the link to the Macbooks: store.apple.com/us/bro...

    Factor in the Apple customer service, the fact that Apples don't get viruses, and the amazing operating system, and for me, the ASUS doesn't compete. Of course I am a MAC (company laptop) and PC (wife's computer) user, so I know the difference. As just one example, right now, I am running 35-40 open tabs on my Macbook, in three different browsers - one Safari and two Firefox. I can't even think about doing that my wife's Dell.

    PLUS, they're offering a FREE I Pod Touch if you buy a MAC. Any MAC. That's a $300 value. Take that out of the $1099 and you're left with $899. It's a no brainer.

  •  
    Lisa
    Jul 23 01:47 AM
    Win,
    I agree with your analysis -- Apple machines have historically been good value, particularly when you take the software into account, and that still holds true.

    But with the rise of online apps such as webmail and Google docs, the software becomes less important. People want low price, portability and Internet access = netbook at low margin. See the comments and predictions from Intel about netbooks here:
    seekingalpha.com/artic...
  •  
    Lisa
    Jul 23 01:48 AM
    Just to finish that thought: that's why the Asus machines I linked to above are such a threat. You can buy an ultraportable for $300 that gets you on the Internet and doesn't even use Microsoft's bloated OS.
  •  
    JeffreyNC
    Jul 23 07:33 AM
    Optiongirl,

    Steve Jobs to Apple is what Walt Disney was to Disney. When Walt died the company went a drift for couple decades, depending on your perspective, one might say the Eisner years were misguided. At the time of his death, I am not even sure if Disney held seat on the board, but he was there guiding the companies creative endeavors (i.e The Jungle Book and Walt Disney World in Florida).
  •  
    Tom Jackson
    Jul 23 03:36 PM
    Do not under estimate the potential for a breakthrough and don't shy away from the fact that a slight reduction in margins coupled with a major market expansion is good news. When you get to the guts and tone of the discussions about upcomings you will find an interpretation possible that fits a major global leap in market penetration following closely on the global IPh leap. Think "best in category" best price value ratios, leveraging OSX and more. Now think about the potential of a world class, world market price. new CPU in $599 to 995 range that includes (option) A TV and all the rest. Snazzy cheap and irresistible. Just imagine it and how it will take biz from HP and Dell and others. hundreds of millions sold?

    If big enough it would become all about execution and upgrades and customer service for at least 24 months. And would give Steve enough time to rest and think creatively about the next breakthrough.

    Tom
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