Beat ?: Yes (reported $1.19/share vs estimates of $1.08/share...31% earnings per share growth over 2Q07's 92 cents)
Profits --> Up 31% to $1.07 Billion (from $818 million)
Sales --> Up 38% to $7.46 Billion (from $5.41 Billion)
Gross Margins --> Down 2.7 pts to 34.2% (36.9% in 2Q07)
* AAPL's 2Q08 Sales Growth By Product :
A.) Mac Revenues: Up 43% yoy to $3.6 Billion
Mac Unit Sales: Up 41% to 2.5 million Macs
B.) iPod Revenues: Up 7% yoy to $1.7 Billion
iPod Unit Sales: Up 12% to 11.0 million Ipods
C.) iPhone Revenues: $419 million
iPhone Unit Sales: 717,000 iPhones (vs 2Q07's 270,000 units - fyi, the first generation iPhone launched on 6/29/07)...Important to Note, Apple ceased production + ran out of their 1st generation iPhone inventory in May...sales recognition paused until they later launched the 3G iPhone in July
* Apple's 'Mac Products and Services' business represented 61% of the company's total 2Q08 revenues ($4.6 Billion)
* Apple's 'Music Products and Services' business unit represented 33% of the company's total revenues ($2.5 Billion)
* Apple's 'Other Music Related Products and Services' (includes iTunes) grew sales 35% year over year to $819 million
* Apple's Retail Store Sales were up 58% year over year to $1.44 Billion + Profits from retail store operations grew 61% to $291 million
* AAPL's 2Q08 Sales Growth Ex Retail by GEO :
1. Americas (North + South): Up 28% to $3.4 Billion
2. Europe: Up 42% to $1.6 Billion
3. Japan: Up 41% to $365 million
4. Other (includes Asia Pacific): Up 44% to $571 million
* AAPL's CASH position as of the end of 2Q08 was $20.8 Billion...AAPL generated $1.3 Billion in cash during 2Q08
* AAPL's 2Q08 effective Tax Rate was 29% (previously Apple guided this at 31%)
Other Highlights + Guidance:
* International Sales: Accounted for 42% of the company's 2Q08 revenues
* 3G iPhone Launch: Apple sold 1 million 3G iPhones within 3 days of the product's July 11th launch across 21 different countries...it took Apple's first generation iPhone 74 days to reach the million sale plateu (fyi, Apple's 3G iPhone sales will be reflected in AAPL's 3Q08 earnings)
* AAPL's 3Q08 Earnings Guidance: It should be stated that Apple LOVES to provide Wall Street with CONSERVATIVE forward earnings guidance...ok, with that said, Apple's forecasting 3Q08 Earnings per share of $1.00 (3Q07's EPS was $1.01/share) and Sales of $7.8 Billion...the sales number represents 25% growth over 2Q07. Apple's forecast fell short of Bloomberg analyst consensus 3Q08 expectations of EPS and Sales of $1.24/share and $8.3 Billion, respectively. Apple also forecasted 3Q08 gross margins to fall to 31.5%
* Mac Desktop sales grew 44% year over year...Mac Laptop sales grew 42% yoy...U.S. education business generated Mac unit growth of 25% vs. 2Q07
* U.S. iPod sales were up 10% yoy...International iPod sales were up 15% yoy
* AAPL ended 2Q08 with 216 retail outlets...AAPL plans to have 242 locations by the end of 2008
Conference Call Quotes:
* Apple CFO Petter Oppenheimer on AAPL's 2Q08 iPhone Revenue Recognition: "During the June quarter, we shipped 717,000 first generation iPhones, and recognized revenue from iPhone handset sales, accessories, and carrier payments of $419 million. As we indicated previously, because we announced the iPhone 2.0 software and its many new features on March 6th but did not make it available until this month, we did not begin recognizing handset revenue for any iPhones sold on or after March 6th until we made the iPhone 2.0 software available. For those phones, we began recognizing handset revenue on July 11th and we will continue to do so over the respective remaining terms of their 24-month estimated economic lives. Therefore, any iPhone handset revenue recognized during the June quarter relates to iPhones sold prior to March 6th."
* AAPL CFO on Gross Margin Deterioration: "In the June quarter, we did do about 180 basis points better than our guidance, and this was driven, as I said in my prepared remarks, by a one-time true-up that we had with our contract manufacturer deferred margin about 70 basis points. The remaining 110 was primarily driven by a better commodity environment than we planned, a bit richer of a product mix and leverage from the higher revenue. As I look forward to the September quarter, I would see gross margin being about 31.5%, down from the 34.8% as a result of primarily three factors: first the full quarter impact of the back-to-school promotion that we are running; second, we’ve got a future product transition that I can’t discuss with you today; and then finally, the one-time true-up with the contract manufacturer deferred margin won’t repeat...We’re delivering state-of-the-art products at price points that our competitors can’t match, which has resulted in market share gains in each of our products. We plan to continue this strategy and to deliver great value to our customers while making a reasonable margin but not a margin so high as to leave an umbrella for our competitors. In addition, and one of the investments that we make is to introduce new products that initially cost more because they deliver an entirely new level of value to the customer. Then we ride the cost curves down with value engineering and volume manufacturing, leaving us far ahead of our competitors. We have some of these types of investments in front of us that I can’t discuss with you today and we plan to continue to execute this strategy in the future. As we look beyond the September quarter, we would anticipate gross margins being about 30% in fiscal 2009. We are very confident in our new product pipeline, our growth opportunities, and the decisions we are making for our future."
* AAPL CFO on International Growth: "Europe had an outstanding quarter. Revenue grew at 42%, so higher than the overall company, and Japan for the third straight quarter has grown higher than the overall company this quarter at 40%. And Asia-Pacific continues to do extremely well, with a year-over-year increase in the Mac area of 53%...In terms of some of the markets that you mentioned, we had several markets in the developing market area that were growing over 50% in revenue year over year, such as China, Russia, and Latin America. But surprisingly, we also saw some of the more mature markets growing at over 50% year over year, such as France and Germany and Australia. So overall, it was a very, very strong quarter in every major geographic region."
* Apple CFO on Apple's iPod MarketShare: "We were very successful in maintaining our high MP3 market share in the U.S. during the quarter and gaining share internationally. Our share is now over 70% in both the United States and Australia, over 60% in Canada, and over 50% in the U.K., Japan, and Switzerland, based on the latest published data from NPD, GFK, and BCN. We have strong double-digit share in numerous other European and Asian countries and we continue to gain share year over year in most countries for which we have data. "Full Disclosure: I own shares of AAPL.
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