Yesterday, Apple released the results for its 2014 fiscal second quarter (which ran from December 29, 2013 to March 29 2014) and held a call with analysts to discuss the results. Apple always sees a big decrease in revenue in its second fiscal quarter because it comes right after the holiday quarter. Nevertheless, Apple reported quarterly revenue of $45.6 billion and net profits of $10.2 billion, which is a record for Apple's second fiscal quarter and is Apple's best ever non-holiday quarter. If you want to get all of the nitty gritty details, you can download the audio from the announcement conference call from iTunes, or you can read a rough transcript of the call prepared by Seeking Alpha. Apple's official press release is here.
As always, I'm not as interested in the financial details as I am the statements of Apple executives during the call that are of interest to iPhone and iPad users. Nevertheless, I did think it interesting that Apple announced a 7 for 1 stock split to take place in June, which will result in a change from the current approximately $525/share to about $75/share. I don't own Apple stock and I certainly don't provide advice on Apple stock, but I suspect that this stock split will be seen as good news to some Apple investors. Matthew Yglesias of Vox speculates that Apple might be doing the split in an attempt to get Apple included in the Dow Jones Industrial Average.
But anyway, back to the product-related news. Here are the items that stood out to me as of interest to iPhone and iPad owners:
- Apple sold 43.7 million iPhones last quarter, which was the main reason that Apple had such a good quarter. By comparison, in the 2013 fiscal second quarter, Apple sold 37.4 million iPhones. By my count, as of March 29, 2014, Apple had sold over 515 million iPhones — over half a billion.
- Luca Maestri, who will be Apple's new CFO later this year, said that a big reason for the increase in iPhone sales was strong iPhone sales in China and Japan. He said that in China, the "affordably priced iPhone 4S" has sold particularly well. Apple CEO Tim Cook said that in the U.S. there was more "pressure" on sales because of carriers being more strict in enforcing their upgrade policies — i.e., people may have wanted a new iPhone, but they need to wait longer before they an buy one at a subsidized price.
- Over half of the people who registered their iPhones in the past quarter were new iPhone owners.
- Apple sold 16.3 million iPads last quarter. This was less than the 19.5 million iPads sold in the 2013 fiscal second quarter, but Cook explained that the cause was not a decrease in demand for iPads but instead a change in the way that Apple is handling inventory combined with a large backlog in orders for the iPad mini a year ago whereas lately Apple has been able to produce the supply to match the demand. Whatever the reason, Apple still sold a lot of iPads. By my count, as of March 29, 2014, Apple had sold over 211 million iPads. (Cook said "over 210 million.")
- Most iPads are being sold to first-time users. Cook said that over two-thirds of people registering an iPad in the last six months were new to iPad.
- Cook noted that the iPad is the fastest growing product in Apple's history. Cook pointed out that the over 210 million iPads that Apple has sold in the four years since the iPad was introduced in April 2010 is almost twice as many iPhones as Apple sold in the first four years of the iPhone. (By my count, Apple sold just over 108 million iPhones in the first four years.) Cook also noted that the iPad is the only Apple product to be an instant hit in three key markets: consumer, business and education. In education, the iPad has over 95% of the U.S. tablet market. In business, Cook said that "virtually all, 98% of the Fortune 500" are using iPads.
- Cook also noted that people really love their iPads. "The other thing you look at on iPads that are just blow away is customer sat[isfaction] is 98 [percent]. There is almost nothing in the world with a 98% customer sat[isfaction]. And the 'intention to buy' numbers look good with two-thirds of the people planning to buy a tablet or planning to buy an iPad. The usage numbers are off the chart, far and exceeding Android tablets, four times the web traffic of all Android tablets combined."
- Cook was asked about the significance of the release of Microsoft Office for iPad. He said: "Office, I believe, does help. It’s very unclear to say how much. I believe if it would have been done earlier, it would have been even better for Microsoft, frankly. There's lots of alternatives out there from a productivity point of view, some of which we brought to the market, some of which many, many innovative companies have brought. But I do see that Office is still a very key franchise in the enterprise, in particular, and I think having it on iPad is good, and I wholeheartedly welcome Microsoft to the App Store to sell Office. Our customers are clearly responding in a good way that it’s available. So, I do think it helps us particularly in the enterprise area."
- Cook said that the "iPad has a bright future," noting that "of course, the thing that drives us more than any of this are the next iPads, if you will, the things that are in the pipeline, the things that we can do to make the product even better. And there is no shortage of work going in on that nor any shortage of ideas. ... I'm very bullish on iPad." He also noted: "We continue to believe that the tablet market will surpass the PC market in size within the next few years and we believe that Apple will be a major beneficiary of this trend."
- iOS 7, released in September of 2013, is now being run on 87% of iOS devices.
- Cook announced that next week, Angela Ahrendts will join Apple as the Vice President in charge of Apple's retail and online stores. Ahrendts was announced last October, but since then she has been winding down her job as the CEO of Burberry. Most consider her perfect for the job, and it will be interesting to see what she does to improve Apple's stores in the future.
- This time last year, Cook announced that Apple was working on "new product categories," and three months ago Cook confirmed that new products are planned for the end of 2014. The assumption is that this will be the iWatch. Cook noted yesterday: "We are expanding Apple’s products and services into new categories and we are not going to under invest in this business." Later on in the call, Cook said that "we currently feel comfortable in expanding the number of things we're working on, so we've been doing that in the background. And we're not ready yet to pull the string on the curtain. But we've got some great things there that we're working on that I'm very, very proud of and very, very excited about."
- Cook also noted that Apple is not going to rush to introduce new types of products just to be first on the market; Apple will instead wait and take the time to get the product right. "But for us, we care about every detail, and when you care about every detail and getting it right, it takes a bit longer to do that. And that's always been the case, that's not just something that just occurred. As you probably know from following us for a long time, we didn't ship the first MP3 player, nor the first smartphone, nor the first tablet. In fact, there were tablets being shipped a decade or so before then, but arguably, we shipped the first successful modern tablet, the first successful modern smartphone and the first successful modern MP3 player. And so it means much more to us to get it right than to be first. And I think you can see so many examples out in the marketplace where it's clear that the objective has been to be first. But customers at the end of the day don't care about that, or that's not what they look for from Apple. They want great — insanely great — and that's what we want to deliver. And so that's the way we look at it."