Like many other companies, Apple starts its fiscal year before the calendar year. What most of us consider the last few months of the year is, in the eyes of Apple, the beginning of a new year. Thus, Apple’s 2010 fiscal first quarter began on September 27, 2009 and ended on December 26, 2009. Apple’s first fiscal quarter always includes the holiday buying season, and in recent years, it has been a great quarter for Apple.
Yesterday, Apple announced its 2010 Fiscal First Quarter results, and once again Apple shattered its previous, already impressive records. To avoid confusion, I’m going to refer to this as the 2009 holiday
quarter in this post so that it is clear that I’m talking about what
Apple did at the end of calendar year 2009. If you want to hear the call yourself, you can download it from iTunes or you can read the transcript provided by Seeking Alpha. As has become a tradition here on iPhone J.D., here is my take on
the significant iPhone-related news from the conference call, which came from Apple’s Chief Financial Officer, Peter Oppenheimer, and Apple’s Chief Operating Officer, Tim Cook. If you want a broader view of the other Apple announcements including those that relate to the Mac and the iPod, take a look at Macworld’s good report.
Apple sold over 8.7 million iPhones last quarter, which is both a
new record and double the number sold during the holiday quarter in
2008. Of course, in 2008, Apple saw a huge spike in iPhone sales in
the late Summer when the iPhone 3G was released with almost 6.9 million
sold. Thus, holiday iPhone sales in 2008 were only about 4.4 million,
and the decrease seemed understandable coming off of such a hot quarter. But in 2009, Apple saw both a
spike in the late Summer when the iPhone 3GS came out (almost 7.4
million sold) and a spike in the following holiday quarter. No matter
how you look at it, iPhones were selling like hotcakes last quarter.
So much so that perhaps we should now start referring to hotcakes
selling like iPhones. Those 8.7 million iPhones sold brought in $5.4
in revenue, an average selling price of about $620. (That $620 is the
price for carriers like AT&T; carriers typically subsidize that
price when you lock in to a contract and thus the user pays much less
than $620 for an iPhone.)
As if 8.7 million isn’t impressive enough, Tim Cook said that Apple
“could have sold a lot more” iPhones in the 2009 holiday quarter but
“elected not to because we are managing inventories very tightly.” One
of the reasons that Apple is so profitable is that it does a very good
job managing inventory, trying to keep just the right amount of product
available for sale without having a glut in the market. So if you
tried to buy an iPhone last quarter but had to wait a few days for it
to come in stock, now you know why.
Corporate users — and I count most lawyers in this category — love
the iPhone. The iPhone continues to be ranked the number one
smartphone in JD Power’s customer satisfaction surveys. Perhaps more
significant for many lawyers, Oppenheimer said that Apple has
“continued to see a rapidly growing number of enterprise CIO’s who have
added iPhones to their approved device list.” Currently over 70% of
the Fortune 200 are supporting iPhones, which is double from when the
iPhone 3GS started shipping in the Summer of 2009. Internationally,
50% of the Financial Times 100 companies are supporting iPhones. Tim
Cook pointed out that “those are some pretty staggering numbers when
you think about the time period we have been in the business. It is
only 2.5 years.” Cook further pointed out that the growth in iPhone
corporate use is not accidental, noting that the corporate iPhone
market “is a key focus of ours” and that Apple has “done a tremendous
amount on the product side itself by implementing
tons of features in the latest OS for iPhone that several of our
enterprise customers had desired.” In my opinion, the sheer number of
Fortune 200 companies supporting iPhones is a clear rebuttal to those who suggest that iPhone security may be insufficient for serious business use. (By the way, the American Lawyer noted a few months ago that over half of the most profitable law firms in the U.S. support the iPhone, and I’m sure that law firm support has only increased since then.)
The iPod Touch, which I think of as the iPhone without the phone, also had amazing sales. iPods always sell well during the holiday quarter, and Oppenheimer said that Apple sold 55% more iPod touches then they did a year ago. Considering that the iPod touch is such a great music player, video player and game machine, it is no wonder that it is becoming an even more popular present. Indeed, the nice thing about the iPod touch is that you can give it as a gift and the recipient gets most of the utility of an iPhone without the monthly service contract.
Apple also announced that it had added 17 new iPhone carriers last quarter, including Canada Bell, meaning that Canadians now have a choice of carrier when they buy an iPhone. In the U.S., of course, the iPhone is still AT&T-only.
Speaking of which, Analyst Gene Munster asked Apple about continuing to stick with AT&T as the only carrier in the U.S., a reference to media reports about AT&T coverage problems in some areas. Tim Cook responded that in the “vast majority of locations” iPhone users have a “great experience” with AT&T, and further noted that it should be remembered that AT&T has “more mobile broadband usage than any other carrier in the world.” It seems that Cook was suggesting that AT&T may see more service strain than other carriers, such as Verizon, because AT&T has so many iPhone users and those iPhone users use so much more data on their phones than non-iPhone users. Finally Cook noted that Apple has taken a look at AT&T’s plans for addressing those cities that do have issues and that Apple has “very high confidence that they will make significant progress towards fixing them.”
There was some discussion of the iPhone being released in China.
The iPhone was long available in China in the gray market, but now it
can be purchased through official channels and Apple sold 200,000 of
them last quarter. Tim Cook said that while Apple is just getting
started in that market, he likes what he sees so far because China has
a significant middle and upper class, even though the average income is
lower in China than other countries like the U.S.
Tim Cook also pointed out that the iPhone is a “runaway hit” in Japan, with sales up 400% since the end of 2008.
that there were more than three billion downloads to date from the App
Store, and Oppenheimer repeated that number yesterday, noting that
iPhone and iPod touch users are downloading apps in 77 countries.
Oppenheimer specifically declined to give more information, such as the
number of free versus paid apps, for “competitive reasons.”
Some iPhone app developers have been very vocal in their complaints about the App Store review process. Analyst Charles Wolf asked about this, and Tim Cook responded that over 90% of new apps are actually approved within 14 days of submission, and for the 10% that take longer to approve it is usually because Apple finds bugs in the software and asks the developer to fix it to protect the customer.
Speaking of app developers, Oppenheimer noted that Apple recently bought a company called Quattro which sells ads on mobile devices. Oppenheimer said that mobile advertising is “just in its infancy,” but that Apple is planning to “offer a seamless way for our developers to make more money on their apps, especially those that are providing free apps.” Once Apple implements the technology it purchased from Quattro, expect to see even more free apps that contains ads. Hopefully, Apple will find a way to make ads in iPhone apps tasteful and unobtrusive.
And finally, while I my focus is on the iPhone angle of the conference call, everyone knows that the big Apple news this week will not be the iPhone, but the new product that Apple will announce tomorrow. Analyst Mike Abramsky asked Tim Cook to say something about that. Of course, nobody likes a surprise more than Apple, so Tim Cook declined, saying that he “wouldn’t want to take away your joy of surprise on Wednesday when you see our latest creation, so I’ll just delay that for Wednesday.”
The “joy of surprise.” I like that. I’m looking forward to tomorrow.
