Apple's 2010 fiscal first quarter began on September 27, 2009 and
ended on December 26, 2009. The second fiscal quarter ended on March 27, 2010. Thus, Apple's Q2 always falls after the big holiday sales season and before the big educational buying season, and historically, it is one of the lowest quarters for Apple. But thanks to the iPhone, this year that is not true. Last night, Apple announced its 2010 Fiscal Second Quarter results, and Apple had an amazing quarter of sales.
If you want to hear the full call yourself, you can download it from iTunes or you can read the transcript provided by Seeking Alpha. You can also read a short Apple press release here. But if you just want the iPhone-related highlights of the call, then you are in the right place. As usual, the questions were answered by Apple's Chief Financial Officer, Peter Oppenheimer and Apple's Chief Operating Officer, Tim Cook.
- Oppenheimer said that Apple had an "outstanding March quarter" that "exceeded our expectations." He explained: "Revenue was $13.5 billion, a 49% increase over the prior March quarter’s results. This very strong performance was due primarily to the more than doubling of iPhone sales and the strong momentum of our Mac products." The quarter before the last one (which included the holiday season) was Apple's best quarter ever, but 2010 Q2 was the second best quarter in Apple's history, and the best non-holiday quarter ever.
The iPhone was a huge reason for Apple's amazing quarter. Apple sold 8.75 million iPhones during the quarter. This is the largest number of iPhones that Apple has ever sold in any quarter, and was even 50,000 more than Apple sold last year in the 2010 Q1 holiday quarter (September 27, 2009 to December 26, 2009), which held the prior record for the most iPhones sold.
- Apple received, on average, about $620 per iPhone sold in the quarter. (Carriers like AT&T subsidize the iPhone price so that consumers pay far less than $620, and AT&T makes up the difference through its monthly fees.) This compares to the around $170 that Apple makes for each iPod sold and around $1,275 that Apple makes for every Mac sold. (Apple make more when the sale is from an Apple store instead of a third party reseller.)
- The iPod touch — which many call the iPhone without the phone — also had a sales increase of 63% over last year.
- As a result, a full 40% of Apple's revenue last quarter — $5.445 billion — came from the iPhone. To put this in perspective, Apple's Macintosh computer sales were up compared to this quarter last year, but as a percentage share Apple's revenues Mac sales were down to 28% because of the phenomenal iPhone sales. Nobody can dispute the significance of the iPhone to Apple.
- To further put this in perspective, this time last year Apple was thrilled and surprised to have sold 3.8 million iPhones during the quarter. They more than doubled that this year.
- To further put this in perspective, although there was growth in the overall smartphone market this past quarter, the iPhone unit growth of 131% outgrew the market by three times.
- To further put this in perspective, check out the yellow line in this great chart prepared by Macworld in its excellent article on the conference call. (You can also read a transcript of live chat by Macworld writers and a few others that took place during the call.)
- The iPhone is now sold in 88 countries and is available on 151 carriers.
- Customers once again ranked the iPhone #1 in the J.D. Power and Associates 2010 U.S. Wireless Smart Phone Customer Satisfaction survey.
- Apple is looking forward to the release of iPhone OS 4, which Oppenheimer said is coming "this summer." No specific date or month was revealed, and instead Oppenheimer merely confirmed that there will be two improvements to the iPhone this summer: (1) software, the new iPhone software 4.0 that was recently previewed, and (2) hardware, the "new iPhones that will be coming this summer."
- There have been over 4 billion apps downloaded from the App Store. There are over 185,000 apps available, including over 3,500 for the iPad. Apple confirmed that it operates the App Store, like its iTunes music store, at essentially a break-even point making only a small amount of profit. The money that Apple makes from the App Store for the most part goes right back into improving the App Store because the primary reason for the App Store is to promote iPhone (and iPod touch and iPad) sales.
Tim Cook answered a question about why Apple has multiple carriers in many countries but only one carrier in some countries, such as the U.S. which has only AT&T. Cook said that every time Apple has changed a country from a single carrier exclusive to a non-exclusive with multiple carriers, iPhone growth has increased and market share has improved. However, Apple does not believe that this would be the result in every country, and there re still three main counties with a contractual exclusive relationship: the U.S., Germany and Spain. Cook did not give any indication of when or whether the iPhone would ever become available on multiple carriers in those three countries.
- When asked about how the price of the iPhone affects sales, Oppenheimer said that even when the $99 version of the iPhone 3G came out last year, Apple was surprised at the large number of people who still opted for the more expensive iPhone 3GS. Price is important, but Oppenheimer said that it is not the only factor that determines what people buy.
- There was also some discussion of the iPad on this call. Apple did not reveal any specific iPad numbers because the iPad started shipping in April, after the 2010 Q2 quarter ended. Nevertheless, Oppenheimer said that "we feel very, very good about the start of iPad." He also said: "I think it is a new category and certainly it is early but we really, really like what we see right now. We had what we thought were high hopes and it exceeded those." Tim Cook added: "We will see where this thing goes but it has shocked us the level of demand at least initially."
- When asked how an iPad compares to a netbook, Tim Cook said that there is no comparison. "To me it is a no-brainer. iPad/Netbook, it is sort of 100 to zero. I can’t think of a single thing the netbook does well. iPad does so many things very, very well. I am already personally addicted to mine and couldn’t live without it."
- Apple plans to open 40-50 new stores during fiscal 2010, half of those in international locations such as London, Paris and Shanghai.
- And finally, Apple was asked how much it spends on legal expenses, but Oppenheimer ducked the question, merely saying: "We have certainly factored into the guidance we have given you for the June quarter and results we have reported for March our legal and other expenses. Whatever we are incurring in that area is included."
It really wasn't that long ago that you frequently saw articles in the press about how Apple was dying as a company. Many companies and law firms (such as mine) that had traditionally been all-Macintosh shops switched over to Windows. But thanks first to the iPod, and now with the iPhone, Apple is stronger than ever. Time will tell whether the iPad proves to be as important as the iPod and iPhone have been, but for Apple products as a whole, the future looks bright, and I can't wait to see what Apple brings us next.
