Apple issued their financial reports for the end of the 2011 fiscal year (which ended in September), reporting the best September quarter they’ve ever had. Apple CEO Tim Cook and CFO Peter Oppenheimer responded to questions and expanded on the numbers provided on a conference call this afternoon.
Here are the big-ticket bullet points:
- This quarter’s revenue was a record-breaking $28.27 million and net profits were $6.62 billion.
- iPhone sales had a record-breaking quarter with 17.1 million sold (up over last year’s sales by 21 percent).
- iPad sales had a record-breaking quarter, with 11.12 million sold (up over last year’s sales by 166 percent).
- Mac sales had their best quarter ever with 4.89 million Macs sold (a 26 percent increase and, interestingly, six times the rate for PC growth as forecast by IBC).
- 6 million copies of OS X 10.7, aka Lion, have been downloaded from the Mac App Store since its release on July 20th.
This was Cook’s first financial report as CEO, and he took a moment at the beginning of today’s conference call to say a few words in remembrance of Steve Jobs, who passed away on October 5: “The world has lost a visionary, creative genius, amazing human being, great leader and mentor.” A number of questions were asked during the conference call, and they were answered by Oppenheimer and Cook both. Here are some of the more interesting subjects which were discussed:
iPhone growth less than expected
The iPhone’s sales represent smaller yearly growth than Apple has traditionally enjoyed, but this is mainly accountable to the fact that new iPhones have historically been released in September, thus increasing that quarter’s numbers. The recently-released iPhone 4S did not drop until October, and so did not impact the previous quarter’s data. Tim Cook and Peter Oppenheimer both also added that speculation and rumor about the next iPhone was very high over the summer and likely resulted in consumers holding back on purchases.
iPads, tablets and cannibalism of the PC market
When asked about how iPads could potentially be eating into Mac sales, Tim Cook did acknowledge that there was some “cannibalism” in that regard, but was not concerned. “I do believe that we’re seeing cannibalization,” he explained. “It’s showing up in two ways: Some people are electing to buy an iPad rather than a Mac, but I believe that a materially larger number are going to buy an iPad instead of a Windows-based PC, so I think we’re overwhelmingly coming out very, very well in that cannibalization.” He then commented on how the Mac enjoyed its best quarter ever, saying, “Even with the best quarter on the iPad with some cannibalization of the Mac, the Mac had its best quarter ever, which is almost unbelievable. With cannibalization like this, I hope it continues.”
Legal action against Samsung and others
Questions predictably arose about Apple’s aggressive legal actions against competitors for patent infringement, particularly Samsung. Cook did not want to comment on a specific court case (especially on what Apple’s objectives were for doing so), but said “We spend a lot of time and money and resources in coming up with incredible innovations, and we don’t like it when someone else takes those. And so that’s why we, unfortunately, have been pushed into the court system as a remedy to that.”
The tablet market
With the arrival of Amazon’s Kindle Fire tablet (among others), it wasn’t unexpected that questions would arise about whether tablets with lower price points and fewer features could eat away at the iPad’s dominance in the market. Cook was decidedly unconcerned, calling to mind examples of previous attempts to cut into the iPad’s birthday cake. “Some had different form factors, different price points, and I think it’s reasonable to say that none of these have gained any traction thus far. In fact, as those competitors came to market, our share went up.”
With regard to the iPad’s monstrous dominance in the tablet market, Apple is understandably positive. “We thought from the beginning it’d be a huge market, but it’s been even greater than we thought. We’ve now sold over forty million on a cumulative basis, and it’s pretty clear to me that if you forecast in time, that the tablet market… I still believe it’ll be larger than the PC market. That’s not a guidance number, that’s just something I very much believe. There will be many more people who can access it and the ease of use is so phenomenal and off-the-charts that I think it’s a huge opportunity for Apple across time.”
Apple’s growth in China was remarkable over the past year, especially in the previous quarter. Growth in that country was 2 percent in 2009, 12 percent this year and 16 percent this quarter. It’s the fastest growing region for Apple at the moment with 270 percent revenue increase year over year, $4.5 billion in 2011. “How far can it go?”, Cook asked “Certainly in my lifetime I’ve never seen a country with as many people rising into the middle-class that aspire to buy products that Apple makes. I think it’s an area of enormous opportunity. It has quickly become #2 on our list of top revenue countries… and we’re obviously placing additional investment [there].”
Other regions that showed significant growth for Apple this year were Brazil, Russia and the Middle-east, all markets which haven’t traditionally been very strong for Apple, but have been opened up by the iPhone.
On another note, Twitter and other web news outlets have been buzzing today with reports that Apple “missed” goals for 2011. One of the key things to understand about those comments is that they fell short of analyst projections for sales and profits, but not their own. If you should see any analysis talking about how Apple failed to meet expectations, make sure you are clear about whose expectations they’re talking about. Spin is easy to create if you don’t have to use Apple’s measuring stick to assess what’s going on.