MacDailyNews presents live notes from Apple’s Q116 Conference Call (prerecorded)

Mac Daily News ^ | January 26, 2016 | Mac Daily News Staff

[Swordmaker]

(Read the bullet points from the bottom to the top to get the correct order of events and points as they were made in the conference call as made.--Swordmaker)

MacDailyNews presents live notes from Apple's Q116 Conference Call with analysts starting at 5pm EDT/2pm PDT today.

Apple will provide live audio streaming of its Q116 Results Conference Call using Apple's industry-leading QuickTime multimedia software.

The live webcast will begin at 2pm PDT/ 5pm EDT today here.

Apple today announced financial results for its fiscal 2016 first quarter ended December 26, 2015. The Company posted record quarterly revenue of $75.9 billion and record quarterly net income of $18.4 billion, or $3.28 per diluted share. These results compare to revenue of $74.6 billion and net income of $18 billion, or $3.06 per diluted share, in the year-ago quarter. Gross margin was 40.1 percent compared to 39.9 percent in the year-ago quarter. International sales accounted for 66 percent of the quarter's revenue.

Apple Inc. Q1 2016 Unaudited Summary Data
(Units in thousands, Revenue in millions)

Live notes from Apple's Q415 Conference Call in reverse chronological order:

• After Hours : 97.65 Down 2.34 (2.34%) 6:00PM EST
  
• End of conference call.

• Cook: Our strategy is always to make the best products. We are able to provide several different price points for iPhones. We continue to offer the iPhone 5s at the low end and it continues to do quite well.

• Apple Upgrade Program geared to helping customers simply and easily upgrade to the new iPhone models each year
  
• After Hours : 97.82 Down 2.17 (2.17%) 5:56PM EST
  
• Cook: Apple’s services assets are huge and the investment community should focus upon more

• Cook: Number of people who were iPhone users prior to iPhone 6/Plus (before September 2014) stands at 60%. Much headroom remains.

• Cook: Demographics in India are incredibly great for Apple products, so Apple continues to invest in India – a really good business environment for the future
  
• Cook: Number of people moving into middle class in China is massive and Apple remains “very bullish on China and don’t subscribe to the doom and gloom outlook on China, frankly.”
  
• Cook: China LTE penetration at end of Dec. was in the mid 20% area; tremendous headroom remains
  
• Cook: Apple will invest confidently through any downturns
  
• Cook: BRIC economies admittedly currently look pretty bleak, but “this too shall pass.”
  
• Cook: We will continue to invest in India
  
• Cook: Our Apple Retail Store expansion plans in China have not changed

• Maestri: We grew iPhone channel inventory by 3.3 million units as we were below channel inventory target range at the start of the quarter

• Cook: iPhone has a lot of headroom. There is still a tremendous number of people in the world who buy smartphones and Apple should be able to win their fair share of those
  
• Cook: If we make a great product and have a great experience, we expect people to move to iPhone
  
• Cook sees overall economic “malaise” in virtually every country around the world
  
• Cook: We do think that iPhone units will decline in Q2. We do not project beyond Q2. Q2 will be the toughest compare vs. the rest of the fiscal year

• Data center capacity expenditures tied to rapid installed base growth

• After Hours : 98.65 Down 1.28 (1.34%) 5:35PM EST

• Maestri: We entered the Dec. quarter below 5-7 week target inventory for iPhone, but we have existed on the low end of the 5i7 week target range
  
• Maestri: $691 ASP for iPhone counting a $49 impact on ASP due to currency; iPhone mix was very, very strong

• Cook on Virtual Reality. It don’t think it’s a niche market. I think it’s really cool and presents some opportunities.
  
• Cook: iPhone Upgrade Program will be meaningful over time
  
• Cook: We were blown away by the level of Android to iPhone switchers last quarter. The highest numbers “by far.”

• Maestri: We have increased prices in certain countries based on currency rates, which protects margins, but affects demand
  
• Maestri: Macroeconomy is weakening worldwide YOY
  
• Maestri: In constant currency, revenue would actually be down between 5-15%, we are looking at a 400 basis point impact for the March quarter

• Maestri: We believe the March quarter faces the most difficult YOY compare vs. the other quarters this year

• Apple is providing the following guidance for its fiscal 2016 second quarter:
  – revenue between $50 billion and $53 billion (larger range than usual, due to currency fluctuations)
  – gross margin between 39 percent and 39.5 percent
  – operating expenses between $6 billion and $6.1 billion
  – other income/(expense) of $325 million
  – tax rate of 25.5 percent

• The dividend is payable on February 11, 2016, to shareholders of record as of the close of business on February 8, 2016
  
• Apple’s board of directors has declared a cash dividend of $.52 per share of the company’s common stock
  
• Apple will update on capital return program when they report Q216 earnings in April

• $215.7 billion in cash on-hand, up 10.1 billion sequentially, $201 of which is located outside the U.S.A.

• Apple Watch and Apple TV established new all-time quarterly record sales
  
• App Store growth set all-time records
  
• $5.5 billion in services revenue, up 15%, a new all-time quarterly record

• After Hours : 99.27 Down 0.72 (0.72%) 5:23PM EST

• Cisco partnership continues to grow
  
• IBM released 48 IBM MobileFirst for iOS apps during the quarter

• In November, 451 Research measured 97% customer satisfaction rate for iPad Air 2
  
• iPad channel inventory is within 2-4 week target range
  
• Mac channel inventory is within 2-4 week target range
  
• Apple exited the quarter at the low end of the target 5-7 weeks of inventory

• iPhone ASP: $691 despite very unfavorable currency headwinds
  
• iPhone sales grew 76% in India

• All-time record iPhone sales, all-time quarterly Apple TV sales, all-time record net income

• Luca Maestri: Apple is in an unequalled position of strength
  
• Apple’s installed base drove over $31 billion in related purchases in FY15, up 23% YOY, and almost $9 billion in Q1’16, up 24% YOY
  
• Apple’s services business is now one of the largest in the world

• Apple customer satisfaction is unmatched

• Cook: We have the “Mother of All Balance Sheets” with $216 billion on hand; that’s $39 per diluted share of Apple stock
  
• Cook: Apple Music now has over 10 million paying subscribers

• Cook: China, Hong Kong, Spain, and Singapore to get Apple Pay in 2016
  
• Cook: We set a new quarterly record for Apple Watch sales
  
• Cook: We had our best quarter by far for Apple TV sales. 3,600 apps now available

• Apple remains committed to innovation and will invest through the current economic uncertainty

• 
  

• Currency headwinds are extraordinary
  
• Cook: 74.779 million iPhone units sold is an incredible accomplishment
  
• Cook: In constant currency, Apple’s growth rate would have been 8%
  
• Cook: Apple’s strongest financial results ever.

• Apple has now completed $153 billion of their $200 billion capital return program
  
• Apple returned over $9 billion to investors through share repurchases and dividends
  
• Apple generated operating cash flow of $27.5 billion during the quarter

• Apple’s installed base recently crossed a major milestone of one billion active devices (iPhone, iPad, Mac, iPod touch, Apple TV, and Apple Watch devices that have been engaged with our services within the past 90 days)
  
• International sales accounted for 66 percent of the quarter’s revenue
  
• Gross margin was 40.1 percent (vs. 39.9 percent YOY)
  
• Record quarterly net income of $18.4 billion, or $3.28 per diluted share (vs. $18 billion, or $3.06 per diluted share YOY)
  
• Record quarterly revenue of $75.9 billion (vs. $74.6 billion YOY)

• After Hours : 99.46 Down 0.53 (0.53%) 5:00PM EST
  
• After Hours : 99.50 Down 0.49 (0.49%) 4:55PM EST
  
• After Hours : 98.79 Down 1.20 (1.20%) 4:50PM EST
  
• AAPL: After Hours : 100.24 Up 0.25 (0.25%) 4:45PM EST

[Swordmaker]

Amazing. Apple bests the record on the best quarter of any business in history, Apple's own record from the Year-over-year from the same quarter 1st fiscal quarter 2015 (last calendar quarter 2014), and the anal-cysts are claiming that because Apple did not meet their over-heated expectations, Apple missed on Revenues and iPhone production, even though both of those were also all time records as well. . . and dollar value of the revenues had to be discounted because the US dollar has inflated Apple product foreign prices in the rest of the world by 15% suppressing sales and Apple still made record revenues!

Investor's Business Daily's headline "Apple Misses Q1 Targets For iPhone, Mac, iPad Sales" Investor's Business Daily

reported Apple missed on things Apple does not provide guidance or targets to meet. . . which makes their headline a complete lie. The only thing Apple may have missed are overblown expectations of anal-cysts. These hyperbolic headlines are resulting in after-hours trading of AAPL being down, so expect AAPL to open down tomorrow even though Apple just reported the best quarter of all time for any company in history. It makes no sense.

[Swordmaker]

Blow-by-blow of Apple's 1st Fiscal Quarter 2016 Financial Results Conference Call.

• Record quarterly revenue of $75.9 billion (vs. $74.6 billion YOY)
• Record quarterly net income of $18.4 billion, or $3.28 per diluted share (vs. $18 billion, or $3.06 per diluted share YOY)
• Gross margin was 40.1 percent (vs. 39.9 percent YOY)
• 74.779 million iPhones sold
• 16.122 million iPads sold
• 5.312 million Macs sold
• New quarterly record for Apple Watch sales
• Apple's installed base recently crossed a major milestone of one billion active devices (iPhone, iPad, Mac, iPod touch, Apple TV, and Apple Watch devices that have been engaged with their services within the past 90 days)

-- PING!

Apple Financial Report
1st Fiscal Quarter 2016
Ping!

The latest Apple/Mac/iOS Pings can be found by searching Keyword "ApplePingList" on FreeRepublic's Search.

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[ImJustAnotherOkie]

Since they have put the iCar on hiatus maybe they can start selling Muslim sex toys.

With a Cash Balance like that, and few prospects for future growth who knows what the future holds.

[Menehune56]

Dang, looks like Apple is well on it's way to going out of business. Hope I can pick up some deals at the liquidation sale.

/s

[Swordmaker]

Since they have put the iCar on hiatus maybe they can start selling Muslim sex toys.

The only quote that I saw that counted with the departure of the guy in charge of the Apple Car, after the visit of the Daimler CEO Daimler Dieter Zetsche where he told German weekly Welt am Sonntag that a recent trip to Silicon Valley revealed that Apple and Google have made more progress on automotive projects than he had assumed, is that Apple chief designer Jony Ive is not happy with the speed of progress. That does NOT mean Apple has put their car plans on hiatus, nor does it mean, as some anal-cysts, have claimed Apple has put on a hiring freeze in that area. No one knows because Apple has said absolutely NOTHING. The only ones talking out of their asses, are Anal-cysts and members of the Apple Hate Brigade such as YOU, with your idiotic comment about "Muslim Sex toys."

[Richard Kimball]

I'm of two minds on Apple right now. None of the new products they've come up with since Jobs died appeal to me.

The Macbook Pro and the iMac are still the best computers out there, though.

The generation of revenue and profits are incredible. It's odd to me that anyone could find something negative about having the most profitable quarter in history. That's just amazing.

[Swordmaker]

The generation of revenue and profits are incredible. It's odd to me that anyone could find something negative about having the most profitable quarter in history. That's just amazing.

These ANAL-CYSTS will pull something out of the pimples on their nethermost orifices to find fault no matter what. They're complaining that Apple did not meet THEIR estimates of what Apple should sell in each of the product categories. They complain that Apple didn't meet THEIR estimates of revenue, but write about it as if these estimates were engraved in stone by God, and it is a venal sin for Apple to have missed these estimates they pulled out of their rears, twirled around in their fingers, smelled, and then pronounced good.

CNBC is, and has been, one of the worst of the lot, so much so that one pundit has laid a lot of the drop in AAPL on their doorstep because of the constant litany of negativity with innuendo and rumors based on absolutely nothing, so much so that it because self-fulfilling.

Of course, putting their negativity out there, CNBC's bile get's picked up by the blogosphere, then echoed back and forth, which gets quoted and gains a life of quotations as though each of them knows something they really don't. When one tracks it all down, it leads back to CNBC.

Yahoo Finance bent so low this last summer they actually FAKED the Wall Street whisper numbers for Apple's Revenue between 8:30 AM, before the Financial Call, and 2:00 PM, when Apple released the numbers, beating the numbers Wall Street was expecting by $1.4 BILLION in revenue. But Yahoo Finance posted a head line claiming Apple MISSED the Revenue Whisper number by over $1 billion (!) and their new whisper number had been increased from the one they had published just that morning at 8:30!!! That whisper number doesn't change on the day of financial releases.

On that day, even though Apple was reporting another RECORD QUARTER, with huge numbers beating everything except the over-heated expectations on iPhone sales and iPads expected drop, Yahoo's false headline and its meme took off. It was after hours and AAPL in after hours trading dropped like a stone! The next morning's opening AAPL was off by about 12 dollars. Someone bought a WHOLE lot of AAPL in after hours. . . and then Yahoo said OOPS! Mea Culpa! and deleted the story from 2:00 PM and apologized, saying the meant Apple missed on iPhone numbers only. Meanwhile, a whole lot of small investors who read that, dropped their AAPL at a loss, but someone else who, I think, know what was going on in advance, bought in and made a killing!

I posted the two articles on FR, pointing out the fraudulent data. . . but no one else in the Financial Press seemed to notice that Yahoo Finance had doctored the Whisper number to be able to claim Apple had missed on Revenue when it was an obvious lie!

Where is the Securities and Exchange Commission on all this? Out to lunch. They are supposed to be watching but they have ignored these shenanigans all through the Obama administration as these Anal-cysts have manipulated AAPL for theirs and buddies', the stock traders' gain at the expense of the amateur traders and investors.

[Swordmaker]

Oh, incidentally, I posted comments on both the 8:30 AM and 2:00PM Yahoo articles, pointing out the changing of the Whisper number between the two articles. . . and both were deleted by the author or moderator of Yahoo as inappropriate criticism. I did not use any language or insults, I just pointed out the differences in the Whisper Numbers and quoted each article and asked what gives? Why the differences, and pointed out that Apple beat the 8:30 Revenue but missed the changed number at 2:00. . . and inquired who was moving the goal posts, and why?

ZOT!

What does that tell you about motives?