During Apple’s first-quarter 2012 financial results conference call, Apple CEO Tim Cook and CFO Peter Oppenheimer made a number of comments related to Apple’s iPhone, iPad, and iPod businesses, as the company celebrated record revenue, profits, and sales of iPhones, iPads, and Macs.
As usual Apple CFO Peter Oppenheimer gave the opening remarks, saying the company was “very proud” of the results. Oppenheimer said that despite the drop off in unit sales, iPod sales beat internal expectations, with the iPod touch representing more than half of all iPod sales. In addition, the iPod retains over 70 percent market share in the U.S., and is still the top-selling MP3 player in most of the countries Apple tracks.
Discussing the iPhone, Oppenheimer said that nearly all of the top companies in Fortune 500 now use and support iPhone on their networks. It is “changing the way companies use mobile devices for work”, he said, noting that many companies were developing mission-critical apps. The 128 percent year-over-year iPhone sales growth outpaced the expected 40 percent growth in smartphone sales overall, he said, adding that the iPhone 4S is now available in 90 countries.
Apple CEO Tim Cook later added that the company was thrilled with iPhone sales for the quarter, which were substantially above the prior 20 million unit sales record. He attributed the outstanding sales to several factors, including consumer enthusiasm, delayed sales from the prior quarter, and the fact that the company made a “large bet” on potential demand—but noted that it still ended the quarter with a backlog, and thus “didn’t bet high enough”. Cook said that sales in the U.S. and Japan were particularly strong, as were iPhone sales in greater China, which is especially surprising given that the iPhone 4S was not available in mainland China during the quarter - and later said that there was nothing to announce regarding the company’s likely tie-up with China Telecom.
Turning to the iPad, Oppenheimer said the company was “very pleased” with its record iPad sales during the quarter, saying that sales surpassed internal expectations. Overall, the company has now sold over 315 million iOS devices, including more than 62 million in the holiday quarter alone—suggesting that the company sold roughly 9.6 million iPod touch units during the period. Oppenheimer also revealed that iOS app developers earned over $700 million during the holiday quarter, and are quickly approaching $4 billion earned since the launch of the App Store in 2008.
Cook later reiterated that Apple is “very happy” with iPad sales, and believes that the record sell through is consistent with its long-term belief that the tablet market is a “huge opportunity” for the company. He said that the company still believes that the tablet market will grow to be larger than the PC market, and noted that based on research, it appears as if tablet sales have already overtaken traditional desktop PC sales. He added that there are now over 170,000 apps available specifically for the iPad compared to “hundreds” for competing products, and also noted that Apple doesn’t really see “limited-function” tablets and eReaders as direct competition for the iPad. Cook said that Apple will continue to “innovate like crazy in this area”.
In addition, Cook uncharacteristically revealed exact Apple TV sales for fiscal 2011 and for the holiday quarter. Saying the product was doing very well, Cook said that 2.8 million units were sold in fiscal 2011, with another 1.4 million units sold in the first quarter of 2012. He also said that the company will continue to add things to it, adding that he personally “couldn’t live without it”. Discussing iCloud, Cook revealed that the company has signed up over 85 million users in just three months, and described consumer response as incredible. He went on to describe the realization of iCloud as a “fundamental shift”, and said that, instead of being a product, per se, it’s actually a very important strategy for the next decade.
Finally, concerning the company’s massive cash balance, Oppenheimer said that the company’s executives and Board of Directors are “actively” discussing options as to what is the best use of the cash - whether it be investments in the supply chain, or acquisitions—before noting bluntly that the company had nothing to report as far as possible stockholder dividends or stock buybacks.
Reporting its first quarter 2012 financial results today, Apple said it sold a record-breaking 37.04 million iPhones in the quarter, a 128 percent increase year-over-year, and up from 17.01 million units in the prior quarter. Apple sold 15.43 million iPads during the quarter—another record—up 111 percent from the year-ago quarter and up from 11.12 million units in the fourth quarter of 2011. Finally, the company said it sold 15.4 million iPods during the holiday quarter — a 21 percent decrease compared to the same quarter last year, but up from 6.62 million in Q4 2011. Unit sales of iPhones, iPads, and iPods bring the cumulative totals for the three device categories to 183 million, 55.28 million, and 336.58 million, respectively.
Apple posted revenue of $46.33 billion and net quarterly profit of $13.06 billion, or $13.87 per diluted share, representing all-time revenue and profit highs, compared with revenue of $26.74 billion and net quarterly profit of $6 billion, or $6.43 per diluted share in Q1 2011. Revenue from Other Music Related Products and Services, which includes revenue from the iTunes Store, App Store, and iBookstore in addition to sales of iPod services and Apple-branded and third-party iPod accessories, was $2.027 billion for the quarter, up 42 percent year-over-year and 21 percent over the prior quarter.
“We’re thrilled with our outstanding results and record-breaking sales of iPhones, iPads and Macs,” said Tim Cook, Apple’s CEO. “Apple’s momentum is incredibly strong, and we have some amazing new products in the pipeline.”
“We are very happy to have generated over $17.5 billion in cash flow from operations during the December quarter,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the second fiscal quarter of 2012, which will span 13 weeks, we expect revenue of about $32.5 billion and we expect diluted earnings per share of about $8.50.”
Apple was the world’s top purchaser of semiconductors in 2011, according to new research from Gartner. Apple last year purchased over $17.2 billion in semiconductors, up 34.6 percent from its 2010 total of $12.8 billion, and good for a 5.7 percent share of all semiconductor purchases on a per-company basis. Following Apple on the list was Samsung, with a 5.5 percent share, HP, also with a 5.5 percent share, Dell, with a 3.2 percent share, and Nokia, with a 3.0 percent share. “The major growth drivers in 2011 were smartphones, media tablets and solid-state drives (SSDs),” said Masatsune Yamaji, principal research analyst at Gartner; all three are major growth areas for Apple, including the iPhone, iPad, and the drives found in the company’s MacBook Air laptops.
Apple has hired away Anderson Teixeira, former President of Sony Ericsson U.S. and Head of Region North America, to become its new head of Latin American operations. According to 9to5Mac, Teixeira, whose official title at Apple will be Latin America General Manager, had been with Sony Ericsson for ten years, and started at Apple earlier this month. A mid-2009 profile on Teixeira revealed that he is a native of Brazil, and during his time with Sony Ericsson was based out of Miami, FL, Raleigh, NC, and Munich, Germany. For Apple, Teixeira will operate out of Apple’s Coral Gables, FL office.
Apple won the most recent round in its ongoing patent dispute with Samsung as a German judge ruled in favor of Apple in a patent infringement complaint. Forbes reports that Mannheim Regional Court judge Andreas Voss ruled that Apple did not infringe on what is believed to be a Samsung patent relating to a “turbo channel encoding/decoding device for a CDM communication system”. Samsung has the option to appeal to the Higher Regional Court in Karlsruhe; according to the report, the ruling is only the first of Samsung’s seven patent claims against Apple in Germany.
The End User License Agreement for Apple’s new iBooks Author app has drawn the attention of some members of the online community. The criticism revolves around a section at the top, which states, “If you charge a fee for any book or other work you generate using this software (a “Work”), you may only sell or distribute such Work through Apple (e.g., through the iBookstore) and such distribution will be subject to a separate agreement with Apple.” As summarized by Dan Wineman, that statement, and section 2 B, suggest that “Apple is trying to establish a rule that whatever I create with this application, if I sell it, I have to give them a cut. ” Such an arrangement isn’t unreasonable on the surface, as Apple is providing the software for free, and it does not appear to bar users from distributing works freely online. Wineman argues, however, that Apple did not give him a chance to agree to the terms prior to installing the software, at which point the user is implicitly accepting of it; he compares it to a car dealership hiding secret terms in the glove box, which go into affect as soon as a customer drives a purchased automobile. Apple has yet to comment on the situation.
Apple has posted a streaming video of this morning’s education event on its website. The video, which clocks in at roughly one hour long, features Apple executives Phil Schiller, Eddy Cue, and Roger Rosner introducing the company’s new textbook and education initiatives, which include iBooks 2.0, the new digital textbooks section of the iBookstore, iBooks Author for Mac, and the new iTunes U app. For more information on the event, check out our transcript, or simply take a peek at our News section.
Apple has released iTunes 10.5.3, the latest version of its digital media management software. According to the release notes of Apple’s new iTunes U app, iTunes 10.5.3 is required to sync content with the new application; it is unknown what other features or improvements may have been added in the update. iTunes 10.5.3 is available now as a free download from apple.com/itunes and should be available via the company’s Software Update utility later today.
Update: Apple’s release notes for iTunes 10.5.3 read as follows: “iTunes 10.5.3 allows you to sync interactive iBooks textbooks to your iPad. These Multi-Touch textbooks are available for purchase from the iTunes Store on your Mac or from the iBookstore included with iBooks 2 on your iPad. iBooks textbooks are created with iBooks Author — now available as a free download on the Mac App Store.”
At today’s education event, Apple also announced an overhaul of its iTunes U service with the debut of a new iTunes U application for the iPad. Designed to provide a new and more interactive way of accessing the previously podcast-based iTunes U curriculum, the new application allows users to not only download course material but also interact with teachers and professors by providing access to assignments, updates, course notes, lectures and presentations. The app also provides integration with iBooks based textbooks allowing users to consolidate notes and highlights from their texts into the iTunes U app for easy review. Teachers and instructors can use iTunes U to layout out course syllabi, customizing topics, delivering content and lectures integrated with iBooks textbooks and providing additional information such as course notes, reading lists, office hours and more. iTunes U is available from the App Store as a free download and is a universal app requiring iOS 5.0 or later.
During Apple’s education event today, the company announced a new Textbook section coming to the U.S. iBookstore to showcase a new collection of interactive textbooks that will be supported by iBooks 2. In addition, Apple has partnered with three leading textbook companies that are collectively responsible for publishing 90% of textbooks including McGraw Hill, Houghton Mifflin Harcourt and Pearson. Apple has also published a new, free iBooks Author tool for Mac OS X that will enable any publisher or end user to easily create enhanced interactive textbooks to be used on the iPad, iPhone or iPod touch with the iBooks app. The new iBooks based textbooks are expected to transform the traditional learning experience by providing enhanced electronic textbooks that include rich multimedia and interactive features such as video, study cards, built-in quiz and review questions and more. Current textbooks on the iBookstore are priced at around $15 and range in size from around 800MB to about 3GB.
During Apple’s education event today in New York City, the company announced the imminent release of iBooks 2, supporting a new variety of interactive book features focused primarily on education. Promising to deliver a “new textbook experience” for the iPad and other iOS devices, the new version will support books providing enhanced graphical and interactive features such as study cards, embedded quizzes and enhanced note-taking and highlighting capabilities. iBooks 2 is now available from the App Store as a free download.
Apple’s Big Apple-themed education announcement media event will begin in less than one hour, at 10:00 AM Eastern Time. While no Apple announcement is a “sure thing” prior to the company’s events, reports from the past few days have indicated that the bulk of Apple’s announcement will focus on digital textbooks, with an emphasis on the K-12 market. In addition to potential partnerships with publishers, it has also been suggested that Apple will unveil its own software that will make it easier for anyone with the desire to create interactive, multimedia textbooks which can then be made available for download via iBooks. We’ll be providing live updates of the event as it happens, so check back here at 10!
9:50 - 10 minutes before the start of the event, attendees are allowed in to take seats.
9:55 - The event is taking place in the Guggenheim Museum’s basement auditorium.
9:56 - Despite the subterranean venue, the stage has the typical lighting and look of a Cupertino-style Apple event.
9:58 - Apple SVP of Worldwide Marketing Phil Schiller takes the stage, starting the event early - atypical of Apple.
Apple’s education event, scheduled for tomorrow in New York City, will focus on broadening the education content available for the iPad, with an emphasis on the K-12 market, according to a new report. Citing two people with knowledge of the announcement, Bloomberg reports that Apple will announce a set of tools to make it easier to publish interactive textbooks and other digital educational content. In addition to making more content available, Apple also hopes to empower “self-publishers” to create new kinds of teaching tools, likely based on a modified version of the ePub standard. A report form earlier this week suggested that Apple would adopt the ePub 3 standard in such a tool, allowing for easier creation of interactive, multimedia-rich content.
Apple has been working with McGraw-Hill and potentially other publishers on a digital interactive textbook initiative that it is expected to launch at its special event on Thursday, according to a new report. Citing a person familiar with the matter, the Wall Street Journal reports that McGraw-Hill has been working with Apple on the announcement since June, and may have been joined in participation by Pearson and Houghton Mifflin. Cengage Learning, a leader in higher-education textbooks, has partnered with Apple in the past and will also be attending the event. “Apple today clearly has a strong position in hardware, and companies like Cengage Learning have a very strong position on the content side,” said Bill Rieders, Cengage executive vice president of global strategy and business development. “To the extent there’s a combination there, that could be exciting.”
In a separate report, Ars Technica also suggests that Apple is working on digital textbooks, but instead suggests that Apple will announce support for the more robust ePub 3 standard in iBooks moving forward, as well as a new tool for creating ePub 3- compliant e-books. Referring to the tool as “GarageBand for e-books”, the report cites former Apple education employee and current CEO of digital textbook house Inkling Matt MacInnis as expecting such a tool. “That’s what we believe you’re about to see,” MacInnis told Ars, a statement that was agreeable to the report’s other sources. “Publishing something to ePub is very similar to publishing web content. Remember iWeb? That iWeb code didn’t just get flushed down the toilet—I think you’ll see some of [that code] repurposed.” Late Apple co-founder and former CEO Steve Jobs was known to have been involved with the initiative, and according to the report worked on this project for several years.
Expanding the ongoing legal battle between the two companies, Apple has filed another suit against Samsung in Germany. According to a Bloomberg report, Apple is seeking to ban sales of 10 Samsung smartphone models, including the Galaxy S Plus and the Galaxy S II. The suit was filed in the Dusseldorf Regional Court and is based on Apple design rights in Europe, court spokesman Peter Schuetz said, adding that Apple has also started a separate suit against five Samsung tablet models related to a September ruling banning the Galaxy Tab 10.1. The two companies are currently involved in a number of suits against one another worldwide.
Apple has officially launched its iTunes Match online music service in the Netherlands. Launched in the U.S. in November, iTunes Match is a $25/year service that matches tracks in a user’s iTunes library with tracks stored on the company’s iTunes Store servers, uploading any tracks it can’t match, and offering users full access to all their music — up to 25,000 tracks — from any of their devices. As noted by Mac Rumors, Dutch collecting society Buma/Stemra announced last week that it had reached a deal with Apple for iTunes Match; links to the service have yet to appear on the Dutch iTunes Store, but Apple has updated its terms and conditions with new text covering the service, and the direct link to the iTunes Match page is now working.
Update: According to AppleInsider, iTunes Match has also launched in Argentina, Bolivia, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Estonia, Guatemala, Honduras, Latvia, Lithuania, Nicaragua, Panama, Paraguay, Peru, and Venezuela.
An administrative law judge with the International Trade Commission (ITC) has issued an initial ruling in Apple’s patent suit against Motorola, ruling that the latter did not violate Apple’s patents. Ars Technica reports that Motorola was ruled to have not infringed any of the three smartphone-related patents upon which Apple built its case; however, the ruling is still subject to review by a six-person ITC panel. Apple and Motorola have been involved in a series of lawsuits against one other since October 2010, when Motorola Mobility filed a series of suits against Apple, leading to a countersuit from the Mac-maker; Google acquired Motorola Mobility last August, complicating the various disputes.
Apple today released its 2012 Supplier Responsibility Progress Report (PDF Link) as part of its ongoing efforts to provide acceptable working conditions for those that are involved in building its products. The report itself includes data from 221 audits of Apple’s overseas suppliers, and was accompanied by a list of 156 suppliers (PDF Link) that represent 97 percent of the company’s supply chain, the first time the company has offered such as list. In addition, Apple joined the Fair Labor Association (FLA) as a Participating Member. According to a FLA press release, the group will “independently assess facilities in Apple’s supply chain and report detailed findings on the FLA website”; Apple is the first technology company to join the Association as a Participating Company. In an email to his employees that was subsequently published by French-language MacGeneration, CEO Tim Cook discussed the moves:
We’ve just released our sixth annual update on conditions in Apple’s supply chain, and I want to personally share some of the results with you.
We insist that our manufacturing partners follow Apple’s strict code of conduct, and to make sure they do, the Supplier Responsibility team led more than 200 audits at facilities throughout our supply chain last year. These audits make sure that working conditions are safe and just, and if a manufacturer won’t live up to our standards, we stop working with them.
Thanks to our supplier responsibility program, we’ve seen dramatic improvements in hiring practices by our suppliers. To prevent the use of underage labor, our team interviews workers, checks employment records and audits the age verification systems our suppliers use. These efforts have been very successful and, as a result, cases of underage labor were down sharply from last year. We found no underage workers at our final assembly suppliers, and we will not rest until the number is zero everywhere.
We’ve also used our influence to substantially improve living conditions for the people who make our products. Apple set a new standard for suppliers who offer employee housing, to ensure that dormitories are comfortable and safe. To meet our requirements, many suppliers have renovated their dorms or built new ones altogether.
Finding and correcting problems is not enough. Our team has built an ambitious training program to educate workers about Apple’s code of conduct, workers’ rights, and occupational health and safety. More than one million people know about these rights because they went to work for an Apple supplier. Additionally, Apple offers continuing education programs free of charge at many manufacturing sites in China. More than 60,000 workers have enrolled in classes to learn business, entrepreneurial skills or English.
Finally, we are taking a big step today toward greater transparency and independent oversight of our supply chain by joining the Fair Labor Association. The FLA is a leading nonprofit organization dedicated to improving conditions for workers around the world, and we are the first technology company they’ve approved for membership. The FLA’s auditing team will have direct access to our supply chain and they will report their findings independently on their website.
No one in our industry is driving improvements for workers the way Apple is today. I encourage you to take some time to read more about these efforts, so that you can be as proud of Apple’s contributions in this area as I am.” [via Mac Rumors]
Apple has scheduled a “Big Apple”-themed “education announcement” media event in New York City for January 19, 2012, sending out a digital invitation featuring a chalkboard image of the Manhattan skyline with an Apple logo in the middle of skyscrapers.
The event is expected to focus on iTunes, the iBookstore, and possibly textbook sales in the iTunes Store.
Apple this morning seeded its registered iOS developers with the third beta version of iOS 5.1. According to Apple’s sparse release notes state simply that the release contains “bug fixes and improvements”. The update is currently available as an OTA Software Update for devices already running iOS 5.1 beta 2, and will likely be available shortly to registered iOS developers from the iOS Dev Center.