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Ina Fried

Recent Posts by Ina Fried

Hi, Wall Street, It’s Apple. Did We Mention Those iPhone Sales Were a Record?

Record iPhone sales weren’t enough for some investors, who sent Apple shares lower following the company’s quarterly earnings report.

Ralphie iPhone

The company topped its own forecast and sold a record 47 million iPhones, but nonetheless managed to disappoint: Shares were off more than 4 percent in after-hours trading following the numbers.

As is often the case, Apple’s outlook for the current quarter was less than some investors were hoping. The company said to expect revenue of $41 billion to $43 billion as opposed to the more than $45 billion that many analysts had been projecting.

Apple will get to have its say on the quarter in a conference call with investors, due to start around 2 pm PT. AllThingsD will have live coverage and analysis here.

(By the way, the time stamps are Eastern Standard because that’s where I happen to be at the moment.)

4:54 pm: As the hold music continues to play, Apple shares are now down more than 5 percent in after-hours trading, changing hands recently at $487.43 a share, down $26.58.

5:01 pm: Call is getting started with the usual formalities. CEO Tim Cook and CFO Peter Oppenheimer are on the call.

5:01 pm: Usual risk factors: Government may not be able to print cash as fast as Apple can earn it, etc.

5:02 pm: Cook is “extraordinarily pleased,” noting no tech company has ever reported the kind of results Apple did last quarter.

Explaining Apple’s success, he notes that Apple is unwilling to cut corners to deliver the best customer experience. (Was that a sign that the low-cost iPhone might not be so close or is that the head fake trademarked by the late Steve Jobs?)

Cook notes that the Mac debuted 29 years ago tomorrow. “We’ve come a long way since 1984,” Cook said, but added the company still has the same spirit and drive.

Lots of impressive numbers coming, Cook said, but the most important thing is that customers love the company’s products.

As for the numbers, 500 million iOS devices now out there.

“Everyone at Apple has their eyes on the future,” Cook said.

5:05 pm: On to CFO Peter Oppenheimer and the numbers …

5:06 pm: iPhone, iTunes and iPad sales all a record, as was $13.1 billion in net income.

Due to its rising importance, Oppenheimer said Apple will now break out greater China (Mainland China, Hong Kong and Taiwan) as a separate geographic region.

It’s also rejiggering how it reports product sales, separating product sales, service revenue and accessories.

5:10 pm: Oppenheimer takes a break from the numbers to note that while other operating systems have security and fragmentation concerns, Apple’s devices deliver a better business experience. He also highlights companies and government agencies that are using iPhones with their employees.

Same with iPad, which is being used at Barclay’s Bank, among other businesses. Governments love them some iPads, too.

As for Mac, the company sold 312,000 Macs per week. That’s less than a year ago, although Oppenheimer said the company had manufacturing constraints on the new iMac that limited sales from what they would otherwise have been.

As for iPod, iPod touch accounted for more than half of all iPod sales.

The iTunes Store was added in more than 50 countries, including Russia. The App Store had a record quarter with 2 billion downloads in December alone.

More than $7 billion has been paid out to developers, Oppenheimer said.

More than 2 billion iMessages are sent each day, each one causing a little pain for the cellular carriers, who used to call those text messages — a significant source of revenue.

5:18 pm: Cash: Apple has lots of it, much of it offshore.

Apple has also changed how it gives guidance. It’s finally admitting its past estimates were amounts it was reasonably confident it could meet. Now, it says, it is providing a range of estimates that it thinks should represent the sales and earnings it will post.

5:21 pm: On to Q and A.

5:25 pm: On smartphone screens getting bigger: Cook says that it is the best display on the market and that Apple has the biggest screen it can have without sacrificing one-handed operation ability.

“We put a lot of thinking into screen size and believe we have picked the right one,” Cook said.

Again, is this quashing the notion of an iPhone phablet or another head fake?

5:25 pm: On rumors of iPhone order cuts. He just said he would question the accuracy of such rumors. Even if a particular data point were accurate, Cook said, it wouldn’t necessarily be an accurate proxy for the overall business.

“We obviously have multiple sources for things,” he said. Yields can also vary, as does inventory.

Oppenheimer on Apple’s new guidance, carefully trying to avoid using the word “sandbagging.”

“In the past we gave you a single point estimate of guidance. It was conservative. … We’re now providing you a range of guidance that we expect we can … report within.”

“We believe we will report within that range.”

5:33 pm: Cook, on lower Mac sales.

Mac sales would have been materially higher had it been able to ship more iMacs in the quarter. Also, the company had one week more in last year’s fourth quarter. And inventory was lower than in the year ago. Those three factors more than make up for the decline in sales, Cook said.

Also, “the market for PCs is weak,” Cook said, noting that IDC forecast the market contracted 6 percent during the quarter. And, oh yeah, there’s the iPad.

“There’s some cannibalization there,” Cook said.

5:37 pm: On iPad mini vs. iPad demand.

Oppenheimer: It’s hard to know. We could not make enough [iPad minis] in the quarter. We were constrained every week.

5:40 pm: On iPhone mix, Cook said average selling prices were roughly the same as a year ago. Cook said iPhone 5’s share of the mix was roughly similar to where iPhone 4S was a year ago.

5:41 pm: Peter Oppenheimer: We expect to spend about $10 billion on capital expenditures this fiscal year, up $2 billion from a year ago. Some $1 billion of that is for its stores. It also buys equipment on behalf of its suppliers and is boosting its data centers.

5:45 pm: On China: Already second-largest market, Cook said, and “it’s clear there is a lot of potential there.”

5:46 pm: Analyst asks a bunch of TV questions Cook says he won’t answer. He did say that Apple sold more Apple TVs last quarter than ever.

“I have said in the past this is an area of intense interest for us,” Cook said. “It remains that. There is a lot we can contribute in this space. … I don’t want to be more specific.”

5:52 pm: Cook: Apple believes it can catch up to demand this quarter on iPad mini and iPhone 4 (which was in short supply last quarter). As for the iMac, supply will greatly increase this quarter, but it might still not catch up to demand.

On cannibalization: “We know iPhone has cannibalized the iPod business. We know that iPad has cannibalized the Mac.”

“Our strategy is to never fear cannibalization. If we do, somebody else [will cannibalize].”

But computer cannibalization is “the mother of all opportunities” for Apple, because Windows’ share of computers is so much greater than the Mac.

Also, there is the potential “halo effect” when consumers get an iPad as their first Apple product, given that history shows those that buy one device often buy more.

“I see cannibalization as a huge opportunity.”

5:57 pm: Apple adding LTE support in Italy, Denmark, Switzerland and a bunch of other countries next week.

“We feel very good about the situation that we are in,” Cook said, vis a vis high-speed network support.

6:01 pm: Oppenheimer: We remain confident in our business and our new product pipeline. (Apple always is.)

6:02 pm: That’s all, folks.

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The problem with the Billionaire Savior phase of the newspaper collapse has always been that billionaires don’t tend to like the kind of authority-questioning journalism that upsets the status quo.

— Ryan Chittum, writing in the Columbia Journalism Review about the promise of Pierre Omidyar’s new media venture with Glenn Greenwald