John Paczkowski

Recent Posts by John Paczkowski

Apple to Antenna-Obsessed Investors: Look! Over There! A Big Pile of Money!

Asked last week if he would apologize to investors for the decline in Apple’s share price caused by controversy over the iPhone 4’s antenna design, CEO Steve Jobs refused. “We want investors for the long haul,” he said during the Q&A at Friday’s press conference. “To those investors who bought the stock and are down $5, I have no apology.”

Nor did he really need one. Because Apple has once again obliterated investor expectations. Posting third-quarter results after the bell Tuesday, the company reported earnings per share of $3.51 on revenues of $15.7 billion–a record 78 percent increase over the same period a year ago. The Street had been looking for EPS of $3.11 on revenues of $14.75 billion. Gross margin was 39.1 percent, compared to 40.9 percent in the year-ago quarter. And 52 percent of the quarter’s revenue came from international sales.

Apple (AAPL) sold 3.47 million Macs during the quarter (no cannibalization by the iPad here), a 33 percent unit increase over the year-ago quarter and a new quarterly record. It sold 8.4 million iPhones–61 percent more than it did a year ago. And it sold 3.27 million iPads in the device’s first quarter at market.

The only product to see a sales decline was the iPod. Apple sold 9.41 million of them during the quarter, eight percent fewer than it did last year.

“It was a phenomenal quarter that exceeded our expectations all around, including the most successful product launch in Apple’s history with iPhone 4,” Jobs said in a statement. “IPad is off to a terrific start, more people are buying Macs than ever before, and we have amazing new products still to come this year.”

We have amazing new products still to come this year.

This year’s already seen the introduction of the iPad and the iPhone 4. What could he possible be referring to? That all-in-one connected Apple Television we keep hearing about?

Apple’s shares are spiking on the company’s latest financials. They’re up nearly four percent in after-hours trading as I write this. You can almost see concerns over antennagate sublimating before your very eyes.


  • Apple CFO Peter Oppenheimer and COO Tim Cook will be presiding over today’s call.
  • Oppenheimer notes that the “tremendous growth” the company saw during the quarter was driven by the launch of the iPad in addition to strong iPhone and Mac sales.
  • Apple sold 3.47 million Macs during the quarter–a record. That’s 33 percent year-over-year growth, far better than that of the overall market’s 22 percent. Record Mac sales in the education market despite budget cutbacks.
  • ITunes revenue was $1 billion. More than 225,000 apps in App Store, including more than 11,000 for the iPad. Over five billion apps downloaded to date.
  • According to IDC, the smartphone market grew 38 percent during the June quarter. The market for the iPhone grew almost twice as fast, says Oppenheimer.
  • Cumulative sales of “iOS devices”: More than 100 million
  • IPod sales are down, but this was expected as people move to the iPhone. The iPod’s share of the U.S. market for MP3 players is still 70 percent.
  • IPod touch sales are up 48 percent year-over-year.
  • Apple’s retail stores generated about $2.58 billion in revenue, up 73 percent year-over-year. About 677,000 Macs sold, a nice jump from the 492,000 sold a year ago. Fifty percent of Macs sold were to customers who had never owned one before. Apple plans to open 24 stores this quarter, among them outlets in Paris, Shanghai, London, Barcelona and Madrid.
  • Apple is deferring revenue for the value of the iPhone 4 cases it said last Friday that it would give away–about $175 million worth. This will be recognized in the December quarter.
  • ”We’re very confident in our new product pipeline,” says Oppenheimer.
  • Tim Cook says 80 percent of the Fortune 100 are either deploying or piloting the iPhone. Fifty percent are doing the same with iPad. “It’s incredible,” he adds.
  • The company is working hard to deal with supply constraints for some products. “We’re selling iPads and iPhones as fast as we can make them…we’re working around the clock to try to get supply and demand in balance….High demand is a good problem to have,” says Cook.
  • Here’s an interesting question: Why do you run out of products all the time? Cook: “We do not create product shortages to create buzz….I’m not sure where that idea is coming from. We’d like to put our products in the hands of everyone who wants them….Demand for the iPhone 4 has been incredible and we’re doing our best to catch up.”
  • Any changes in demand since antennagate?

    Cook: “Let me be perfectly clear: We are selling every unit we can make, currently.”

    Follow up: So you haven’t seen any slowdown in order rates, or any increase in returns?

    Cook: “My phone is ringing off the hook with calls from people who want more supply.”

  • Cook on iPad sales: “It is not following a typical early-adopter curve and then taking a long time to cross into the mainstream….Our guts tell us that this market is very large, and we believe that iPad is really defining it. We want to take full advantage of this momentum so we’re investing in it quite a bit.
  • Any signs of cannibalization? Too early to tell, says Cook, who notes that the company just reported its best Mac quarter ever at the same time it sold 3.3 million iPads. “For us, that’s a jaw-dropper.”
  • What’s the mix of 3G versus Wi-Fi iPads? Won’t say, but average sale price for iPads this quarter was about $640. Any mathletes out there willing to extrapolate from that?
  • North Carolina data center should be completed by the end of the calendar year.
  • How long will the current demand for the iPad persist given the rival devices now coming to the market? Cook: “On the iPad we are absolutely selling every unit that we can make….It’s no secret that everybody is trying to work on something…but we’re extremely happy with our competitive position.”
  • Worried about all the press Android devices have been getting? Cook dodges, says iPhone sales were up 61 percent this quarter, growing faster than the overall smartphone market, as gauged by IDC.
  • Macs are selling really well. “In Asia Pacific, Macs grew 73 percent year-over-year,” Cook says. “In China, we grew 144 percent, Korea, 184 percent. In Hong Kong we almost doubled. Even in Spain, with difficult economy, Mac grew 59 percent.”
  • IPhone doing well in all of the key markets. In Spain, will go from a single carrier to three carriers.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik