Apple, Inc. AAPL
Q1 2012 Earnings Call Transcript

Operator: Ben Reitzes, Barclays Capital.

Ben Reitzes - Barclays Capital: Tim and Peter, can you describe the iPhone momentum as you ended the quarter and what is included for the iPhone in your guidance and your enthusiasm for the product as we head into the first half of the calendar year? Any more detail in metrics would be helpful. Thank you so much.

Tim Cook - CEO: Sure Ben. This is Tim. We were thrilled with the 37 million iPhones that we sold, it's about 128% against a market rated growth of about 40% according to IDC's latest projection. This is substantially above the 20 million unit previous record. We would attribute it to a – just a breathtaking customer reception of the iPhone 4S with iOS 5 and key features such as Siri and this incredible camera with advanced optics. Customers are absolutely loving this product. We also attributed to – we made a very bold bet entering quarter as to what the demand would be, and as it turns out, despite it being a very bold bet, we were short of supply throughout the quarter and did again with a significant backlog as Peter has said. That situation has improved some since the end of the quarter, but we still are short in some key geographies currently. I would also attribute the performance to the delayed purchases from the prior quarter as we've discussed in the October call as people were anticipating a new iPhone being announced. I think we made the correct decision to go with a broad range of iPhone. This turned out to be a benefit as we thought it would, and of course the 14th week, as Peter said, is a part of this. Although everyone knew that as we did as well and had factored that into our guidance. Geographically we saw strength literally in every key region, but in particular I would call out the U.S. and Japan, which got going early in the quarter, and had many more sales than most countries. I would also say that I was particularly pleased with the iPhone sales in Greater China, particularly considering that we did not launch the iPhone 4S in China until in January, and therefore had no sales into Mainland China during last quarter. And so we could not be happier – we thought we were (betting bold as) I think many of you would have thought, if you would have known what we were doing, but as it turns up, we didn't bet high enough. Our customers are loving iPhone and we're very happy with that.

Ben Reitzes - Barclays Capital: My follow-up is, as we're doing the math here, it seems like the ASP is up sequentially for the iPhone, so it seems like there was a very good mix of the 4S and the higher capacity 4S. Could you just comment a little bit on that versus the iPhone 4, which you cut the price of?

Tim Cook - CEO: The iPhone 4S was the most popular iPhone during the quarter, and consistent with most launches, we typically see a higher mix at the front end of the launch.

Operator: Kathy Huberty, Morgan Stanley.

Kathy Huberty - Morgan Stanley: Just to follow-up on the iPhone discussion, Tim, can you talk about whether the pent-up demand at the end of December and today is those countries like U.S. and Japan that had the phone all quarter or is it just countries that recently received and are able to sell the phone, so if you can talk about that? Then the second part would be, does the component environment and your production capacity or your suppliers' capacity allow you to start to address that catch-up demand, address China, which is new this quarter, and also help you start to rebuild inventory in March, or are there any constraints that you see in the near term?