Apple Inc AAPL
Q2 2013 Earnings Call Transcript

Transcript Call Date 04/23/2013

Operator: Good day, ladies and gentlemen, and welcome to this Apple Incorporated Second Quarter Fiscal Year 2013 Earnings Release Conference Call. Today's call is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to Nancy Paxton, Senior Director of Investor Relations. Please go ahead, ma'am.

Nancy Paxton - IR: Thank you. Good afternoon, and thanks to everyone for joining us. Speaking today are Apple's CEO, Tim Cook and CFO, Peter Oppenheimer; and they'll be joined by Treasurer, Gary Wipfler for the Q&A session with analysts.

Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including without limitation, those regarding revenue, gross margins, operating expenses, other income and expense, stock-based compensation expense, taxes, future products, and capital allocation plans. Actual results or trends could differ materially from our forecast.

For more information, please refer to the risk factors discussed in Apple's Form 10-K for 2012, the Form 10-Q for the first quarter of 2013, and the Form 8-K filed with the SEC today, along with the associated press releases. Apple assumes no obligation to update any forward-looking statements or information, which speak as of their respective date.

I'd now like to turn the call over to Tim Cook for introductory remarks.

Tim Cook - CEO: Thanks, Nancy. Hello, everyone, and thank you for joining us. We have a lot of news to share with you today about the details of our March quarter, as well as a significant increase to our capital return program. First, I'd like to talk about our business and the road ahead. We're now half way through our fiscal 2013, and we've accomplished a tremendous amount. We've introduced and ramped production of an unprecedented number of new products, and we've set many new sales records.

Our revenue for the first half was over $98 billion, and our net income was over $22 billion. During that time we sold 85 million iPhones and 42 million iPads. These are very, very large numbers, unimaginable even to us just a few years ago. Despite producing results that met or beat our guidance as we have done consistently, we know they didn't meet everyone's expectations. And though we've achieved incredible scale and financial success, we acknowledge that our growth rate has slowed and our margins have decreased from the exceptionally high level we experienced in 2012.

Our revenues grew about $13 billion in the first half of the fiscal year. Even though that's like adding the total first half revenue of five Fortune 500 companies, our average weekly growth slowed to 19% and our gross margins are closer to the levels of a few years ago. Our fiscal 2012 results were incredibly strong and that's making comparisons very difficult this year. Last year our business benefited from both high growth and demand for our products and a corresponding growth in channel inventories along with a richer mix of higher gross margin products, a more favorable foreign currency environment and historically low costs. These compares are made further challenging until we anniversary the launch of the iPad mini, which as you know we strategically priced at a lower margin. As Peter will discuss, we are guiding to flat revenues year-over-year for the June quarter along with a slight sequential decline in gross margins.

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