Q2 2014 Earnings Call Transcript

Transcript Call Date 04/23/2014

We now have an almost 800 million iTunes account, most of these with credit card, this is a staggering number. We continue to gain share in the personal computer market as well. We defied industry trends again by growing, while the market contracted. Our bold decision to make OS X free has resulted in the largest ever percentage of the Mac install base running on the latest version of the operating system, just months after its release.

iPad sales came in at the high end of our expectations, but we realized they were below analysts' estimates and I would like to proactively address why we think there was a difference. We believe almost all of the difference can be explained by two factors. First, in the March quarter last year we significantly increased iPad channel inventory, while this year we significantly reduced it. Luca will go into more detail about this later.

Second, we ended the December quarter last year with a substantial backlog of iPad mini that was subsequently shipped in the March quarter whereas we ended the December quarter this year near supply demand balance. We continue to believe that the tablet market will surpass the PC market in size within the next few years, and we believe that Apple will be a major beneficiary of this trend.

When we look at our Company performance on a geographic basis, we are especially proud of our very strong results in Greater China where we established an all-time quarterly revenue record of almost $10 billion including the results from our retail stores, and in Japan, where revenue was up 26% in spite of the foreign-exchange headwinds and where our smartphone market share reached an incredible 55%.

We're continuing to invest in our retail stores and since our last call, we've opened our first stores in Brazil and Turkey and we now have retail stores in 15 countries around the world. I'm looking forward to welcoming our new retail and online leader, Angela Ahrendts, who will be joining Apple's executive team next week.

Stepping back, we're now just past the halfway mark through fiscal 2014. Our strong March quarter results brings us to total revenues of over $103 billion for the first six months of the year and earnings-per-share growth close to double-digits. We estimate that over the last six months, we've added over 60 million new registered users of our four product categories.

Additionally, over two-thirds of people registering an iPad in the last six months were new to iPad while over half of the people registering iPhones were new to iPhone. It's wonderful to add tens of millions of first-time Apple product users, especially considering the strong halo effect we've seen over and over again in our history. Customers who have a great experience with their first Apple product often become loyal and happy owners of multiple Apple products over time.

As always, I'd like to thank our talented employees who make these results possible through the creativity and passion they bring to their work every day. And I'd like to thank our hundreds of millions of customers for their loyalty and enthusiasm and for continually inspiring us to surprise and delight them.

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