Q1 2014 Earnings Call Transcript

Transcript Call Date 01/27/2014

In this football season, nearly every team in the NFL use iPads as playbooks, replacing their traditional three ring paper binders. In the education market, schools continue to choose iPad and the great content available across apps, books and courses. To-date, U.S. education institutions have purchased over 7 million iPads. In fact, we've sold over 750,000 iPads to K-12 schools in the State of Texas alone, including 7,000 iPads rolling out to all K-12 students in the Midway Independent School District. We have expended the availability of iBook textbook from four countries to over 50 countries, so that students and teachers around the world can experience the power of what a textbook can be. We continue to add new titles from key education publishers like Oxford University Press and Cambridge University Press.

In addition, nearly 25,000 books have been created and published by individual educators using iBooks Author bringing lessons from life in exciting new ways. Over 1,000 institutions are delivering courses and content through iTunes U. At the Ohio State University where there are over 20,000 iPads on campus, faculty have developed over 70 iTunes U courses in less than one school year. We remain very focused on providing a great user experience for our iPhone and iPad customers and we are extremely pleased that the iOS platform continues to lead the industry in user engagement.

According to IBM's digital analytics benchmark, iOS devices accounted for more than twice the online traffic and more than five times the online sales compared to Android devices on both Black Friday and Christmas Day. IBM reported that iOS devices represented 32.6% of online traffic on December 25th and more than double the 14.8% for Android. While iOS devices drove 23% of online sales that day, five times the 4.6% for Android.

According to the latest reports by Chitika Insights, iPhone accounted for 54% of North America's smartphone web traffic while iPad accounted for 78% of tablet traffic. These usage percentages are far greater than the share of the smartphone and tablet markets represented by our devices and they underscore just how engaging and important our iPhones and iPads are to the people who own them.

We are also very pleased with our customer's adoption of iOS 7. As on this month, 80% of iOS devices are running iOS 7. That doors the single-digit adoption percentage measured for the latest version of the Android operating system and makes iOS 7 the most popular operating system in the world. The rapid transition to the latest version of iOS provides a more advanced and secure experience for our customers, and a more streamlined opportunity for our developers.

Turning to Mac, we sold 4.8 million Macs compared to 4.1mm in the year ago quarter, an increase of 19%, making this among our best Mac quarters ever. The growth was driven by significantly increased sales of iMac and MacBook Air, while sales of MacBook Pro also remained strong.

Mac sales grew in each of our operating segments, led by Europe and Greater China. We were also very pleased to have generated such strong results for our Mac product, particularly given IDC's most recently published estimate of 6% year-over-year contraction in worldwide personal computer sales. Mac has now gained global market for 30 of the last 31 quarters.

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