Q1 2014 Earnings Call Transcript

Transcript Call Date 01/27/2014

And according to a recent report from Distimo, the App Store has a 63% to 37% market share advantage over Google Play in global revenue from apps. Top developers continue to launch their apps first or exclusively on the App Store. Examples of highly successful launches from 2013 include Temple Run 2 and Cut the Rope 2, which generated millions of downloads and multi-win periods of App Store exclusivity. NaturalMotion recently launched Clumsy Ninja exclusively on iOS and saw 10 million downloads in the first week and Plants vs. Zombies 2 resulted in the biggest game panel launch ever for Electronic Arts PopCap with 16 million downloads from the App Store in the first five days alone.

With the introduction of iOS 7, developers are able to create stunning apps that take advantage of the redesigned user interface and more than 200 new features and APIs, and many of the App Store's biggest recent successes, including Candy Crush Saga, Puzzle & Dragons, Minecraft, QuizUp and Clumsy Ninja were created by international developers. The seamless integration of the iOS platform, the global reach of our ecosystem, our thoughtful app review process and our highly engaged customers continues to make the App Store a superior marketplace for extremely talented developer community.

I'd now like to turn to the Apple Retail Stores. Revenue for the quarter was $7 billion a new quarterly record and an increase of 9% from the year ago quarter. The growth was fueled by record iPhone and iPad sales through the store as well as Mac – as well as strong Mac sales. We completed the remodel of six stores and opened four new stores during the quarter, ending with a total of 420 stores including 166 outside the United States. With an average of 418 stores open during the December quarter, average revenue per store was $16.7 million compared to $16.3 million in the year ago quarter.

Retail segment income was $1.7 billion. We hosted 114 million visitors to our stores during the quarter which translates to almost 21,000 visitors per store per week. We were excited to roll out iBeacon technology at our stores in the U.S. during the quarter enabling shoppers to receive iPhone notifications about products and services via the Apple Store App. iBeacon transmitters use Bluetooth wireless technology to send a shopper's exact location inside an Apple's Store and send messages based on the aisle of products the customer's near.

For example, customers walking by an iPhone stable could receive a message offering to help them check their upgrade eligibility or trade-in value of an existing phone. We expect to see many innovative uses of iBeacon technology from other businesses and developers in the coming months, including retailers and professional sports.

Total Company operating expenses were $4.4 billion and included $572 million through stock based compensation expense. OI&E was $246 million and the tax rate for the quarter was 26.2%.

Turning to our cash, we ended the quarter with $158.8 billion in cash for short-term and long-term marketable securities, a sequential increase of $12 billion from the September quarter. Our domestic cash was $34.4 billion at the end of the December quarter, a sequential decline of $1.1 billion.

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