Q2 2014 Earnings Call Transcript

Transcript Call Date 04/23/2014

Now, I'd like to talk about the Mac. We sold 4.1 million Macs, compared to just under 4 million in the year-ago quarter, thanks to strong performance from MacBook Pro and MacBook Air. Macs have now gained global market share for 31 of the last 32 two quarters. Response to Mavericks has been great, and we're very proud of the fact that so many of our Mac customers have taken advantage of the most advanced and secure experience possible. We ended the quarter with Mac channel inventory slightly below our 4- to 5-week target range.

Turning to iPad, we sold 16.4 million units. As Tim explained earlier, our iPad results and the comparison to the March quarter last year were heavily influenced by channel inventory changes. Specifically, this year we sold 16.4 million iPad into our channel and sold through almost 17.5 million, reducing our channel inventory by 1.1 million units.

Last year, we sold over 19.4 million iPads into our channels and sold through 18 million, and therefore increased channel inventory by 1.4 million units. As a result, the year-over-year sell through decline was only 3% compared to the sell-in decline of 16%.

We exit the March quarter with 5.1 million of iPad channel inventory which left us within our target range of four to six weeks. iPad continues to lead all other tablet by far in terms of user engagement, size of ecosystem, customer satisfaction and e-commerce.

A recent study by Chitika Insights found that iPad users in North America generate almost four times the web traffic of all Android tablet users combined. In a February survey, ChangeWave measured a 98% customer satisfaction rate for both iPad Air and iPad Mini with retina display, and also found that among people planning to purchase a tablet with 90-days, two-thirds plan to buy an iPad.

iPad continues to allow companies around the world to reimagine the way they use technology to drive efficiency and improve employee satisfaction. Thousands of iPads are used at FedEx every day. In an industry where efficiency is critical, FedEx pilots and maintenance crews around the world use iPad to transform operational processes and save the company millions of dollars.

Eli Lilly has deployed we sold over 20,000 iPads and 50 internal apps as part of a laptop replacement program that dramatically increased the productivity and capabilities of its employees.

The U.S. Department of Veterans Affairs is on its way to deploying iPads to 11,000 providers to transform the way doctors and patients interact. As part of these initiatives, a suite of applications is being developed to allow quick access to real-time secure medical information. In education, according to the latest data published by IDC, iPad has over 95% share of the U.S. education tablet market as teachers and students increasingly benefit from the growing range of engaging iBooks, textbooks and solutions that are helping to transform the education experience.

Let me now turn to our cash position. We ended the quarter with $150.6 billion in cash, plus marketable securities, a sequential decline of $8.3 billion. Our domestic cash was $18.4 billion at the end of the March quarter, a sequential decline of $16 billion and $132.2 billion or 88% of our total cash was offshore.

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