When it comes to China and the Asia-Pacific region, Apple has enough iPhones, but it doesn't have enough iPads. "We're still supply constrained" with iPads, Mr. Cook says.
He offers a little macroeconomic analysis of China's rising middle class and how it affects demand for Apple products. "We're doing everything to understand" the market, he says.
Barclays asks about potential shortages in Qualcomm chips that could be used in a rumored iPhone 5.
Mr. Cook says Apple doesn't use those chips now, and it doesn't talk about future products. Generally speaking, he says, Apple works closely with suppliers to know what's available and about any restraints that might be coming.
An analyst says that Wal-Mart employees in his building were talking about Apple's stores within Wal-Mart stores moving from one store to 25 stores in Arkansas. So when will it be in all 10,000 Wal-Mart stores?
Mr. Cook: There are no plans to be in all 10,000 -- we're trying some things and seeing how it goes. They've been a very good partner for us and sold iPods for awhile, and are a more substantial partner in the iPads, and an evolving partner for the iPhone. We hope to continue expanding.
What's up with China, Piper Jaffray asks?
Mr. Cook says Greater China revenue had a record quarter with $7.9 billion, driven in large part due to the fact that the iPhone 4S wasn't available until January, so there was pent up demand. Also, the "halo affect" of the iPhone and iPad sent Mac sales up 60% in the quarter.
Ooh, a question about iCloud. Goldman wants to know if customers are buying extra paid storage.
Mr. Oppenheimer is demurring a little bit, says that it is growing, but the company only launched the device in October. We didn't make this product to get people paying for storage but so we could get more iPad and iPhone customers, he said.
Apple has 125 million iCloud users.
In light of Google Drive's launch, here's a comparison of all the cloud storage providers: http://blogs.wsj.com/digits/2012/04/24/how-google-drive-compares-with-other-storage-services
Goldman Sachs asks about wireless carriers reducing price subsidies for the iPhone. (In the U.S., carriers pay about $400 to subsidize the iPhone, analysts estimate.)
Mr. Cook suggests that carriers may not want to kill the Golden Goose that is the iPhone. "It's important to remember that the subsidy is not large compared to the monthly payments in a 24-month contract period. The churn from iPhone customers is the lowest of all the phones they carry and that has a direct financial benefit to the carrier," he says.
Then, like a proud father, he starts to talk up the iPhone.
When it comes to convergence, "we're not going to that party, others might from a defensive point of view," Mr. Cook says, taking a jab at competitors.
Mr. Cook put the iPad sales into perspective as he likes to do:
Apple has sold about 67 iPads since it launched about two years ago.
It took 24 years to sell that many Macs.
It took more than five years to selll that many iPods, and more than three years to sell that many iPhones.
Analyst: How do you think about the markets for tablets and PCs going forward? Why don't you believe the ultrabook and the tablet market won't converge? Isn't realistic we'll have a device under two pounds with great battery life that can fold up?
Mr. Cook: Anything can be forced to converged, but the problem is that products are about tradeoffs. You begin to make tradeoffs that you make at end of the day that don't please anyone. You can converge a refrigerator and a toaster but that probably won't be good for the end user.
(Nice analogy, Tim.)
So what about the reduction in price on the iPads and iPhones?
Mr. Cook says the reduction of the iPad 2 to $399 is opening up some demand in the education market, which might be sensitive to price, as well as international markets.
Mr. Oppenheimer says that the manufacturing roll out for iPhone 4S was the quickest ever in March and the biggest launch supply ever. Basically, because they were able to sell so many iPhones and iPads in the March quarter, they expect to sell less than they would have in the June quarter had they not had as much supply to meet demand.
Here comes the Q&A!
Morgan Stanley wants to know why guidance for the next quarter "implies a sequential downtick" than past guidance.
The company's cash pile grows. It now has $110.2 billion, with about 70% offshore. The dividend isn't exactly going to make a big dent.
Apple sees about 18,000 retails visitors to each of its retail stores per week.
Whoa. Apple's retail store had a huge quarter, second only to the holiday sales season of Q1. Total retail revenue was $4.4. billion, up 38% from last year.
Schools are loving the iPad, Mr. Oppenheimer says. Apple sold 2 iPads for every one Mac it sold to K-12 customers.
The San Diego school district bought 10,000 iPads in the March quarter, and plans to buy 15,000 more in the next quarter.
The app store now offers 600,000 apps, with 200,000 apps just for the iPad.
Apple shares piling it on now -- the stock is up 7.4% at last glance, adding $40 billion in market cap back to the company. It still has a little ways to get back to the $600 billion record value from a couple of weeks ago.
Companies are increasingly creating in-house business apps for their employees, Mr. Oppenheimer says.
The iTunes store generated $1.9 billion, up 35% year over year, Mr. Oppenheimer says.
The iPhone 4S shot total iPhone sales up by a factor of five in China.
The iTunes store generated $1.9 billion, up 35% year over year, Mr. Oppenheimer says.
The iPhone 4S shot total iPhone sales up by a factor of five in China.
Oh -- we forgot about the iPod numbers. It's certainly not Apple's hottest product anymore. Sales totaled 7.7 million, compared with 9 million a year ago. Apple says that's ahead of expectations, but we would imagine this downward trend to continue.
We've got CFO Peter Oppenheimer on the line. Apple recorded the highest March revenue the company has ever seen, he says, as he reads from a statement.
I wonder what Mr. Cook thinks about Google's new cloud storage service Drive? The service will compete with Apple's own iCloud. Does this increase the heat of the already simmering blood feud between the two companies over their competing smartphone platforms?
So much for concerns about slugging iPhone sales. There were concerns after AT&T and Verizon both reported sharp drops in first-quarter sales of the iPhone compared with the holiday quarter. That could suggest iPhone sales are cooling off, but the iPhone 4S did come out in the fourth quarter, and many consumers may be looking ahead to this year's release of the next iteration. The latest sales figures don't suggest a big slowdown.
Sprint also sells the iPhone -- it was the latest carrier to add it -- but the company doesn't report results until Wednesday.
Some analysts had gone so far as to predict that Apple shares could reach $1,000 by 2014, making Apple the first-ever company to reach a $1 trillion market capitalization. But other events this month, including a Justice Department antitrust lawsuit accusing the company of e-book price fixing, and rumors of an imminent “iPad mini,” may have contributed to the stock’s slowdown. The shares are off about 11% since peaking April 9.
Rarely, if ever, does Apple make a product announcement during an earnings call, but we’ll be listening closely to see if Chief Executive Tim Cook or any other executives give us any hints about forthcoming releases. An iPhone 5 in June anyone?
Looks like investors' fears over the past few days were unfounded. Apple shares are up 6.4% in after-hours trading, after their big earnings beat. That's not quite enough to undo the 12% slide that the stock has suffered over the past 11 trading days. But traders have only had a few minutes to respond so far.
How did the iPhone and iPad fare in the second quarter? Not too shabby.
Apple sold 35.1 million iPhones, just shy of the 37 million during the holiday period, but analysts were only expecting about 31 million to 32 million sold. Remember that the 4S model came out last quarter.
Apple sold 11.8 million iPads -- that meets analysts' expectations. It's down from 15.4 million in the first quarter, but well over double from the year earlier period.
And don't forget the Macs -- about 4 million were sold, just a 7% increase from the year-ago but about in line with estimates.
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