Liveblogging: Apple's Q2 2008 financial results

In a conference call today with analysts, Apple (NASDAQ: AAPL) discussed financial results of the second fiscal quarter of 2008 which runs from 01 January – 31 March 2008.Apple's revenue was up 43 percent year-over-year.

Apple announces Q2 2008 financial results
In a conference call today with analysts, Apple (NASDAQ: AAPL) discussed financial results of the second fiscal quarter of 2008 which runs from 01 January – 31 March 2008.

Apple's revenue was up 43 percent year-over-year.

The company posted revenue of US$7.51 billion and net quarterly profit of US$1.05 billion, or US$1.16 per diluted share. These results compare to revenue of US$5.26 billion and net quarterly profit of US$770 million, or US$.87 per diluted share, in Q2 2007. (Apple projected a revenue of US$6.8 billion and a profit of US$.94 per diluted share last quarter.)

Gross margin was 32.9 percent, down from 35.1 percent in the year-ago quarter. International sales accounted for 44 percent of the quarter’s revenue. Up from 43 percent in the year-ago quarter.

Apple shipped 2,289,000 Macs representing 51 percent unit growth and 54 percent revenue growth over the year-ago quarter. They sold 10,644,000 iPods during the quarter representing one percent unit growth and eight percent revenue growth over the year-ago quarter. Quarterly iPhone sales were 1,703,000.

Apple stock closed today at US$162.89 (up US$2.69 or 1.68%) and is up slightly in after-hours trading.

Notes from the conference call follow...

Present from Apple are: Nancy Paxton (Investor Relations), Peter Oppenheimer (CFO), Tim Cooke (COO) and Gary Wipfler (Treasurer).

(Notes are stream of consciousness)

Revenue driven by demand for Macs, iPods and iPhones.

50% of CPU sales were customers new to the Mac

34% growth for education, highest in eight years

64% portable growth with new MB, MBP and MBA

3-4 weeks channel inventory

10.6M iPods sold, 8% growth, higher ASPs in every segment

Introduction of iPhone SDK in June will broaden appeal

iPod Shuffle sales down in March quarter, Feb 19 price reduction helped increase them

Apple has 73% of U.S. MP3 player market

Outside the U.S., Apple gained market share in MP3s

4-6 weeks of iPod channel inventory on hand

Apple is now the largest music retailer in the U.S. with

- 50M customers

- 80% market share

TV shows now available for sale in Germany

iPhone momentum continues

Expect to meet goal of 10M iPhone sales in calendar 2008

1.78M iPhones sales this quarter

Expanded iPhone sales to Austria and Ireland

200,000 developers signed up for iPhone SDK

1/3 of the Fortune 500 and 400 higher-ed institutions requested the iPhone SDK

Opened four new Apple retail stores in the quarter for a total of 208

Average revenue per store US$7.1M compared to US$4.8M in the yea-ago quarter

Sold 580,000 1 hour training sessions

45 new stores expected to opened in FY2008

US$19.4 billion in cash on hand, $4B in cash generated

Outlook for June quarter (Q3 2008):

- Revenue $7.2B (33% growth)

- 33% gross margin

- EPS of about $1

51% Mac sales growth is the highest in decades

Questions:

Q. Gross Margin (32.9%) could more flow to the bottom line? A. Tim commented on the commodity prices (DRAM and NAND) to remain favorable, LCD and HDs are near supply/demand balance.

Q. Anything unexpected in the gross margin. A. Peter expects GM to decline by 2.7%, higher revenue and weaker dollar. Leopard entered second quarter of sales. Other factors: shuffle price change, change in currency market, and more iTunes revenue which has lower margins.

Q. iPhone availability and sequential growth? A. Tim is confident of hitting 10M in iPhone sales for the year.

Q. Channel questions, direct v. indirect mix. Plus expansion of BestBuy. A. Direct sales 54% - up from 49%. BestBuy 400 stores now, 600 by summer.

Q. Education, student v. institutional buying A. Up 35% in both (highest growth in 8 years), big K12 quarter coming, back to school is more of a higher education quarter. Surpassed Dell in higher ed sales (last year?)

Q. Clarify revenue recognition of iPhone revenue. A. New features in iPhone 2.0 software provided free for customers that purchased after March 6, defer recognition of revenue until that point.

Q. Date of delivery of iPhone 2.0 software? A. Deliver it in late June, delay in revenue recognition affect handset sales from March 6 and the time they deliver the software. Does not count payments from carriers.

Q. Margin question, growth and operating margins down for first time. Time to re-invest? A. Guided 32% GM, reported 32.9% which is an increase. Want to drive growth both top and bottom line.

Q. Gross Margin question. Decline in Leopard sales biggest portion, Leopard revenue down about $100M, iPod shuffle down, NAND, DRAM and panel pricing down. Was it procurement timing issues. A. Leopard revenue in Dec quarter $170M, just over $40M in March quarter, best selling release in Apple history. iLife and iWork went into third quarter, also have to factor lower sequential revenue and iTunes is a larger part of the mix which is lower margin. Currency effect is a price cut, which contributed.

AAPL After Hours: 157.00 -5.89 (-3.62%)  -  Apr 23, 5:22PM ET

Q. Memory pricing favorable in June quarter. DRAM and NAND are at low levels and close to cash cost, how is this favorable? A. Favorable doesn't mean lower than previous quarter. It means that it's in a favorable trading range.

AAPL After Hours: 161.43 -1.46 (-0.90%)  -  Apr 23, 5:29PM ET

Q. Channel A. All geography, very balanced Mac sales, Mac Pro sales since new processor

Q. MacBook Air gross margins? A. Not on the individual unit level, sorry

Q. SDK shipment catchup period? A. Begin to recognize the revnue and product cost over the remaining life.

Q. GM down 220 basis points (Leopard a richer mix) larger drivers? A. Hard to do year over year GM comparisons, prefer sequential detail.

Q. Operating segment deviation by geography? A. We'll put out the 10Q in the next week or so, segment reporting of gross margin will be in that report.

Q. Can you comment on your acquisition of PA semi? A. No comment on purpose or plans.

Q. Unlocking iPhones, has it changed? A. Gives us confidence of shipping 10M in 2008.

Q. iPhone demand outstripping supply in the US, but opposite is true in Europe A. Stockouts occurring in US stores, inventory low in stores and in channel. In aggregate, US and Europe are low. In total we sold more than we expected. Smaller season decline than expected.

Q. iPhone unlocked percentage? Can you quantify it? A. Can't quantify with precision, other than to say that it's "significant"

Q. ASP decline in MacBooks? A. ASP decline was slight on a sequential and YOY basis, transition in quarter and mix shifts in MB and MBP lines.

Q. Demographics of MBA purchases? Road warriors? Windows users? A. Appealing to college professors and travelers, cannibalization of other portables was very low.

Conference call concluded.

AAPL  After Hours: 161.99 -0.90 (-0.55%)  -  Apr 23, 5:46PM ET

A replay will be available after 5pm PT. A podcast is available on the iTunes store.