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Company Guidance
Sales - $25b Gross margin to be 38% OPX to be $2.725b Tax rate 24%. EPS of about $5.50
Q/A
12% downtick in revenue for the Sept quarter. A future product transition that they are not going to discuss today will affect some earnings, but otherwise it appears that there is a very high level of confidence by management. (It appears that there was a one-time benefit this quarter and margins will move back to more normalized levels in the future.) Cannibalization of products? There are some customers that have chosen to buy iPad over Mac, but more so there has been a good amount of Windows PCs that were not purchased due to iPad purchases. Update on China China was very key to our results. Greater China, Taiwan, Hong Kong. YoY revenue was up over 600%. This far in 2011, revenue from the region was $8.8b. Margin. What will impact? Gross margin will be down 370 bps sequentially, at 37%. Some of this will be loss of revenue on product transition and back to school promotions. RAM, DRAM, LCD, optical drives are in positive supply and price declines are expected. Hard drives are not as available and prices may rise. One-time benefit on Gross margins Warranty and phone support area. They are not seeing a follow through of these benefits.
What drove iPhone strength in the quarter? We added 42 new carriers and 25 new countries in the quarter. However, those occurred throughout the quarter. The real sequential improvement was emerging and developing markets. China was a big part, as was Brazil and the Middle East. This is good as these have not been traditional markets that Apple has been involved with. They are seeing a big demand and will continue to see the fruits of their labor there. What about Android? It is difficult to get our hands around the number of Android devices that are being activated. Apple has a simple method of seeing how many are activated, but it is not so clear with Android. Apple has 100,000 apps and Android has only hundreds. Also, other tablets are not getting traction. Apple TV? Apple TV continues to do well, but we do not want to mislead. It is still a hobby here and do not want anyone to conclude that it is another leg of the stool. We love the product and customers love the product and we really got it right when we went to the new Apple TV last fall. It continues to evolve and we continue to invest in it. China and Prepaid phones China Mobile China Mobile selling phones at a breakneck pace Prepaid or unlocked phones, are very key in China as well as many emerging markets since credit systems are not as well established as other areas. iPhone volume was up 500% YoY. Apple is not saying that they have figured out how to play perfectly in that environment, but they feel very very good about their progress there. All numbers from China has exceeded any of Apples thoughts and expectations from that region. Why not more movie titles on iTunes? We have a broad library of movies and TV shows, especially in US. Look for more content later this quarter, there are some very cool things coming. --Apple stock finished at $396 after at the conclusion of the call, up 5.3% in the after-hours session. 4.4 million shares traded after-hours.
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