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Apple's Third Quarter 2015 Earnings Announcement And Conference Call : July 21, 2015

Join the MacNN team for Cook and company's breakdown of today's financial results.
1:32 - You're early! Check out William's e-book publishing series, as well as the latest in our series of OS X and iOS pointers.
4:38 - 47.5 million iPhones (lower than expected), 10.9 million iPads, 4.8 million Macs sold
4:39 - $7.7 billion in profit (breaks old record) on $49.6 billion in revenue. Revenue growth of 33 percent.
4:39 - Gross margin was 39.7 percent compared to 39.4 percent in the year-ago quarter.
4:40 - International sales accounted for 64 percent of the quarter's revenue.
4:40 - For the next quarter: revenue between $49 billion and $51 billion with gross margin between 38.5 percent and 39.5 percent
4:40 - Apple's board of directors has declared a cash dividend of $.52 per share of the Company's common stock.
4:48 - Wow - Microsoft's quarterly results are a mess. More on that over at the main news page shortly.
4:54 - Glorious classical music playing. You'd think they'd use the time to highlight stuff on Apple Music, perhaps use the Beats 1 stream.
4:56 - We've got about six minutes left. Just long enough to read our review of Microsoft Word 2016. We'll still be here when you get back.
5:00 - At 4:00 EDST, just before the results, AAPL was down $1.32 to $130.75. Trading is currently suspended because of the earnings announcement as is per the norm, we'll see what happens after hours.
5:02 - Just after an open mic laugh, let's go!
5:02 - CEO Cook, CFO Maestri present.
5:03 - Tim: "busy and exciting quarter," and you've already got the numbers.
5:03 - channel inventories reduced across product lines by over one million units.
5:04 - Topped internal expectations on sales of all products.
5:04 - 3x the rate of growth of smartphone market. iPhone revenue up 59%, highest switcher rate from Android ever measured.
5:05 - 86% of iPhone users will buy another iPhone. 50% for next highest brand measured.
5:05 - 9% Mac growth in a market that contracted by 12%, driven by new MacBook.
5:05 - Appstore best quarter ever revenue growing 24%
5:05 - China revenue growth 112%, iPhone unit growth 87%.
5:06 - Highest ever PC market share in China, Mac sales growing 33%. App store revenue more than doubling in the quarter.
5:07 - Demand caught up, 19 countries for Apple Watch, three more countries coming end of month.
5:08 - Apple market research - 94% wear and use regularly, if not every day. Social networking apps seeing most usage amongst third party apps.
5:08 - Nebraska Medicine - new apps facilitating doctor and patient communication, quick access to chart and dosage information.
5:09 - Hypertension patients in Louisiana; London King College Hospital Apple watch in trials and monitoring of cancer patients.
5:09 - Over 8500 third party apps available for Apple Watch
5:10 - Tim covering WWDC highlights
5:11 - OS on schedule, full release in the fall.
5:12 - MacNN won't be on the launch of the new Apple News app. Shortly, though.
5:12 - Millions and millions of customers already using Apple Music. 15k artists signed up for Connect.
5:13 - "renewed sense of excitement around music"
5:13 - Apple Pay rollout in UK, citing public transportation system payment on the underground.
5:14 - AMEX for corporate cards next month on Apple Pay.
5:14 - 700 universities across taking Apple Pay in the fall.
5:14 - 1.5M US locations taking Apple Pay by end of 2015
5:15 - Luca Maestri
5:15 - You've already got the numbers for this too.
5:17 - ASP of 6 and 6+ $660 worldwide
5:17 - Low end of 5-7 weeks of channel inventory.
5:18 - Mac growth driven by portables (there's not much else, honestly)
5:18 - iPad continues to contract. 11.2 million units sold, 10m shipped.
5:19 - iPad and iPhone sales are going to be an issue for Wall Street, for no good reason.
5:19 - NPD: 76% share of US tablet market above $200. No interest in competing in low-end tablet market.
5:20 - United Air renewed iPad program with 10k iPad Air 2, providing iPhones to 20k flight attendants. New apps coming to "improve customer experience."
5:20 - Air Canada, National Grid notable new customers.
5:21 - Discussing Japan Post deal to improve senior care. Seeing strong interest from other countries.
5:22 - 250k apps developed in China for Chinese app store.
5:22 - Apple Watch, well over 100% growth in the category, more than offset iPod and accessory sales. Not disclosing Apple Watch metrics, to not give insights to competitors.
5:24 - $13B returned to investors in the quarter, $4B to repurchase shares. Launch of $6B share purchase in May. Over $200B cash on hand.
5:26 - Question: why drain channel inventory, and questions about YOY versus QOQ iPhone sales.
5:27 - Tim: Channel inventory dropping because we sold more iPhones than we thought. Apple only maintains minimum inventory. This quarter, able to end at the end of the range. Good thing, not a bad thing, says Tim. Revenues could have been much higher if the channel got expanded (think Apple Watch).
5:27 - "Business run long term, not on the 90 day clock"
5:28 - "did exceptionally well, any way you think to look at it"
5:29 - Percentage of customers upgraded to 6 or 6+ : 27% of installed base prior to launch have upgraded. "bullish sign on the future, lot of headroom left for upgraders."
5:29 - Follow-up: What are the metrics to guarantee the iPhone will continue to grow?
5:30 - Tim: iPhone will have another stellar quarter. Confident that this quarter will be great. We'll take it one quarter at a time, macro point of view, bullish view is the 27% upgrade number, highest Android switcher rate, customer satisfaction versus competition HUGE margin, Loyalty rate versus competition.
5:31 - First time iPhone buyers: "very very large numbers in the countries you'd want to see those in." China, Russia, etc.
5:31 - "proven that we can compete for a fair number of those" (smartphone universality)
5:31 - Question: Key factors for gross margin range for September quarter.
5:33 - Maestri: factors - foreign exchange challenging environment, different product mix typical of seasonality, transition cost as Apple prepares for "a busy fall"
5:33 - Commodity costs continue to be favorable.
5:33 - Follow up: Mix dynamics on iPhone in last quarter
5:34 - Maestri: ASP up $99 on iPhone, driven by iPhone 6+; Partial offset by -$24 from foreign exchange.
5:35 - Question: Gross margin, how should we think about trends in the gross margin? Will the trends in other cycles continue into next year. Watch under interest from investor, some may have wanted more metrics and info. Any thoughts for investors on failure to launch?
5:36 - Maestri on gross margin: At a macro level, every cycle is different. Many factors not in our control (currency, materials, market forces).
5:36 - "very good track record to reduce those cost factors over the life cycle"
5:37 - Tim: Watch. Not going to give competitors insight reiterated. Color on data "to avoid reaching the wrong conclusion."
5:38 - Revenue in category: not accurate to look at YOY change in the category, and assume that that's the revenue. Sales in watch exceeded Apple expectations, even with supply trailing demand at end of quarter.
5:39 - EOQ: Apple Watch period sell through percentage higher than original iPhone, iPad. Tim clearly not giving numbers, and said he wouldn't.
5:39 - "we feel really great about how we did" with the Apple Watch. "more excited about how the product is positioned for the long term because we're starting a new category."
5:40 - "Native apps will be killer for the Apple Watch."
5:42 - Question: To Maestri: Marketshare of iPad being 78%. Think of iPhone market in premium category, how do you think about it in a similar metric, given high ASP.
5:42 - Tim: "We look at this differently than you do. Our job is to grow our products regardless of price." Sometimes people need to move from one price band to another, and if we do a great job with the product, they'll spend more to get more out of it.
5:43 - app development "done in an environment that's not the best of conditions"
5:43 - Question: goal of expanding the marketshare happening, or just taking the high end?
5:44 - Tim: "no doubt, we're expanding our marketshare in these markets" meaning high-end phones. Key that we expand both, not just one.
5:45 - Question: 86% of iPhone retainers buy another iPhone. That seems low to the analysts.
5:45 - Tim: The 86% seems low to me too, but its a third party source. Own data suggests higher.
5:46 - Number of plans in the last year that may change iPhone churn, may help the upgrade rate. Not named, but AT&T Next, etc.
5:47 - Question: Many products have been absolutely fantastic and and some point have seen high growth. iPhone facing challenging market in next few quarters. Will you shift more to other products to offset?
5:47 - Tim: "phone has a lot of legs to it, many many many years."
5:48 - Early innings of the iPhone, not the late innings. Market rate of growth over the long haul will be impressive. Multiple winners here.
5:48 - MacNN: But do you think that he'll share unreleased product info?
5:49 - Apple's focus gives it the level of quality. Both Apple Music, Pay very important. Mac continues to perform very well. Tim bullish on iPad, points to iOS9 productivity enhancements.
5:49 - Enterprise picking up. iPad consumer upgrade cycle will eventually occur, based on usage specifics which are "unbelievably great". 6x greater than closest competitor.
5:50 - MacNN analysis: As a reminder, every other company would kill to have iPad sales numbers, despite them dropping for Apple YOY.
5:50 - Question: Concern about China stock market. How does that play out for Apple economically?
5:51 - Tim: "remain extremely bullish on China, and we continue to invest"
5:51 - "despite volatility in Chinese market, up 90% YOY"
5:53 - "LTE penetration in China only at 12%. China doesn't possess the level of fiber that other countries do." LTE key to Apple's growth in China.
5:54 - Question: Switching rate, how much is it up?
5:55 - Tim: In some markets, get switchers. In some markets, get new users. In some markets, capture upgraders. Pick one or all.
5:55 - Question: Demand as prices raised in various geographies, and what's the thought process on the next iPhone cycle. (MacNN commentary: this seems like a familiar question).
5:56 - Maestri: Every single currency has weakened against the dollar. Apple doesn't like to raise prices, but not many options in some markets this year.
5:57 - In the long run, a strong dollar isn't great for international business. Remarkable to see how resilient iPhone sales have been.
5:57 - Question: solid demand through the quarter? What are the trends?
5:58 - Tim: On the Watch, June sales higher than April or May. Watch has a back-ended kind of skewing. iPhone following normal seasonal pattern. No obvious impact from last quarter in greater China's numbers.
5:59 - That's all! We'll be breaking down some of this a bit later on the main news page.

Previous Live Event Coverage:

2016 WWDC Keynote, June 13, 2016
Apple second quarter, 2016 earnings report, April 26, 2016
Apple 'Let Us Loop You In" Press Event, March 21, 2016
The Encryption Tightrope; Balancing Americans' Security and Privacy, March 01, 2016
Apple quarterly earnings report, January 26, 2016, January 26, 2016
Apple fourth quarter 2015 earnings call, October 27, 2015
Apple September 9 "Hey Siri" launch event, September 09, 2015
Apple's third quarter 2015 earnings announcement and conference call, July 21, 2015
2015 WWDC Keynote - The Epicenter of Change, August 06, 2015
Apple's September 9 event, September 09, 2014
WWDC 2014 keynote, June 02, 2014
WWDC 2014, June 02, 2014
Apple fiscal Q4 conference call, October 28, 2013
Apple's October 22 media event, October 22, 2013
Apple's September 10 event, September 09, 2013
Samsung Unpacked at IFA, September 04, 2013
Samsung Unpacked 2013 Episode 2, September 04, 2013
Apple fiscal Q3 2013 , July 23, 2013
WWDC 2013 Keynote, June 10, 2013
Apple fiscal Q2 2013 earnings call, April 23, 2013
Apple iPad mini unveiling, October 23, 2012
Apple iPhone 5 launch event, September 12, 2012
Apple Financial Conference Call Q3 2012, July 24, 2012
Live 2012 WWDC Coverage, June 11, 2012
Apple fiscal Q2 2012 results call, April 24, 2012
Apple cash balance call, March 19, 2012
Apple's iPad 3 Event, March 07, 2012
Apple fiscal Q1 2012 results call, January 24, 2012
Apple FYQ4 Quarterly Results, October 18, 2011
Apple - Let's Talk iPhone, October 04, 2011
Apple July Conference Call, July 19, 2011
Live WWDC 2011 Event Coverage, June 06, 2011
Google I/O 2011 day one keynote, May 10, 2011
Apple fiscal Q2 2011 results call, April 20, 2011
March 2 iPad event, March 02, 2011
Intel Thunderbolt Technology, February 24, 2011
HP webOS event, February 09, 2011
Google Android event, February 02, 2011
Apple January January 2011 fiscal results call, January 18, 2011
Verizon NYC Event, January 11, 2011
Google Chrome Event, December 07, 2010
Acer's Interact event, November 23, 2010
Back to the Mac, October 20, 2010
Apple's FYQ4 2010 results, October 18, 2010
Google TV Intro, October 12, 2010
Apple Sept 1 music event, September 01, 2010
BlackBerry August 3 Event, August 03, 2010
Apple iPhone 4 Press Conference, July 16, 2010
Sony E3 Keynote, June 15, 2010
Nintendo E3 Keynote, June 15, 2010
Microsoft E3 Keynote, June 14, 2010
WWDC 2010, June 07, 2010
D8 conference 2010, June 01, 2010
Google I/O Keynote II, May 09, 2010
Google I/O Keynote, May 19, 2010
Apple earnings - 2010, April 20, 2010
iPhone OS 4.0, April 08, 2010

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