F1Q11 Earnings Call
January 18, 2011 5:00 pm ET
Peter Oppenheimer - Chief Financial Officer and Senior Vice President
Timothy Cook - Chief Operating Officer
Nancy Paxton - IR
Benjamin Reitzes - Barclays Capital
Keith Bachman - BMO Capital Markets U.S.
Richard Gardner - Citigroup Inc
Charles Munster - Piper Jaffray Companies
Shannon Cross - Cross Research
Brian Blair - Wedge Partners
Bill Shope - J.P. Morgan
Kathryn Huberty - Morgan Stanley
Mark Moskowitz - JP Morgan Chase & Co
Toni Sacconaghi - Bernstein Research
Jason Maynard - Wells Fargo Securities, LLC
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Good day, everyone, and welcome to this Apple Incorporated First Quarter Fiscal Year 2011 Earnings Release Conference Call [Operator Instructions] At this time for opening remarks and introductions, I would like to turn the call over to Nancy Paxton, Senior Director of Investor Relations. Please go ahead, ma'am.
Thank you. Good afternoon, and thanks for joining us. Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements including, without limitation, those regarding revenue, gross margin, operating expenses, other income and expense, stock-based compensation expense, taxes, earnings per share and future products. Actual results or trends could differ materially from our forecast. For more information, please for to the risk factors discussed in Apple's Form 10-K for 2010, and the Form 8-K filed with the SEC this afternoon along with the attached press release. Apple assumes no obligation to update any forward-looking statements or information which speak as of their respective date. And with that, I'd like to turn the call over to Apple's CFO, Peter Oppenheimer, for introductory remarks.
Thank you, Nancy. Thank you for joining us. We are very pleased to report the outstanding results of our December quarter. The performance of our business was extremely strong, as we sold more Macs, iPhones and iPads than in any previous quarter in Apple's history. And as a result, we're thrilled to announce all-time record quarterly revenue and earnings.
Revenue for the quarter was $26.7 billion, an increase of more than $11 billion over the prior December quarter's result, representing growth of 71%. The robust revenue growth was fueled by record iPhone, iPad and Mac sales. Operating margin was over $7.8 billion, representing 29.3% of revenue. Net income was $6 billion, which exceeded our previous quarterly earnings record set in the September quarter by $1.7 billion, and represented 78% growth over the year-ago quarter's earnings. These results translated to earnings per share of $6.43.
Turning to the details of the quarter, I'd like to begin with our Mac products and services. We established a new quarterly record with sales of 4.13 million Macs, representing 23% growth over the year-ago quarter. That's almost 8x IDC's most recently published estimate of 3% growth for the PC market. We experienced strong sales growth in each of our geographic segments, with over 50% growth in both the Asia-Pacific region and Japan. The growth was fueled primarily by strong demand for the new MacBook Air, which was launched in October, as well as continued strong sales of MacBook Pro. Customers love the new thin and light unibody design of the MacBook Air, and the impressive responsiveness and reliability of its solid-state storage, while MacBook Pro continues to provide customers tremendous speed and high-performance graphics at an excellent value.
We ended the quarter with between three and four weeks of Mac channel inventory. We opened the Mac App Store in January 6, bringing what we've learned from iOS Apps to Mac users to make discovering, installing and updating apps easier than ever. The Mac App Store is available at 90 countries, and features more than 1,000 free and paid apps in categories like education, games, graphics and design, lifestyle, productivity and utility. We've been very pleased with customer response, with over 1 million downloads on the first day alone.
Moving to our music products. We sold 19.4 million iPods compared to $21 million in the year-ago quarter. We experienced continued strong sales of iPod touch, which grew 27% year-over-year and accounted for over 50% of all iPods sold during the quarter. iPod's share of the U.S. market for MP3 players remains at over 70% based on the latest monthly data published by NPD, and iPod continues to be the top-selling MP3 player in most countries we track based on the latest data published by GfK. We ended the quarter within our target range of four to six weeks of iPod channel inventory.
The iTunes Store generated another strong quarter with revenue exceeding $1.1 billion, thanks for strong sales of music, video and apps. We were extremely pleased to bring the legendary music of the Beatles to iTunes during the quarter and to introduce movies to the iTunes Store in Japan. And as we announced a few weeks ago, iTunes users are now renting and purchasing over 400,000 TV episodes and over 150,000 movies per day.
I'd now like to turn to iPhone. We were thrilled to have sold 16.2 million iPhones compared to 8.7 million in the previous December quarter. This represents 86% year-over-year growth compared to IDC's latest published estimate of 70% growth for the global smartphone market overall in the December quarter. Recognized revenue from iPhone handset and accessory sales was $10.47 billion during the quarter, compared to $5.58 million in the year-ago quarter, an increase of 88%.
The sales value of iPhones alone was over $10.1 billion, which yields an ASP of about $625. At the end of the December quarter, we had iPhone distributions through 185 carriers in 90 countries. We continue to experience very strong year-over-year growth in all of our segments, with sales in the Asia-Pacific region and Japan both more than doubling year-over-year.