Apple Call: New Product Transition To Hurt Margins; Jobs’ Health A ‘Private Matter’

imageApple (NSDQ: AAPL) CFO Peter Oppenheimer started off the call ticking off all kinds of good numbers: 1 million iPhones sold, 25 million applications downloaded from the app store, retail store growth of 58 percent and over 5 billion songs sold from the iTunes store. (Ed. note: the iPhone and app numbers go to the current quarter, not the one covered in today’s earnings.) As for the weak guidance, Oppenheimer mentioned a few different factors, including a back-to-school promotion, a mystery “future product transition” and the selling price of the iPod shuffle. When asked to clarify, Oppenheimer didn’t offer a whole lot more, though he noted the iPhone revenue is not being booked today, due to subscription accounting: “If iPhone revenue were reported as revenue when sold, the September revenue guidance would be a lot higher.” He noted that the $7.8 billion figure still represents growth of 25 percent year-over-year.

Q&A

Margin outlook: Analysts are trying to get a hold of whether Apple has changed strategy on certain key items to emphasize volume over margins. Oppenheimer: “We’re delivering state of the art products at pricepoints that our competitors can’t match.” Apple wants to realize a reasonable margin, but not so high as to leave an umbrella for competitors. “As we look beyond the September quarter, we would expect gross margins to be about 30 percent. Later, when pressed again on where Apple is going on products and pricing strategy, Oppenheimer reiterated that the company has some big investments coming up to deliver products at pricepoints the company can’t match.

Steve Jobs’ health: Riffing on a NYP article today bringing up concerns about Steve Jobs’ health, an analyst apologetically asked for the company’s statement on the matter. Oppenheimer: “Steve loves Apple, he serves as the CEO at the please of Apple’s board and has no plans to leave board… Steve’s health is a private matter.”

More after the jump.

Apple TV: Pleased with the sales, but the business remains a “hobby”. It’s not nearly as large as the hardware business or the music business.

iPhone supply: Not going to supply when supply will meet demand, but the company still expects sales in 70 countries by the end of the year. Has there been a production glitch: “Demand has been staggering.” It’s a demand issue: supply is right on schedule. Analyst: Why do you have such confidence that you can fulfill demand in 20 new countries when you couldn’t fulfill demand in 22 countries? “I’m not predicting demand… We do have confidence over supply.” Basically: when we launch, we’ll have something to sell in each country, but maybe not enough to sell to everyone in each country.

Health of US consumer: Is US consumer weakness having an impact on Mac and retail growth?: “We’re going to leave economic commentary to others, but we didn’t see any obvious impact in the June quarter.”

Bottom line: By far the biggest topic on the call was the company’s margin outlook. Apple is going to do something that will involve cutting prices faster then manufacturing costs, so as to squeeze competitors. If the economy is going to have an impact, that’s not the issue going forward. Whatever it is, investors don’t like it: Apple stock is off over 11 percent after hours.

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