Q2 2011 Earnings Call
April 20, 2011 5:00 pm ET
Peter Oppenheimer - Chief Financial Officer and Senior Vice President
Timothy Cook - Chief Operating Officer
Nancy Paxton - IR
Maynard Um - UBS Investment Bank
Mike Abramsky - RBC Capital Markets, LLC
Benjamin Reitzes - Barclays Capital
Keith Bachman - BMO Capital Markets U.S.
Richard Gardner - Citigroup Inc
Charles Munster - Piper Jaffray Companies
Brian Blair - Wedge Partners
Chris Whitmore - Deutsche Bank AG
Toni Sacconaghi - Sanford C. Bernstein & Co., Inc.
Mark Moskowitz - JP Morgan Chase & Co
Shaw Wu - Sterne Agee & Leach Inc.
Andy Hargreaves - Pacific Crest Securities, Inc.
Katy Huberty - Morgan Stanley
Bill Shope - Goldman Sachs Group Inc.
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Thank you. Good afternoon, and thanks to everyone for joining us today. Speaking today is Apple CFO, Peter Oppenheimer; and he'll be joined by Apple COO, Tim Cook; and Treasurer, Gary Wipfler, for the Q&A session with the analysts.
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 margins, 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 refer to the risk factors discussed in Apple's Form 10-K for 2010, the Form 10-Q for the first quarter of fiscal 2011 and the Form 8-K filed with the SEC today 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.
With that, I'd like to turn the call over to Apple CFO, Peter Oppenheimer, for introductory remarks.
Thank you, Nancy. Thank you for joining us. We are very pleased to report the highest March quarter revenue and earnings in Apple's history. We set a new all-time quarterly record for iPhone sales, and a new March quarter record for Mac sales, and we're thrilled with the momentum for iPad.
Revenue for the quarter was $24.7 billion, which was $11.2 billion over the prior March quarter's result and represents the largest year-over-year quarterly revenue growth we've ever generated. This tremendous increase of 83% was fueled primarily by record iPhone sales, very robust demand for iPad and strong growth in Mac sales. Operating margin was an all-time high of almost $7.9 billion, representing 31.9% of revenue. Net income was almost $6 billion. This represented 95% growth over the year gross quarter's earnings and translated to earnings per share of $6.40.
Turning to the details of the quarter. I'd like to begin with our Mac products and services. We established a new March quarter record with sales of 3.76 million Macs, representing 28% growth over the year ago quarter. We're extremely pleased with this very strong growth, particularly given IDC's most recently published estimate of a 3% contraction for the PC market overall. This result makes the March quarter the 20th consecutive quarter that we outperformed the PC market. We experienced strong Mac sales growth in each of our operating segments, most notably in the Asia-Pacific segment, where Mac sales increased 76% year-over-year. The growth in Mac sales was fueled primarily by the continued great popularity of MacBook Air, which was updated in the December quarter, as well as very strong sales of MacBook Pro. We updated the entire MacBook Pro family during the March quarter with the next-generation processors and graphics, high-speed Thunderbolt I/O technology and a new FaceTime HD camera.
The new MacBook Pro lineup offers twice the speed of the previous generation and customer response has been excellent. We began at the end of the quarter with between 3 and 4 weeks of Mac channel inventory. During the quarter, we released the developer preview of Mac OS X Lion, which takes some of the best ideas from the iPad and brings them back to the Mac. Lion features Mission Control an innovative new view of everything running on the Mac. Launchpad, a new home for all your Mac Apps, full screen apps that use the entire Mac display and new multi-touch gestures. Lion is scheduled to ship to customers this summer and we look forward to showing more of its great features at our Developers Conference in June.
Moving to our music products. We sold 9 million iPods compared to 10.9 million in the year ago quarter. Though lower year-over-year, total iPod sales were ahead of our expectations with iPod touch continuing to count for over half of all iPods sold. iPod share of the U.S. market for MP3 players remains at over 70% based on the latest monthly data published by MPD, and iPod continue 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 4 to 6 weeks of iPod channel inventory. The iTunes Store turned in its best quarter ever with revenue of almost $1.4 billion, thanks to record revenue from music, video, iOS apps and books. We were very pleased to begin offering a full catalog of 17,000 ebooks from Random House on the iBookstore during the March quarter. The iBookstore now includes ebooks for more than 2,500 publishers in over 20 categories, and customers have downloaded over 100 million books.