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Apple Inc. (AAPL)

F4Q12 Earnings Call

October 25, 2012 5:00 pm ET

Executives

Nancy Paxton – Investor Relations

Peter Oppenheimer – Senior Vice President and Chief Financial Officer

Timothy D. Cook – Chief Executive Officer

Analysts

Katy Huberty – Morgan Stanley & Co. LLC

Bill C. Shope – Goldman Sachs & Co.

Toni M. Sacconaghi – Sanford C. Bernstein & Co. LLC

Shannon S. Cross – Cross Research LLC

Benjamin Reitzes – Barclays Capital

Charles Eugene Munster – Piper Jaffray

Mark A. Moskowitz – JPMorgan Securities LLC

Steven M Milunovich – UBS Securities LLC

Scott D. Craig – Bank of America/Merrill Lynch

Brian Marshall – ISI Group

Keith Bachman – BMO Capital Markets

Chris K. Whitmore – Deutsche Bank Securities

Kulbinder Garcha – Credit Suisse

Presentation

Operator

Good day, everyone, and welcome to this Apple Incorporated Fourth Quarter Fiscal Year 2012 Earnings Release Conference Call. Today's call is being recorded. 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.

Nancy Paxton

Thank you. Good afternoon, and thanks to everyone for joining us. Speaking today is Apple CFO, Peter Oppenheimer; and he'll be joined by Apple CEO, Tim Cook; and Treasurer, Gary Wipfler for the Q&A session with 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 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 refer to the risk factors discussed in Apple's Form 10-K for 2011, the Form 10-Q for the first three quarters of fiscal 2012 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 dates.

And I'd now like to turn the call over to Peter Oppenheimer for introductory remarks.

Peter Oppenheimer

Thank you, Nancy. Thank you for joining us. We're pleased to report the results of our fourth fiscal quarter. We established a new September quarter records for iPhone, iPad and Mac unit sales, leading to our highest September quarter revenue and earnings ever.

Revenue for the quarter was $36 billion, representing year-over-year growth of 27%. That's a $7.7 billion increase over the prior September quarter’s results and was driven primarily by strong growth in iPhone and iPad sales.

Operating margin was $10.9 billion, representing 30.4% of revenue. Net income was $8.2 billion, increasing 24% over the prior September quarter's result. The quarter's net income translated to diluted earnings per share of $8.67.

Turning to the details of the quarter, I'd like to begin with our Mac products and services. We sold over 4.9 million Macs establishing a new September quarter record. This represents 1% growth year-over-year compared to IDC's latest published estimate of 8% contraction of the global personal computer market in the September quarter.

Portable sales grew 9% year-over-year and represented an all time high of 80% of Mac unit mix, thanks to strong sales of MacBook Pro and MacBook Air.

Earlier this week we unveiled the stunning new design for iMac that packed high performance technology and a brilliant new display with reduced reflection into an incredibly sleek aluminum and glass enclosure. We also introduced an even thinner and lighter version of our most popular Mac, the 13-inch MacBook Pro, featuring a retina display with over 4 million pixels in all flash storage. We began and ended the quarter with between three and four weeks of Mac channel inventory which is below our target range of four to five weeks.

Moving to our music products, we sold 5.3 million iPods compared to 6.6 million in the year ago quarter. iPod touch continue to account for over half of all iPods sold. iPod share of the U.S. market for MP3 players was over 70% in the September quarter based on the latest 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’re very excited to be shipping our newest iPods as of two weeks ago. The new iPod touch is the thinnest iPod touch yet, comes in five great colors and features of 4-inch Retina display, a 5 megapixel iSight camera, our powerful A5 chip and Siri. The new iPod Nano is the thinnest iPod ever featuring a 2.5-inch Multi-Touch display, convenient navigation buttons, and built-in Bluetooth for wireless listening. The Nano comes in seven great new colors and we think our full range of iPods will make wonderful gifts this holiday season.

The iTunes Store generated all time record results, with revenue almost $2.1 billion thanks to continued strong sales of music, apps and video. We look forward to launching the new iTunes featuring the completely redesigned player, seamless integration with iCloud and a new look for the iTunes Store. The new iTunes has a dramatically simpler and clearner interface, so customers’ music, movie and TV purchases on any of their iOS devices or computers are conveniently displayed in their iTunes library and are available whenever they want them.

I’d now like to turn to iPhone. we’re very pleased to have sold 26.9 million iPhones compared to 17.1 million in the previous September quarter. That represents 58% year-over-year growth compared to IDC’s latest published estimate of 45% growth for the smartphone market overall during the quarter. We launched iPhone 5 in nine countries on September 21 and 22 more countries on September 28, and demand has been phenomenal.

Read the rest of this transcript for free on seekingalpha.com