supply of the iPhone 5, as well as the older iPhone 4, was short of demand “until late in the quarter.”
Suddenly, the iPhone 4 is a major point of interest. CEO Tim Cook said the iPhone 4 was under constant constraint. This device is free on contract in the U.S. and is currently Apple’s cheapest smartphone. When asked about lower price points, Cook dodged the question.
Is the competition catching up? Apple’s profit was flat because it released a huge array of new devices, like the iPhone 5 and the iPad Mini. But with increasing competition for smaller tablets from Google and other companies, and Android smartphones, Apple has had to step up its game. It could easily be the first bit of evidence of an exposed bit in Apple’s shell.
China is huge. Apple reorganized its China sales into a new category, and it amounted to $7.3 billion in revenue for the quarter. Apple’s growth for iPhones in greater China was in the triple digits, and even though it was shipping the iPad in December, the company still saw “very nice growth,” Cook said.
Cook said supply of the iPhone 5, as well as the older iPhone 4, was short of demand “until late in the quarter.”
The first question during the Q&A came from Morgan Stanley‘s Katy Huberty, who said that while iPhone sales seemed to be quite healthy, she wondered how the company thought it was faring in overseas markets.
Cook responded that the highest growth in the quarter was in China, where growth was “into the triple-digits,” and higher than the markets.
UBS‘s Steve Milunovich asked about the iPad mini how much the company left on the table. “It’s hard to know,” said Oppenheimer. “We were constrained every week … people love iPad mini, and we ended the quarter with significant backlog.”
When Goldman Sach’s Bill Shope pressed about trends in the supply chain, Cook insisted on making an extended comment about supply chain rumors:
I would suggest it’s good to question the accuracy about any kind of rumor about build plans. Even if a particular data point were factural, it would be impossible to interpret the data point as to what it means for our business. Because the supply chain is very complex. Yields might vary, the beginning inventory might vary. There is a whole list of things that might make any single data point not a great proxy for what is going on.
Digging into iPad outlook, Oppenheimer said that the company expects it will see a “large year-over-year” increase in iPad this quarter, even though it will be down from the prior quarter.
When Oppenheimer declined to break out how many iPad sales were for the regular-sized model, and how many were for the mini, Cook stepped in to state, “I think it’s worth pointing out that we had strong sales of both the iPad and the iPad mini.”
Apple saw the most growth from its iPad business in the holiday 2012 quarter, with unit growing by 48 percent year over year to 22.9 million.
iPad sales average 1.7 million per week compared to 1.1 million a year ago, an average increase of 60 percent.
Revenue growth for the iPad wasn't as strong, as lower margins on the iPad mini affected the company's revenue, holding it to 22 percent year over year growth.
Financial institutions like Barclays, Nomura Securities and Bank of Beijing deploying iPads among employees for secure customer service. Barclays rolled out more than 8,000 iPads, Oppenheimer said.
State and local governments are also "rapidly adopting" the iPad, he said, replacing "huge amounts of paper."
International government deployments strong with Sweden deploying 10,000 iPads and over 5,000 purchased by the Netherlands for Dutch tax authority and court system.
Started and ended quarter with 3.4 million iPads in channel inventory, below target range of four to six weeks.