Apple, Inc. reported its first quarter earnings from 2013 today, saying it made $54.5 billion in revenue for a quarterly net profit of $13.1 billion. While Apple's gross margin dipped a bit—38.6 percent compared to 44.7 percent in the same quarter last year—Tim Cook called the quarter a record in revenue. And it was only 13 weeks long compared to the 14 weeks in Q1 2012.
In terms of raw units, Apple reported slight slipping in demand for some of its products: it sold 12.7 million iPods, down from 15.4 million in the same quarter last year, and 4.1 million Macs, down from 5.2 million units in Q1 2013. "We introduced the new 13-inch MacBook Pro with retina display as well as iMacs in October. As we projected a year ago, we were significantly constrained with iMacs," said CFO Peter Oppenheimer during today's earnings call. "We believe our Mac sales would have been higher absent those constraints." (The constraints Oppenheimer referred to included the ramping up of iMac products in the first weeks of Q1.)
"iMacs were down by 700,000 units year over year," Cook said later. He blamed the slip on a weak market, a short quarter, and the cannibalization of iMac sales by iPad products.
"In terms of cannibalization, I think cannibalization is a huge opportunity for us," Cook said. "Our base philosophy is to never fear cannibalization. If we do, somebody else will just cannibalize it. We never fear it. We know iPhone has cannibalized some iPod business, we know iPad has cannibalized some Macs, and that doesn't worry us."
Apple also reported (ever-increasing) demand for its phones and tablets. It sold 47.8 million iPhones in Q1 2013, up from 37.04 million iPhones in Q1 2012, and 22.9 million iPads, including the new iPad mini, up from 15.43 iPads in Q1 2012. "We experienced strong iPhone growth in most of our geographic segments, including China, which doubled year over year," Oppenheimer said. Cook added, "if you look at greater China, our revenues are $7.3 billion in the quarter." That huge growth has led to rumors that Apple may try to grab a wider share of the Chinese market by creating a lower-cost iPhone.
The company also noted record results from iTunes in the quarter after its design overhaul in October. Revenue in this area reached $2.1 billion in the quarter including more than two billion downloads from the App Store in December alone.
The board declared a dividend of $2.65 per share and said the quarterly net profit was equivalent to $13.81 per diluted share, down just $0.06 from last year's quarter. A majority of the quarter’s revenue—61 percent—came from international sales in this quarter.
On the topic of Apple TV, Cook all but admitted it remains a hobby for users rather than an important revenue stream. "What was a small niche at the time is now much larger. I have said in the past that this is an area of intense interest for us. I tend to believe that there's a lot we can contribute in this space. But I don't want to be more specific."
Regarding iPhone 5 sales, Tim Cook reported Apple was "very constrained for much of the quarter on the iPhone 5," but added that as production got going, Apple's sales went up. "There's been lots of rumors about [part order] cuts and so on," Cook said, in reference to a rumor about demand for the iPhone 5 from last week. "I would suggest it's good to question the accuracy of any kind of rumor about these plans, and also stress that even if a particular data point were factual, it would be impossible to accurately interpret the data point."
Towards the end of the call, an audience member asked Cook about keeping up iPhone 5 demand in light of his cannibalization comments. "There's a lot of demand for lower price points on the iPhone. Why not get more aggressive?" the caller asked.
After a long pause, Cook replied: "I'm not going into our pricing strategy."
