Apple turns in record Q1: $6b profit on $26.7b revenue, 16.2m iPhones sold

Apple's announcement of Steve Jobs' medical leave just one day before releasing its Q1 financial results struck us as well-planned yesterday, and here we are: if Cupertino's record $6 billion profit on a record $26.7 billion in revenue isn't enough to turn that frown -- and stock slide -- upside down, well, nothing else will. iPhone 4 sales were predictably strong through the holidays, clocking in at a record 16.2m units, or up 86 percent from last year, while Mac sales went up 23 percent to a record 4.13m and iPod sales were stronger than expected at 19.45m, a seven percent decline. As for the iPad, Apple's tablet had its second straight dominant quarter, with record sales of 7.33 million -- some 3 million more than the Mac. Apple's financial call with new acting CEO Tim Cook and CFO Peter Oppenheimer is scheduled to start at 5PM EST -- check after the break for our usual liveblog while you're listening live on Apple's site.

6:03PM And that's it! Thanks for joining us, we never want to see a spreadsheet or hear the word "magic" again.

6:02PM A: Whenever we rev iOS, we put in a huge chunk of enterprise features. This isn't something we just started thinking about. This is a huge play here for us.

6:01PM A: Tim -- I think that the consumerization of the enterprise is a megatrend. The most forward-looking CIOs have realized that the productivity of the employee is more important than everyone using the same thing. The ability to write apps using the iOS SDK is amazing, and you can run your whole business from an iPad or an iPhone. I see enormous potential there.

6:00PM Q: There's been a lot of talk about the consumerization of enterprise tech -- are there any barriers around even more success in enterprise?

5:59PM A: Tim. Yes, they are awesome. The Mac of the future, shipping today.

5:58PM Q: What's going on with the MacBook Air and the iPad? Are they super awesome or what?

5:58PM ("Common now" being an internal Engadget joke. Now you know.)

5:57PM A: Peter -- No, I can't tell you that. Common now.

5:57PM Q: Any more insight on iPad gross margins? Can we assume that Apple can improve the feature set and hold pricing stable?

5:57PM A: The iPad difference is that we've been running three quarters without any competition.

5:56PM A: Tim -- if you look at the iPhone portion, we had record sales of iPhones, Peter said we could have sold more. From the market data we've seen, it suggests that we grew faster than the market. We're getting enormous enterprise traction. We have the highest customer satisfaction ratings in the industry, vs Android or RIM or anyone. We have the largest app store. We've now sold 160m iOS devices, which is huge. We firmly believe that our integrated approach is better than the fragmented approach. You can see this in a number of ways -- from the number of fragmented app stores with a variety of ways to pay, people will pull their hair out. Who's on the latest OS -- Android always lags. We're launching on Verizon next month. That all what Steve said. But in net we think our integrated approach is better, rather than making the end user a systems integrator. I don't know a lot of people who want to be systems integrators. And I think the same thing about iPad. It's the same set of issues, at the end of the day.

5:53PM Dude just trolled Tim Cook.

5:53PM Q: Last call, Steve had a lot of comments around Android, some of its disadvantages. Any other comments you'd like to make?

5:51PM A: Peter -- we're working hard to increase the supply of iPhones. That won't come overnight. In terms of guidance -- we're thrilled to give you guidance of 63 percent revenue growth. Our business is doing well, and we're shipping the best products in Apple's history.

5:50PM Q: Question for Peter. Can you talk about the revenue outlook, and what components aside from iPod will exhibit a decline now that the iPhone is on Verizon?

5:50PM A: Tim -- I think that the tablet market is so large it's large everywhere, honestly.

5:49PM Q: How do you see the tablet market in the US -- typically the notion is that tablets are more about consumption vs creation.

5:49PM A: It's clear that we're introducing a lot of people to Apple, and that helps across the product line.

5:48PM A: Tim -- No, I'm probably not going to do that. Here are some other words though.

5:47PM Q: Can you talk about how the iPad might drive marketshare in emerging markets?

5:47PM That was touchy-feely.

5:47PM A: They're not competing, though -- they're sharing.

5:47PM A: Tim -- part of the magic of Apple is that there's not high walls between these product groups. They like each other, they talk to each other, they're of the same DNA. One of the key learnings of the iPad was that people love instant-on, so the MacBook Air incorporated that. That's one example, but there are tons of other examples. And it's not always in the same direction. I think Steve said it great when he said if the Mac company were a separate company and the iPad company were a separate company, what would the Mac company build to compete with the iPad? And the answer is the MacBook Air.

5:45PM Q: You're awesome -- can you talk about that? Are the Mac and iOS merging into one?

5:44PM A: When you look at Mac growth against a shrinking market -- if this is cannibalization, it feels pretty good. Keep in mind that if tablets cannibalize the PC market, we have a low share of the PC market, and the other guys have a lot more to lose. Cannibalization is not something we're worried about -- the iPad team is working on the best iPad and the Mac team is working on the best Mac.

5:43PM A: Tim -- we grew 25 percent at the market level, which is 8 times the market rate of growth, which is stunning. And it wasn't just one region -- Asia / Pacific led growth at 67 percent, which is 10 times the market. We did significantly better than the market in every major region. Was there any cannibalization by the iPad? I don't know for sure, but yes, I think there was some. But I also think there is a halo effect, just like the iPod. There is a halo effect from Apple product to Apple product.

5:41PM Q: Can you update us on the Mac side and address the impact of iPads?

5:41PM A: In general we've found that people really want to do business with us and their customers want the iPhone. I don't want to comment on any specific countries, but it is true that we're not under contractual exclusivity anywhere in the world any longer. The last country was the United States, actually.

5:39PM Q: Given your previous comments on China, can you use that as a case study for why you're only in one carrier in China?

5:39PM A: We're also happy that we've signed a multi-year nonexclusive deal with AT&T.

5:39PM A: In every case where we've moved from a single carrier to multiple carriers, our market share has increased dramatically. On the CDMA phone specifically I don't have anything to announce today other than we're thrilled to work with Verizon, they've built quite a company and earned a great deal of respect. We're happy to give them the iPhone.

5:37PM A: Tim -- I don't envision the overall iPhone selling price decreasing next quarter. Relative to other carriers, we're always looking and assessing in every country who we should do business with, and so we'll continue to do that.

5:36PM Q: Should we expect any impact from the Verizon iPhone? Will other CDMA carriers get the iPhone?

5:35PM A: Tim -- the next generation, which we saw at CES, they're not shipping yet. They lack performance specs, shipping info, pricing. They're vapor. We'll see. But we're not sitting still, and we have an incredible first mover advantage, and a big advantage with the App Store. We're very confident in entering into a fight with anyone.

5:34PM A: Tim -- if you look at what's out there today, there's not much. There's the ones that use Windows, they're generally big and heavy and expensive. They have weak battery life, they require a keyboard and style. Customers are just frankly not interested. Then you have Android tablets, and the operating system wasn't designed for tablets. Google has said this, this isn't just Apple saying this. That means you have the size of a tablet that just isn't reasonable for what we call a 'real tablet experience.' That's just a scaled-up smartphone, which is a bizarre product category. If you do a side-by-side with an iPad, you'll pick an iPad.

5:32PM Q: How do you view the iPad's competitors?

5:32PM A: Peter -- we always work to lower costs, and we have a good track record. We shipped a lot of iPad and we have strong margins. We're happy with that.

5:32PM A: Tim -- Margin consists of a number of different factors, from component prices to engineering. I don't think you can take a single product by itself and speak with accuracy -- that's why we don't guide at the product level.

5:31PM Q: Bill of materials for key devices has come down in the past, allowing for healthy margins. Anything different about the iPad?

5:30PM Oh boy -- we definitely want to know what that is now. LCDs?

5:30PM A: Tim -- I don't want to talk about that, I don't want our competitors to know. But we rely on our ability to innovate beyond what's in the market. A good example is the A4 chip -- we focused on design, but we didn't need to do the fabrication. On the operational side, we signed a billion dollar deal with flash memory suppliers in 2005 because we thought it would be important. We thought that was great use of Apple's cash. In the past several quarters we've identified another area, and we're making payments -- similar to the flash deal, but in another area that is very strategic.

5:28PM Q: What components are you making long-term supply commitments on?

5:28PM A: Tim -- some prices for raw materials are going up due to strengthening of the world economy. The other commodity parts like LCDs and RAM are in supply / demand balance. Last quarter, in most areas we saw favorability, which was a key part of our results.

5:27PM Q: Can you talk about costs for next quarter?

5:26PM In other words: Munster Slam 2: Oppenheimer Boogaloo.

5:26PM A: Peter: You can't run the experiment both ways. We're thrilled, we could have sold more.

5:26PM Q: Munster's back. You said you could have sold more -- how many more?

5:26PM A: We have the best products we've ever done, and we feel very confident.

5:25PM A: We feel very confident in the future of the company -- we've done outstanding in the Mac business. 19 straight quarters of growth, but low share of a big PC industry, so there's still opportunity. Handset market is growing like a weed, so we have tremendous opportunity. iPad is just getting started, and we believe the market is huge.

5:24PM In other words: Munster Slam.

5:24PM A: Tim -- that's part of the magic of Apple, and I don't want anyone to know that magic, I don't want anyone to copy it. Apple is doing its best work ever.

5:23PM Q: GENE MUNSTER TIME. Let's see if he asks about an Apple HDTV. "What's your long-term business plan, and how far out do you go? One year, five years?"

5:23PM A: Tim -- first of all, let me say of Brazil, Russia, India, China, we identified China as an opportunity and put resources into that, the results have been staggering. China revenue was $2.46b this quarter, up 4x from the previous quarter. Korea has also been a very good market for us, driven by iPhone and iPad, and there are several other Asian countries doing well. Japan isn't in that segment, but it' sup 86 percent, which is stunning considering the JP economy.

5:21PM Q: One of the most impressive metrics is Asia / Pacific growth -- what's driving that?

5:20PM A: Tim -- on iPad we increased dramatically last quarter, we got into supply / demand balance and get into 46 countries, we added 20 during the quarter, and we're adding 15 during January for a total of 60. Relative to iPhone 4, I feel good but it's not enough. We still have a significant backlog, we're working around the clock to build more. I feel great that the demand is so high but I'm not going to predict when supply and demand will meet. Verizon will be huge.

5:19PM Q: Morgan Stanley -- how comfortable are you with iPhone / iPad availability, and do you see shortages?

5:19PM A: Tim -- it's just getting going, but we're very happy with the start of it.

5:18PM Q: In regards to the Mac App Store, the best selling apps are Apple apps. How should we think about that?

5:18PM A: Tim Cook -- we made a very bold bet on taking iPhone capacity to the September quarter to 14m, and we sold over 14m. And that was just from the previous number in the 8ish range. We were able to step that up, so we increased over two million, and we're increasing even further, but it takes time. We are thrilled to offer the iPhone 4 to Verizon's 93m customers, as well as new customers.

5:17PM Q: Cross Research -- availability of iPhones, especially with Verizon launch. What are you doing to ensure you have enough iPhones?

5:16PM And it's Q/A time! Let's see how crazy this gets.

5:15PM Apple expecting $22b in revenue next quarter, and earnings per share of $4.90.

5:14PM Apple has 59.7b in cash, compared to 51b last quarter.

5:14PM We're glossing over the margins and tax stuff.

5:13PM $12m average revenue per store, up 67 percent from a year ago. 75.7m visitors, up 49 percent.

5:12PM Four stores in China were the highest-trafficked, and highest earning.

5:12PM Retail stores: 8.85b in revenue, increase of 90-some percent. That's a record. Mac sales in the store were up, although about half were to people who'd never owned a Mac before.

5:11PM App Store: killin'. iAds: chillin'.

5:11PM 160m cumulative iOS devices sales since the end of last quarter.

5:10PM iPad and iPad accessories generated $4.6b in revenue.

5:10PM The iPad is also killing it in the enterprise -- 80 percent of the Fortune 100 are deploying the iPad.

5:09PM They're pleased to work with Verizon.

5:09PM Ended the quarter with 3.75m iPhones in inventory -- Apple thinks it could have sold even more phones if it could have supplied them.

5:08PM iPhone is killing it in enterprise, is what we're hearing.

5:08PM Average sales price of the iPhone 4 was $625. Sales in Asia / Pacific and Japan doubled from last year.

5:07PM Turning to iPhone now -- 16.2m iPhones. That's 86 percent growth, vs 70 percent growth for the rest of the phone market.

5:06PM 4-6 weeks of iPod inventory in the channel.

5:06PM iPod sales were down overall, but the iPod touch was up 27 percent and accounted for 50 percent of total iPod sales.

5:06PM More than 1000 apps in the Mac App Store, available in 90 countries. 1m downloads in the first day alone.

5:05PM 3.5 weeks of Mac inventory in the channel.

5:05PM Breaking down Mac sales. 4.13m Macs -- growing almost 8 times faster than the PC market. Growth fueled by strong demand for the new MacBook Air and MacBook Pro.

5:04PM Peter Oppenheimer is very pleased to announce all-time record revenue and earnings. 71 percent growth in revenue based on record iPhone, Mac, and iPad sales.

5:02PM And we're off!

5:00PM We're being told we'll be underway in just a moment -- looks like we'll be starting soon.

4:57PM Interesting to note that Apple TV sales were not mentioned at all in the PR -- we'll see what Tim and Peter have to say about that.

4:49PM While we're waiting, our own Richard Lai made a little chart of iPhone and iPad sales over the past few quarters -- it's quite illuminating.

4:45PM The call starts in about 15 minutes -- we'll be here. We're expecting to hear very little about Steve Jobs and Apple's succession plan, but there's always a chance.