Highlights of the June quarter
It ’s been a very busy and exciting time at Apple , and I ’d like to review some of the highlights of our June one-quarter . We host our well - ever Worldwide Developers Conference last month , with over 20 million people from around the world watching our keynote academic session , which is a newfangled platter . We ’ve had consuming response from client and developer to the new features we preview inOS tenner YosemiteandiOS 8 . Yosemite has been redesign with a invigorated look and powerful new apps , and iOS 8 is the big release since the launch of the App Store . With herculean persistence features , these approaching releases will allow Macs and iOS machine to mould together in even smarter ways . Customers can set about an activity like writing an e-mail on one equipment and go by it to another , picking up where they left off without miss a beat . They ’ll even be able to make and receive iPhone calls on their Mac with just a suction stop . These are feature that only Apple can deliver .
With iOS 8 , we ’ve opened over 4000 genus Apis , provide more flexibility and opportunity for developers than ever before . iOS 8 provides developers with amazing new theoretical account , enables wider function of Touch ID to firmly authenticate drug user within apps , and lets developer further tailor-make the exploiter experience with major extensibility features such as third - company keyboards .
We ’ve also introduced Swift , an innovative Modern programming language for both Io and OS X. Swift is the resultant role of the latest research on programming languages combined with decades of experience within Apple construction platform . It wee-wee drop a line codification interactional and fun , eliminates entire classes of unsafe codification , and return apps that run lightning fast . It ’s light to learn , tolerate even more hoi polloi to dream big and produce whole new categories of apps .
We conceive our new O releases , combined with Swift , will result in a huge leap forward for the Apple ecosystem , and we ca n’t wait to see what developer will create with Yosemite , iOS 8 , and Swift .
When we introduced iOS years ago , it was a revolutionary operating system for iPhone . Over the long time , we ’ve extended it to the iPod family with iPod touch , and subsequently to a tablet form factor with iPad . An detonation of apps , accessories , and service for these devices has make an incredibly vibrant ecosystem .
We ’re extend iOS in even more dimensions as client around the world make iPhones and iPads an substantive part of their lives at habitation , at school day , at work , and on the go . We ’re putting a immense elbow grease into deport the best experience for our customer wherever they use iOS . That let in a good and intuitive user user interface while drive , calledCarPlay , which is being integrated by 29 major car firebrand including Audi , BMW , Ford , General Motors , Honda , Hyundai , Mercedes , Toyota , and Volvo , and aftermarket organization like Pioneer and Alpine .
We ’ve created a new instrument for developer , calledHealthKit , which lets wellness and fitness apps work together and empowers customer to select what health information they share . We ’re take on the first whole tone in this orbit in collaboration with the Mayo Clinic , whose new app can mechanically receive data from a blood pressure app , for example , and portion out it with a physician . Or a victuals app can inform fitness apps how many calories are being waste each mean solar day . Our own Health app will provide an easy - to - read splashboard of all wellness and fitness data .
We ’re enable raw ways to control lights , and door , and thermoregulator , and other affiliated machine around the star sign using Siri , with theHomeKitfeature of iOS 8 .
And in the Enterprise , we ’re include novel security , productiveness , and gimmick management characteristic in iOS 8 . We ’ve forgeda kinship with IBMto turn in a new class of mobile business enterprise solvent to go-ahead customers around the world . We ’re make for together to provide ship’s company access to the power of big - data analytics aright on every employee ’s iPhone or iPad .
Using Swift , we ’ll join forces to bring over 100 mobile - first apps to endeavor customer , each addressing a specific industry pauperization or opportunity . This is a revolutionary whole step for endeavour , and open up a large market chance for Apple . But more importantly , it ’s great for productivity and creativity of our endeavour customer .
From the pocket , to the car , to the work , domicile , and gym , we have a very gravid vision of what iOS can be , and we ’re incredibly excited about our plans .
The numbers
turn to our fiscal results , today we ’re cover record June quarter tax revenue thanks to the very strong performance of iPhone , Mac , and the continued ontogeny of revenue from the Apple ecosystem . Our team executed bright during the quarter with earnings per contribution up 20 per centum year - over - year , our highest growth rate in seven poop . We sell over 35 million iPhones , setting a new third - quarter record . We generated levelheaded growth in our entry - price , mid - tier up , and lead iPhone categories . I ’m especially glad about our progress in the BRIC commonwealth , where iPhone sale were up a very strong 55 percent class over year .
We also had a book June one-fourth for Mac sales , with growth of 18 percent class over year in a market place that is wince by 2 percent according to IDC ’s latest estimate . need has been very stiff for our portable in especial , and we ’ve had a great client response to the new higher - performance , lower - price MacBook Air .
It was another strong performance for the App Store , and the other services contributing to the prosperous Apple ecosytem . In fact , for the first nine months of this financial year , the line item that we call iTunes software and religious service has been the fastest - growing part of our business sector . iTunes billings grew 25 percent year - over - yr in the June one-fourth and reached an all - sentence every quarter high , thanks to the very hard results from the App Store . We ’re continuing to invest in our incredible ecosystem , which is a huge plus for Apple , and a very important discriminator of our client experience .
The iPad
iPad sales gather our expectation , but we realize they did n’t fulfill many of yours . Our sales were gate in part by a reduction in channel inventory , and in part by market softness in certain parts of the world . For example , IDC ’s latest estimate indicates a 5 per centum overall decline in the U.S. tablet market as well as a decline in the westerly European tablet marketplace in the June quarter .
But what ’s most important to us is that client are enjoying their iPads and using them heavily . In a view conducted in May by Changewave , iPad Air register a 98 percent customer gratification rate , while iPad mini with Retina display receive an astounding 100 pct client satisfaction pace . The survey also found that among mass planning to buy a tablet within 90 days , 63 percent planned to buy an iPad , and our own information indicates that more than half of client buy an iPad are buy their very first iPad .
Another late study , by Custora found that iPad accounts for 80 pct of all U.S. pad - free-base e - Commerce Department purchases . We ’re very bullish about the future of the tablet market place , and we ’re confident that we can retain to land pregnant origination to this family through hardware , software , and servicing .
We think our partnership with IBM , provide a new generation of roving Enterprise diligence , design with iPad ’s fabled rest of economic consumption and backed by IBM ’s cloud service and data analytics , will be one such accelerator for further iPad ontogeny .
Other partnerships and opportunities
Looking ahead , we are very frantic about our agreement to purchase Beats Electronics and Beats Music . euphony is part of Apple ’s DNA , and we think the accession of the Beats squad will be great for medicine lover . Beats provide Apple with a fantastic subscription music service , access to rare natural endowment , and a fast - growing lineup of products that we can build upon .
Not count Beats , we ’ve fill out 29 acquisition since the beginning of fiscal twelvemonth 2013 , include five since the end of the March quartern , and we ’ve convey some incredible technology , and more importantly some unbelievable talent , into Apple in the outgrowth .
We ’re hard at work and indue heavily on exciting opportunity across our business , and we have an incredible pipeline of new product and services that we ca n’t wait to show you .
On the iPad decline
If you sort of back up from this , the category that we created , which has been in a petty over four years , we ’ve now sold 225 million iPads . Which is , I think , likely a prominent number than anyone would have predicted at the time , including ourselves , quite honestly . We still feel the class as a whole is in its other day , and that there ’s also pregnant innovation that can be bring to the iPad , and we be after on doing that .
When I look at the top - level numbers , I get really excited when I see that more than 50 percent of the iPads we ’re selling are hold out to someone who ’s a first - time tablet buyer . I get excited when I see that the retail ploughshare according to NPD for the calendar month of June was 59 percentage in units , and over 70 percent in terms of buck .
And of course , [ CFO ] Luca [ Maestri ] had refer in his preamble that our education share is 85 percentage . We also are in virtually all Fortune 500 companies—99 percent of them to be exact — and 93 per centum of the Global 500 . However , when we dig into the job market deeper , though our market share in the U.S. in the commercial sector is good — it ’s 76 percent , allot to IDC — the insight in clientele is low , it ’s only 20 . And to put that in some kind of context , if you wait at penetration of notebook computer in business , it would be over 60 .
So we think that there ’s a substantial top side in business organization , and this was one of the matter behind the partnership with IBM that we announce last week . We think that the core thing that loose this is a better go - to - market place , which IBM clearly brings to the board , but even more significantly , apps that are written with Mobile River - first in mind . Many of the — not all , but many of the enterprisingness apps that have been write for iPad have been basically ports from a desktop system and have n’t taken full reward of Mobile River . And so we ’re excited about bring that to business along with partnering with IBM which we call back is a first - class company , and seeing what that can do to gross sales of business , which I honestly conceive the chance is here .
The marketplace is still omen in 2018 — I think these are Gartner numbers — to be about 350 million in size , and to put that in some context , I think the PC market right now is about 315 . And so I think our theory that has been there , honestly , since the first time we send iPad — that the tablet market would finally surpass the PC market — that theory is still entire . I just think we have to do some more things to get the business side of it make a motion in a faster flight , and I think we ’re now on to something that can really do that .
So as I front at it , and back up from the 90 - twenty-four hour period clock kind of matter , I ’m incredibly delirious , excited about the plan we have on the production side , and also on the go - to - mart side , in particular the IBM declaration .
One other full stop I might append on this , because I think this is interesting and I do n’t suppose it arrive out in our commentary so far is the food market ’s very bifurcated on iPad . In the BRIC countries , iPad did exceedingly well . The growth was very eminent . Like in China , it was in the 50s , the Middle East it was in the 60s ; in the develop countries , like the U.S. , the market is clear watery there . It ’s interesting to mention , however , that those — the U.S. as an example — we had a very , very strong Macintosh market in the U.S.
And so there ’s belike a bit of high - male erecticle dysfunction kind of stuff and nonsense begin to play out too , where higher - ed is clearly still very much notebook - orientate ; K-12 , on the other hand , we deal 2.5 iPads for every Mac into K-12 . And so we ’re headed , we ’re clearly headed into that season now , and it typically starts in graduation meter - frame in fiscal Q3 for us , and that ’s in all likelihood another affair that we ’re seeing .
On China
China , honestly , was surprising to us . We thought it would be secure , but it well went past what we think . We occur in at 26 percent revenue growth , admit at retail . And if you look at the units , the unit growth was really off the chart across the card . iPhone 48 pct off ; that equate to a securities industry estimate of 24 , so growing at 2x the grocery store . iPad was up as well , as I ’ve cite before . The Mac was up 39 percent , and that ’s versus a grocery store in China that ’s also contracting along with securities industry in those parts of the world ; in China it was projected to contract by five percent .
And so we ’re meet some real persuasiveness there , and the thing that ’s actually growing the most is the iTunes package and religious service category , which has the App Store in it , and that area is almost doubling twelvemonth over year . And so it ’s very very exciting what we ’re seeing there .
We are still in the process of roll out , along with our cooperator China Mobile , the TD - LTE , into more cities , and so we ’re still in the other going on that , that just start in January , as you make out . And my understanding is that later this year , there will be a permit for the other operators to start shipping FTD - LTE , which I think is another grownup opportunity in China .
On trade-in programs for the iPhone
What I think is happening in the totality as you look across the world is that trade - ins are actually tremendously good for our ecosystem because people wind up … we have more people that are able to join the political party when we have a trade - in , because in essence it wrap up being used by … the prime example is someone else within the family , or in the example that has become more common in the last year , someone trades it in , and that pop off to either somebody else in that country that is very cost - sensitive , or somebody in a different country .
And I see all of this as unspoiled . In looking at how much of it cannibalizes , it is very hard to reply that question with any grade of preciseness , but my intestine is that the cannibalization gene is low . Because you wind up attracting people who are much more price - sensible than there . The great thing is , our products require a much higher resale note value than others do , and so that leads to a larger swop - in , and from my perspective , that mean a larger ecosystem , more people that nose up bewilder on iPhone , and as you know from follow us for quite some time , if we get somebody to examine an Apple product , and then buy an Apple product , the likeliness that they start bribe other Apple products that may be in dissimilar categories , or upgrade to one in that class in the future is very in high spirits . And so , net , I look at it to be positive ; it ’s very unmanageable to quantify with certainty .
On the iPhone 5c
I can distinguish you this : that if you look at the growth rates — we do n’t divide out each one , but if you look at the year over twelvemonth growth charge per unit — and so this would be comparing the 5c to last year , it would be equate the 4s , which was in the mid - grade — the growth in that sector was the highest growth during the quarter we just finish , of the three tiers . And so we ’re extremely happy with how it do last fourth .
On component costs and gross margin
What we come across in the June quarter was that NAND , mobile DRAM , and LCD , the pricing on all of those declined , while PCDRAM increased despite the market for PCs condense . In the September quarter , what is factored in our guidance is that LCDs and fluid DRAM continue to decline , that NAND pricing remain basically monotonic from last one-quarter , and that PC DRAM has a slim price gain .
And in terms of other good that I did n’t talk about , we ’ve don that they would decline at historical rate . And so that ’s factor in the earthy margin guidance .
On upgrading
In term of the installment plans that you name in the U.S. relative to iPhone , there ’s a portion of different models that are being tried in the U.S. and throughout the worldly concern . And actually , last quarter , as we estimated , and this is subject to estimating error , but we estimated less than one out of four iPhones were sell on a traditional subsidy plan . That number is markedly unlike than it would have been two years ago . The installment be after that you ’re speaking about , which make a customer the right to upgrade fast or faster than a common two - year oscillation , we call up that play to our client al-Qaida in a large way .
And so that makes us incredibly bullish that customers on those programme would be very probable to upgrade when we harbinger a fresh product .
On acquisitions and partnerships
We have a lot of really swell people and I cogitate we have the capability to develop a sizeable company and get by it , and relative to IBM , I feel the same way . I think you could only do so many partnership well , and it ’s unusual that we introduce into a partnership . But in this particular case , I retrieve arguably the company are so free . And I ’ve gotten to know Ginni [ Rometty , chief operating officer of IBM ] somewhat well over the last couple of geezerhood , and I cerebrate we see the importance of the customer a lot of the same fashion and both finger that Mobile River and enterprisingness is just an tremendous opportunity .
We ’re not compete with each other , and so I think a partnership in that case is particularly bang-up .
Would we do more of either of the things we did ? We ’re always front in the acquisitions infinite , but we do n’t let our money glow a hole in our pocket and we do n’t do things that are n’t strategic . With Beats , we find we were fetch an incredible subscription service , a very rare set of talent that we think can do great things at Apple , and accession to a very fast - grow business in their headphone and headphone outer space . And so culturally , we feel there was a couple and music has been deeply engraft in Apple ’s deoxyribonucleic acid for many many years .
And so it was a great wedlock , and I think the partnership with IBM is a smashing marriage as well . If more like that present themselves , then I think that we can carry off more thing . I intend we have a very , very solid executive team , and can do that . But it ’s not my goal to acquire a sure bit of companies or expend a sealed amount of money . We want to do things that aid us make great product and are smashing for our client , and so forward .
On IBM and analytics
We did n’t talk about how the business model is going to work , but generally speaking I remember that each of us have tax revenue streams in the enterprisingness , and each of us win from having those revenue streams . And so that ’s our look at that . We win if we can drive that penetration number I spoke about from 20 to 60 , that would be implausibly exciting here . The wall would shake ! And so that ’s what I hope for .
Direct app sales to enterprise
We have no plan to change the linguistic rule with Enterprise . Some enterprises write proprietary apps that they do not want to offer to others , and so we apparently have a way for them to distribute those into their go-ahead on just the employees that they want to , and so I ’m not apprehensive about changing that .
We ’re all for assume rubbing out of the organisation and not supply it . Again , the fully grown thing for us is getting the penetration numeral up and take our products , iPhones and iPads and Macs , in more people ’s hand , and we think there ’s a huge chance in enterprisingness to do that .
