Apple: Steve Jobs Is Fine, and We Still Hate Netbooks

Next to no news from the Apple earnings call this afternoon, which is just the way Apple execs like their earnings calls. Once again, the company provided no information about CEO Steve Jobs’ health, except to note that he is still scheduled to come back to work in June. And the company continued to pooh-pooh the concept of netbooks — super-cheap, super-small laptops with very little horsepower that are the hottest part of the PC business right now.

But COO (and temporary CEO) Tim Cook’s dismissal of the netbook market will continue to spark speculation the company is readying something that sits in between a laptop and an iPhone (which is itself a computer, of course). Silicon Alley Insider’s Dan Frommer got more of Cook’s response than I did so I’ll reprint it here:

When I look at what is being sold in the netbook space today, I see cramped keyboards, terrible software, junky hardware, veyr small screens, and just not a consumer expeirnce and not something we would put the Mac brand on. So it’s not a space — as it exists today — that we’re interested in, nor do we believe that customers in the long term would be interested in. That said, we do look at the space and are interested in how customers respond to it. People who want a small computer than does browsing and email might want to buy an iPod touch or iPhone. We play indirect basis. Then of course if we find a way where we can deliver an innovative product that really makes a contribution, then we’ll do that. We have some interesting ideas in this space.

EARLIER:

Apple (AAPL) just turned in a strong quarter and followed it up with conservative guidance. A fairly typical performance for the company. Now investors will want to know about new product lines, Steve Jobs health and other matters. I’ll be covering the call live. Please refresh this page for the most current information. Click here if you want to listen in yourself.

Joining call now. CFO Peter Oppenheimer going over info that’s already in the release.

Mac products: 2.2M Macs, a 3% decline y/y. Tough comparison from last year. But better than 7% drop in PC sales overall. “We feel very positive about our Mac performance”. Began and ended quarter w/3-4 weeks of Mac inventory.

iPod: People still buying ‘em! iPod touch selling well, and so are apps. Claims people like the new shuffle player. [Dubious about that]. We own the Mp3 player market. [Duh]. Began and ended quarter w/4-6 inventory.

iTunes store: 35,000 apps available in store, up from 15,000 a quarter ago. “We are within hours” of 1 billionth app download.

iPhones: Unless I’m missing something, absolutely no new data here. Praising new iPhone 0s 3.0 that’s in the works. Delayed start of revenue recognition of all iPhones sold after we announced the new OS, which was March 17. Will start up again once OS is released.

Stores: Half our Macs sold to people who had never owned one before. Average revenue per store is down year over year, because the economy is lousy.

Gross margins: Commodity and other component costs lower than we expected. Higher-margin sales better than we expected. We also spent less on operating expenses than we expected.

Guidance: Forecasting is “challenging” in macroenvironment. Again, noting delay in revenue recognition for iPhones (see above). Excited about new products in pipeline, etc.

Q&A

Outlook for pricing on component supply? Mostly favorable, but some commodities, like NAND, will increase sequentially. I don’t expect to see the levels of reduction that we saw in calendar q1. Will it be down? It will be “in a similar range as last quarter”.

Cash flow issues? Not really. 1) Made prepayment to [sorry didn't catch who that was] 2) Accounts payable down was down, from holiday quarter to spring quarter which is standard 3) Tax payments were higher than what we saw last year $1.3 billion in payments, up “signficantly” from last year.

Mac business: Desktops selling well, but average selling price down quite a bit. What’s going on? Sales accelerated in March after he announced new product launch. Higher-end Pro product we sell to professionals are down a bit, which is related to economy for obvious reasons. Education sales also down a bit, for same reasons. Hoping Federal stimulus funds will help with that.

Back to netbooks - why won’t Apple sell them? Cook still criticizing netbooks. Ones available today are “just not a consumer experience, and not something we would put the Mac brand on, quite frankly. It’s not a space today that we’re intersted in, and it’s not a space we think that customers in the long-term are interested in.” But.. a slight hedge with regard to smaller computers, which are, of course, what the iPhone and iPod Touch are. We “have intersesting ideas in this space”. Today’s netbooks really shouldn’t even be called computers, really.

App store: Mix beteween paid and free downloads, and iPod and iTouch mix? Nope. Won’t disclose it. Again, “hours away” from 1 billionth download. Cook: One of the keys behind growth of iPod was iPod Touch “more than doubled year-over-year”. iPod + iPod Touch now 37 million units, and that’s a big platform for developers. So virtuous cycle there.

[Sorry, missed two qs here]

Why are still doing an exclusive with AT&T for the iPhone? And how’s Steve Jobs? AT&T is the best wireless provider in the U.S. “They have done a very good job with iPhone…we’re very happy with the relationship we have and do not intend to change it.” Structurally, we’re using GSM architecture, and Verizon uses CDMA, and we wanted a world phone.

And Steve Jobs? Oppenheimer: “We look forward to Steve returning to Apple at the end of June.” [Translation: No news]

[Yet another q missing here. Apologies]

Any info on DRM-free/”iTunes plus” sales? Too early to tell.

How much impact did Wal-Mart (WMT) have on your sales? Very key partner for iPod. We believe they do provide us extended reach. Please with results, but “early going, and not much to report there yet”.

So many iPhone Apps. How can you make them easier to find on iTunes? (Same problem as music). Any kind of unsual patterns? Non-answer here.

Please talk about competition for smartphones (ie please dis the Palm Pre). “Difficult to comment on products that aren’t shipping. So there’s nothing intelligent I could say on the Pre.” But “we think we’re years ahead”. We see things through software lens and that has benefited us and customers very well. Power of device and ecosystem enormous and we’re now just scratching the surface”

What about suing Palm re: patents on the Pre, etc? “We think that Apple’s innovation is leading the industry by years. We think competition is great, we think it makes all of us better, as long as other companies invent their own stuff.”

Comments

[winindthedust:]

Repeat of 2007. Look for terrific share gains this year all the way through December.

Apr 22 10:07 PM

[Moon Kil Woong:]

Apple took touch screens off the shelf from OEM and touch screen vendors. Really, successfully suing Palm for a touch screen phone is plain silly. Apple does get kudos for bringing it to market early and doing a snazzy job of it. Thanks Steve.

As for the stock, I wouldn't dial anything over $130 for it unless the market takes a sharp turn up. $120 is rich enough. Considering if Jobs leaves I wouldn't pay over $80 bucks for Apple, there certainly is a big risk premium for the shares.

Of course, if Jobs pops back in and everything is A ok I wouldn't mind buying it today and waiting for it to hit $180. I hope this is so but right now I don't see that happening. We must invest based on the information available.

As for Wal-Mart. As a branding idea it's the dumbest channel for Apple to sell to. It certainly doesn't look or smell like something Steve Jobs would do. I smell an accountant and some greedy exec that wants instant gratification.

Apr 23 05:11 AM

[Malkiel:]

Beware of companies that engage in heavy spin, a leading indicator of tendency toward self-deception and/or hiding things from the consumer, both losing propositions. As bad as Microsoft has behaved during their Vista disaster, the crock of bs being dealt out here by the Apple corps is even more arrogant and brazen. The netbooks and their hardware configurations are brilliant market penetration strategies which would once have been the type of innovation Apple would have brought to market first. Everybody knows you aren't going to use an iphone in place of a laptop--readability and ergonomics are permanent barriers to excessive miniaturization. Either Apple is sincere in foolishly believing they can ignore this trend, or their dissing of the configuration is unnecessary credibility-damaging posturing as they bide their time.

Apple has blown a golden window of opportunity over the last year to capture serious market share. It's more important to get their OS on many desktops than it is to keep selling the OS on proprietary desktops which are so expensive that they can never capture market. Whoever controls the most-used software controls the internet, a not-inconsequential prize. Windows 7 is going to create a buying sensation among the public which has held off their computer purchases and if it loses back all its recent gains in market share Apple may be forced to change its business model and finally admit, as Pete Najarian said recently, that they're really essentially a software company...

Apr 23 11:14 AM

[who:]

Given the price of netbook is comparable to an iPhone, I guess they are not eager to get in the netbook market given it would probably take away business from its iPhone.

Netbooks have it place - hey I have 2 netbooks and replaced them when I got the iPhone. But, will use my netbooks should i need to do some typing!

Apr 23 01:04 PM

[TCK:]

Apple should produce a netbook with a fancy name and pink case which sells for $1200. The Apple-Loonians will camp out , line up , exchange Microsoft bashing stories while dreaming of making a web page about their pet gerbil.

Apr 24 07:17 AM

[raytayzmd:]

...I hate to be the bearer of bad tidings but Steve Jobs is, in all likelihood, not returning to Apple in June...Mr. Jobs, sad to say, is probably dying...he underwent a Whipple procedure -- a radical, last ditch, procedure considered to be only palliative...in other words, it is highly unlikely that it cured him...

Apr 30 10:41 AM