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by MS Siegler

Apple (NASDAQ:AAPL) has just released its second quarter financial results, and surprise, surprise: they’re very good. The company had revenues for the quarter of $8.16 billion and net profit of $1.21 billion — both easily beat Wall Street expectations. Both also beat the numbers the company posted a year ago, and actually represent the company’s best March quarter (which is Apple’s second quarter) results ever.

Breaking the numbers down a bit: Apple sold 2.22 million Macs for the quarter. 11.01 million iPods. And 3.79 million iPhones — which was more than double the number it sold a year ago. While both Mac numbers and iPod numbers beat Wall Street analysts’ estimates, the iPhone numbers surged past what many were looking for.

While the Mac numbers beat estimates, it is worth noting that sales were down year over year for the first time in about 6 years, as Silicon Alley Insider noted the other day. During the call, Apple COO Tim Cook noted that two of the main reasons for this is that professional users are buying less of Apple’s “Pro” line during the tough economic times, and also that, particularly in the US, the educational buying market is way down right now.

But on the iPhone side of things, everything is just peachy (at least, when it’s not approving hugely disturbing apps). There are now over 35,000 apps in the App Store, and it will surpass 1 billion downloads tomorrow. As I noted above, iPhone sales were up 123% year over year, and the iPhone is now available in 81 countries. Apple has now sold some 21 million iPhones, and the App Store has a reach to 37 million devices when you throw in the iPod touch sales.

Apple reiterated its commitment to AT&T (NYSE:T), but didn’t exactly slam the door on expanding to other providers in the future. This was asked because of the reports that AT&T is trying to extend its deal with Apple to 2011. Cook simply noted that a company like Verizon (NYSE:VZ) uses CDMA wireless technology for its phones, and Apple was committed to making one type of phone (GSM) that would work throughout the world. Of course, with the move to more advanced networks (4G and others), it seems likely that Verizon will get in line with everyone else when it comes to technology. So that could open the door for an iPhone along those lines — but that’s just speculation.

Another huge number from yesterday’s results is that Apple now has almost $29 billion in cash and marketable securities now. But on the call, Apple CFO Peter Oppenheimer reiterated that Apple doesn’t have any major plans for the money, and hopes to keep earning more.

Find the notes taken live during the call below:

Live Notes:

Peter Oppenheimer, Apple CFO

  • Best non-holiday quarter earnings in history
  • Operating margin was one of the highest ever
  • $1.33 earnings per share
  • Non-GAAP numbers are even better (Apple uses those to take iPhone and Apple TV sales into account)
  • 3% decline year over year in Mac sales
  • Strong sales of iLife ‘09 and iWork ‘09
  • Over 11 million iPods, new March quarter record — iPod touch particularly strong
  • Share of US market over 70% for iPod, and gaining share in most international markets
  • 35,000 applications in App Store
  • Hours away from 1 billionth app download
  • “years ahead of competition”
  • 123% increase in iPhone sales year over year
  • iPhone now in 81 countries
  • $1.47 billion in Apple Store revenues
  • Almost half of Mac sales in stores are to new customers
  • Only 1 new store opened, 252 stores total — but more people came to the stores
  • 25 stores open in 2009, half out which will be outside US
  • $28.9 billion in cash, $800 million more than the last quarter
  • Cash will be used for “preservation of capital”
  • $7.7 billion to $7.9 billion in revenues seen for Q3 — but they are holding off on iPhone numbers until iPhone 3.0 software comes out (in the summer)
  • New products are in the pipeline (not named obviously)

Q&A Session

  • What is outlook of pricing and components? Component environment still favorable, but some areas raise concerns.
  • Cash flow from operations down? Pre-payments to other companies for components cut into that. As did tax payments — because we’re making more money.
  • Mac business, what’s going on? Pro products were weaker than they were in the year ago quarter — mainly economic related. The consumer is holding up much better than professional and eduction.
  • Netbook trend doing well, any thoughts? For us, it’s about doing great products. When I look at what is being sold in the netbook space, I see cramped keyboard, junky hardware. This is not something we would put the Mac brand on. It’s not a space as it exists today, that we’re interested in. But we do look at the space, and are interested to see how customers response. People who want a small computer — might want to buy an iPod touch or an iPhone. If we find a way where we can deliver an innovative product — then we’ll do that. We have some interesting ideas. Product pipeline for the Mac is fantastic.
  • App Store, mix between paid and free? We don’t disclose free versus pay. The iPod touch more than doubled year over year. Sum of iPhone plus iPod touch is about 37 million units now.
  • Stabilization of the tech market? We’re not economists, so we won’t predict bottoms and such.
  • iPhone and AT&T question — why maintain exclusive? We view AT&T as a very good partner — best wireless provider in the US. They have done a very good job with the iPhone. (Blah, bland statement.)
  • Any reason you need to stay with AT&T? Well Verizon is on CDMA, but we wanted one phone for the whole of the world — which is GSM (which AT&T uses).
  • China update? China we are not in yet — we would like to be in the next year. We are currently working on that.
  • Steve Jobs update? We look forward to Steve returning to Apple at the end of June.
  • Mac US market share? US was our weakest year over year, but in the US a larger percentage is education oriented — which took a hit this year. Cycles come and go, we just want to make the best products. Long term, we believe we will still gain share if we stay on point.
  • Expanding iPhone adoption? We think iPhone 3.0 side will make people want it even more. And we’re focused on geographic roll outs worldwide.
  • Percentage of customers that updates iTunes library to iTunes Plus? Too soon to tell. March quarter was very strong in iTunes store though.
  • iPhone and Wal-mart? Very key partner to us relative to iPod. Now with the iPhone, they give us more reach — we’re pleased with the results, but it’s early. Selling iPhone in over 50,000 storefronts in 81 countries.
  • What steps to make sure App can be discovered? We’re doing a number of things — including top 50 and 100 apps, paid for and free. “Easy to discover and fun to discover.” Games are very popular, and that’s one reason why the iPod touch is doing well.
  • Competitive landscape for smartphones — Palm Pre? It’s difficult to comment on products that aren’t shipping — can’t say anything on the Pre. iPhone has sold over 21 million units though. We think that we’re years ahead. We see this landscape through the software lens.
  • Use of cash? Nothing new to announce — working hard to make cash keeps coming in.
  • New headquarters construction? No updates, but we’re quite busy with that. We’re spending our energy on new products, Cook joked.
  • Protecting the IP — no action in the last 90 days (this is about Pre)? We think competition is great, “as long as other companies invent their own stuff,” Cook cryptically said.

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Source: Economy Notwithstanding, Apple Posts Its Best Ever Q2 Earnings