April 26, 2012, 7:52 AM ? Apple has unveiled its earnings for another quarter, which usually means two things--a blockbuster financial performance and insights from CEO Tim Cook. The company certainly delivered on the blockbuster performance when it announced second quarter earnings on Tuesday. But this time around, in addition to Cook, chief financial officer Peter Oppenheimer also had a few noteworthy things to say about Apple's fortunes, its product line, and the state of the company. Here are some highlights of what Cook and Oppenheimer had to say to analysts during Tuesday's conference call.
The third quarter will see a sequential downtick, here's why
Oppenheimer: The manufacturing ramps for the iPhone 4S and the new iPad were extremely successful for us. They yielded the highest launch supply and the fastest country rollout for these product families that we've ever had. As a result, we were able to fulfill demand in the March quarter rather than the June quarter this year and that generated revenue of over 39 billion. Therefore, unlike last year, we expect a sequential decline in revenue this year.
I'd highlight five primary factors which has influenced our thinking. The first: the iPhone channel inventory changes. As I discussed in my prepared remarks, we increased our iPhone channel inventory by about 2.6 million units in the March quarter this year, and we exited within our target inventory range of about four to six weeks.
Last year, we continued to add new countries into the June quarter and we built an additional 700 thousand units of iPhone channel inventory last year in the June quarter. So the combination of these channel builds in the March quarter of this year and the June quarter of last year will impact the sequential comparisons from this year to last.
The second factor: Fabulous iPhone 4S execution. As we told you in January, we exited December with significant iPhone 4S backlog, which led to a huge January. We launched China and 20 other countries, also in January, which completed the rollout of the iPhone 4S into all the countries where iPhone is currently shipping. And as I said before, we exited the quarter within supply and demand balance.
The third factor: Our new iPad execution was also fabulous. We had an incredible start with the new iPad. We launched with significant supply, leading to sales of three million units in the first couple of days, which was also the fastest country rollout ever. We therefore were able to satisfy much more the demand for the new iPad in the March quarter this year, compared to the iPad 2 in the March quarter last year. This resulted in a shift of iPad volume into March this year versus last, and it will also affect the sequential compares this year to last.
Fourth, we decreased the entry price of the entry iPad to $399; and finally, the last factor to point out, the U.S. dollar has strengthened recently. We expect this to have an impact on the sequential compare, especially versus last year, where the dollar weakened against most currencies over the comparable time periods.
We've just reported the most amazing March quarter Apple's ever had. We feel very very good about our business and our new product pipeline.
I want to put something out just so it gets out on the call in case it's not asked, and talk a little bit about the gross margin guidance that we've provided for the June quarter.
We're pleased to be providing gross margin guidance of 41.5% for the quarter. We expect about 2/3rds of the sequential decline to be primarily driven by a higher mix of iPads and Macs, a full quarter selling the iPad lineup, and a loss of leverage on our revenue. We expect the remainder of the difference to be primarily driven by the items benefiting the March quarter gross margin that we don't expect to recur in June.
Cook: On the iPhone 4S, our target is to be between four and six, the addition of the 12.6 million allowed us to get within that range by the end of the quarter. We feel that we exited the quarter at supply and demand balance. Because our execution of the option was so good, the vast majority of supply/demand in the different countries was reached in the end of January.
We had the mother of all Januarys with really getting out the vast majority of the iPhone 4S backlog and launching China as well, so it was an incredible start to the quarter for us.
On lower price points
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