Japan Earthquake Didn’t Have Significant Impact on Apple—COO Cook

The Japan earthquake and tsunami had no significant impact on Apple’s results in Q2 ended March 26, Chief Operating Officer Timothy Cook said in an earnings call. There was “some revenue impact,” but “it was not material to” Apple’s results, he said. Apple didn’t experience “any supply or cost impact in our fiscal Q2 as a result of the tragedy, and we currently do not anticipate any material supply or cost impact” in Q3, he said.

The disaster “caused disruption” to “many” of Apple’s suppliers and even those suppliers not impacted by the quake and tsunami faced “power interruptions,” Cook said. Apple “sourced hundreds” of components from Japan, including LCDs, optical drives, NAND Flash and DRAM memory, and base materials including resins, he said. But he said Apple had worked since the disaster with its Japan suppliers and was “able to implement a number of contingency plans.”

Apple doesn’t expect “any material impact to our component supply or cost” in Q3, Cook said, but “the situation remains unpredictable given recent aftershocks, the uncertainty about the nuclear plant and potential power interruptions.” And he said there were “some supply risks that are beyond the current quarter,” so it’s hard to project whether the Japan disaster would hurt Apple after Q3.

Initial iPad 2 sales have been strong and Apple executives said the company is still scrambling to meet demand. Apple sold about 4.7 million iPads in Q2 after shipping the iPad 2 in the U.S. March 11 and in 25 more countries March 25, said Chief Financial Officer Peter Oppenheimer. Apple didn’t say how many of the iPads sold were the new model. The company was “working hard to get” the new model “into the hands of customers as quickly as possible,” the CFO said. The iPad and iPad 2 were being distributed in 59 countries by the end of March, he said. Apple “sold every iPad 2 that we could make during the quarter and would have liked to end the quarter with more channel inventory,” he said. Revenue from sales of iPads and iPad accessories in Q2 totaled $2.8 billion, he said. Apple was “amazed that we are still heavily backlogged -- not only at the end of the quarter but also” now, Cook later said. But he said Apple was “so confident” about its ability to ramp up supplies that it “rolled out” the device to the 25 countries outside the U.S. at the end of March, he said. Apple is also shipping the iPad 2 “to an additional 13 countries next week, and we're planning to add even more countries through the quarter,” he said. “I'm very confident that we can produce a very large number of iPads” in Q3, he said. The App Store now has more than 350,000 applications, and there had been “well over 10 billion downloads to date,” Oppenheimer said.

Apple sold “a record” 18.65 million iPhones in Q2, up from 8.8 million in Q2 last year, Oppenheimer said. Revenue from iPhone handset and accessory sales totaled $12.3 billion in the quarter, up from $5.45 billion. Apple continued to see “very strong” iPhone sales growth in all its operating segments, with sales in the Americas and Asia-Pacific regions “more than doubling,” he said. Apple made “a significant increase in our capacity” again, which he said allowed the company to “expand distribution and get much-needed supply to our channel partners.” Apple ended Q2 with about 5.2 million iPhones in channel inventory, an increase of about 1.7 million over Q1, “to support new carrier launches and existing channel partners,” he said.

Apple sold 3.76 million Macs in Q2, a 28 percent increase from Q2 last year, it said. The only product category with a sales decline was again iPods, with sales tumbling 17 percent to 9.02 million. But Oppenheimer said iPod sales were better than it expected in Q2, driven by strong demand for the iPod Touch, which he said continued “to count for more than half” of all iPods sold. Apple’s U.S. MP3 player market share remained at more than 70 percent, he said, citing NPD data. The iPod continued to be the No. 1 MP3 player in “most countries we track,” he said, citing GfK data. The iTunes store, meanwhile, had “its best quarter ever, with revenue of” nearly $1.4 billion, he said. Apple started selling about 17,000 e-books from Random House on the iBookstore in Q2, and that online Apple store now offers e-books from more than 2,500 publishers in more than 20 categories, he said. Customers have downloaded more than 100 million e-books from it to date, he said.

Apple is, meanwhile, nearing the 1 billionth visitor to its retail stores, Oppenheimer said. A record 71.1 million people visited the stores in Q2, up from 47 million a year ago, he said. Q2 retail revenue soared to $3.19 billion from $1.68 billion in Q2 last year. Apple recently started a personal setup service at its stores under which its sales teams help customers set up computers bought there. Apple stores set up more than 1 million products in Q2, Oppenheimer said. The company operated 323 stores in Q2 and expects to open 40 new stores this fiscal year, “nearly three quarters of which will be outside” the U.S., including its fifth store in China, he said.

Overall Q2 revenue jumped to $24.67 billion from $13.5 billion in Q2 last year. Profit grew to $5.99 billion, or $6.40 per share, from $3.07 billion, $3.33 per share.