Notes of interest from Apple's Q2 2014 conference call

Apple surprised the market on Wednesday by not only beating expectations for its second fiscal quarter of 2014, but also announcing a 7-for-1 stock split, increased share buybacks, and a a higher quarterly dividend. Following the announcements, executives from the company participated in a conference call with analysts and the media, and notes of interest follow.

Participating in the call were Apple Chief Executive Tim Cook, Chief Financial Officer Peter Oppenheimer, and Corporate Comptroller Luca Maestri.

Highlights

• $45.6 billion in revenue was new March quarter record and the highest-ever non-holiday quarter
• Earnings per share saw highest growth rate in last six quarter
• iTunes, software and services revenue grew at a double-digit rate
• 800 million iTunes accounts, most of which have credit cards
• Mac sales continued to exceed the overall PC market
• Over two-thirds of people registering an iPad were new to the platform, while over half iPhone users were also new
• Products and services are expanding into "new markets," Cook said
• Incoming retail chief Angela Ahrendts joins Apple's executive team next week
• Apple has acquired 24 companies over the last 18 months
• The company is planning annual dividend increases going forward
• Apple ended quarter with $156 billion in cash, about $18 billion of it held domestically
• Apple has no plans to repatriate hits huge overseas cash sum, saying it would not be a valuable move for shareholders
• 7-for-1 stock split will take place June 2, 2014, trading will begin split-adjusted on June 9

Apple's iPhone business

iPhone sales were up 17 percent years over year. Apple specifically cited China Mobile as leading an all-time quarterly record in the nation of China.

In Japan, iPhone sales were up 50 percent year over year. Strong growth was also seen in "many other developed markets."

iPhone also saw strength in Brazil, Poland, Turkey, and Indonesia with "strong double-digit" growth. Sales in India also more than doubled.

Siemens has 30,000 iPhones deployed among its employees, with numerous in-house apps developed.

iPhone ASPs were down a little over $40 this quarter, largest sequential decline to date. About half of that decline was driven by sales of the iPhone 4S in emerging markets, Maestri said. The rest was lower capacity mix while moving away from the launch quarter.

"We sold a very, very low single-digit percentage (of iPhone 4 units)," Cook said. Those sales had a minimal impact to results on the quarter.

iPhone 4S drew in new user ratios in the 80 percent range in some markets, Cook said. "If we can get them in on the entry iPhone, it gives them a great product at a great value and gets them into the ecosystem." Cited Apple's ability to keep customers.

Apple's expanded share buyback program

Cook said Apple plans to continue to investing in R&D, supply chain, retail, marketing, distribution, and expansion into new markets.

Apple plans to have enough cash on hand to be flexible, but the company plans to revisit its capital allocation program every year.

Cook said Apple is fortunate to be able to return "significant" capital to shareholders.

Program is increased by $30 billion, for total program size of over $130 billion. Cook called the size and pace "unprecedented," and completion is still expected for December of 2015.

"Vast majority" of its program is focused on share repurchases, because Apple believes its current share price does not reflect the value of the company.

Dividend increase for the second time in two years is "meaningful," Cook said. Apple is planning for annual dividend increases going forward.

Apple's iPad business

Cook said iPad shipments came on the high end of Apple's own estimates, though the 16.3 million units shipped disappointed analysts.

Cook said he continues to believe that the tablet market will surpass the PC market in size in the next few years, and that Apple will be a major player in this market.

Channel inventory was reduced this year, while last year the company increased channel inventory by 1.4 million units.

iPad users in America generate almost 4 times the traffic of Android tablets.

Among people planning to purchase a tablet within 90 days, two thirds plan to buy an iPad.

"Thousands" of iPads being used at delivery company FedEx every day.

U.S. Department of Veterans Affairs is planning to deploy 11,000 iPads to change how doctors and patients interact. Will allow quick access to real-time secure medical information.

iPad has over 95 percent share of U.S. education market.

iPad "absolutely has been the fastest growing product in Apple's history," Cook said. Company has sold over 210 million to date, which is more than the company initially thought was possible, and is also almost twice as many iPhones as the company sold in a comparable period of time.

91 percent of tablet activations in enterprise are iPads.

Cook said Apple has to focus on iPad penetration in both education and enterprise markets to drive further sales.

The release of Microsoft Office for iPad will help drive sales, Cook said. How much is unclear, but the CEO said it would have been better for Microsoft if they had come to market earlier.

"Office is still a very key franchise in the enterprise, in particular, and I think having it on the iPad is good," Cook said.

Customer satisfaction with iPad is at 98 percent. Cook said "there's almost nothing in the world" with a 98 percent satisfaction rate.

"There is no shortage of work going in" on how to make the iPad better going forward. No shortage of ideas for future directions for iPad either, Cook said.

Apple's iTunes and App Store businesses

Cook called iTunes a major part of Apple's business.

Sales were up to $2.6 billion.

Cumulative app downloads are over 70 billion.

The App Store generated 85 percent more revenue than Google Play in the March quarter.

Apple's Mac business

Apple cited strong performances from the MacBook Pro and MacBook Air.

The Mac has gained market share in 31 of the last 32 quarters.

Apple's retail business

First stores in Brazil and Turkey opened in the quarter.

Angela Ahrendts joins Apple's executive team next week

Apple's next (Q3 F2014) quarter

Apple is investing "heavily" in R&D into the next quarter, for both current products and future products and services.