There were some interesting takeaways from Apple’s conference call and its Q&A session of that call.  The call ended right about 6:00 PM EST.  Despite a blowout in sales and earnings and despite 57% of its sales coming from international markets, the big deal is around margins softening and the company was trying to telegraph that the margin drop was expected and slightly better than expectations.  We wanted to do was give a quick paraphrase of most of the Steve Jobs’ Q&A session along with other comments from he and from officers of the company.

For starters Apple was on the offensive against Research in Motion Ltd. (NASDAQ: RIMM) by specifically naming it in enterprise sales and against Google Inc. (NASDAQ: GOOG).  On RIM, Jobs said that iPhone outsold RIM phones and that enterprises are testing both the iPhone and the iPad.  That is an assault on the corporate and enterprise market, something new for Apple.  As far as Google, it is commenting about how Android is very mixed.  Steve Jobs went on to say that Apple would be competing with Android for some time.

The figure touted was 65% of Fortune 100 companies and 80% of Fortune 500 companies testing out iPad deployments.

Adobe Systems Inc. (NASDAQ: ADBE) is not going to be any great friend of Apple by the sound of it in the ‘war against Flash.’  Jobs took the stance that “not having Adobe Flash has not presented a problem.”

Jobs also said that the current crop of seven-inch tablets will be a flop, not on cost but on use and functionality.  Jobs also noted that some 250,000 new Apple TVs have already been sold.

We did not get to hear every single question from the conference call but here is the incomplete list we were able to get.  Unfortunately the missing part will not be available for another hour or two……

A question (analyst name not heard) was around the market for iPhones and iPads and other issues such as price points.

JOBS: Nokia Corp. (NASDAQ: NOK) makes $50 phones but Apple can’t make $50 smartphones.  Steve Jobs does not believe that the issue around 7″ screen failures coming is around functionality rather than price.  Assuming that the software works on cheaper products is not right.
Second question was with $50 billion in cash… “What are your aspirations with that cash and why are you not more open to returning that cash to shareholders.

JOBS: strategic opportunities may come along.. does not want to do stupid acquisitions… sees one or two strategic opportunities coming. OUR TAKE FROM JOBS’ STANCE: In short, Jobs is not going to dispense any cash any time soon via a big dividend or via any share buybacks.

CROSS RESEARCH: The iPhone and iPad is a huge opportunity, but are there any marketing changes or other changes?

Peter: 2/3 of Fortune 100 are deploying iPad and it is picking up interest in K-12 (education).  The company is building additional capacity for that and expanding efforts with carrier partners.  Mac is also increasingly getting into enterprise but they are being pulled in by users.  The focus remains on the consumer and they are not making 2 lines where one is enterprise and another is consumer…

On increasing volumes and margins?

Not offering product-specific gross margin but they are working on all product margins.  The drop was said to be better than what the company expected.

(DEUTSCHE BANK?):

On demand from new carriers on iPhone 4 and are the pressure on subsidies??

The pressure is on supply.  In short, demand is outstripping other issues.  Countries are going to multiple carrier relationships now like you saw announced in Germany.

Will all countries have the iPhone by year-end? ….85 of 89 countries but likely all 89 by year-end and the carrier count will be about 166 carriers.

Why do you think Apple has a price point advantage?

JOBS: We engineer a lot of it ourselves, making own chips, miniaturization, make many components… we are systems architects that know how to build efficiently.
After 6:00 PM EST Apple shares are still lower in the after-hours session.  Over 5 million shares have traded since the close/halt-reopen and the stock is down 5.5% around $300.40.  Original after-hours trading had the stock lower by almost 7% in the after-hours.

JON C. OGG

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