Notes from Apple's Q4 '05 conference call

[AppleInsider]

Apple today announced financial results for its fiscal 2005 fourth quarter ended September 24, 2005, reporting the highest revenue and earnings in the company's history.

Some very brief notes from the conference call with analysts and the media follow:

Apple sold 1,236,000 Macs during the quarter.
The company also sold 6,451,000 iPods.
602,000 of the Macs sold were desktop systems while 634,000 were portables.
The average selling price of Apple desktops was down slightly year over year due to lower iMac pricing.
Apple shipped over 1 million nanos in the 17 days that were left in the quarter after the player was announced.
The company ended quarter with "enormous backlog" of the nano and cannot predict when it will be able meet a supply and demand balance on the players.
Apple's iPod nano backlog issues are a result of a component constraint, not manufacturing or product mix (2GB/4GB or B/W issues), the company claims.
Demand for the nano is "staggering" said Apple's only executive vice president, Tim Cook.
The company hinted at forthcoming iPod/Mac announcements.
There are now over 1000 authorized iPod accessories on the market.
15 major car manufacturers are offering iPod integration with their automobiles; about 30% of cars in the US will offer iPod integration in 2006
Tiger revenue for the fourth quarter was in the mid-$35 million dollar range.
Apple retail stores saw 14.8 million visitors during the quarter, which breaks down to 9800 thousand visitors per store, per week.
The company plans to open 35 to 40 new retail stores in fiscal 2006, most of which will be in the U.S.
Apple for the first time confirmed that it is constructing a [mega flagship] store on 5th Ave in Manhattan and would like to see it open by the end of the year.
Apple's education sector sold more Mac systems during the fourth quarter than any other quarter in last 10 years.
Higher eduction Mac unit sales grew 38% year-over-year, thanks largely in part to a better than expected back-to-school buying season.
During the quarter, DRAM and LCD-panel prices were more stable than had been expected. DRAM prices should stay down through the current quarter. Hard drive prices are also expected to decline, but less than historical trends would imply.
Mac channel inventory came in below Apple's 4- to 5-week target as Mac sell-through exceeded expectations.
For its first quarter of 2006, Apple expects $4.7 billion in revenue based on 35 percent year over year growth.

[ View this article at AppleInsider.com ]

[Nautical]

So much for the early rumors that Apple wasn't selling many nanos at all. And that there were an uneven supply/demand of white/black models.

[nagromme]

...and that Mac sales were in a slump!

PS, they said education sales were good. I wonder how edu market share compares to last year? Improving? Or was this a good back-to-school season for Dell too?

[polyester]

Holy cow! 9800 thousand visitors per store, per week! That's 9.8 million visitors per store, per week. *125. That's... 1,225,000,000. PER WEEK.

I smell a typo.

[rok]

Apple has two businesses: "Mac and Music"

Apple CFO Peter Oppenheimer

gosh, wonder if that statement will come up in the lawsuit of apple vs. apple.

[sunilraman]

(edit: okay, see chart below)

[FireEmblemPride]

Has Apple ever sold over a million Macs in any quarter within the last five or so years?

[sunilraman]

chart here... AAPL Financial Year 2004 and 2005, by Quarter

[sunilraman]

notice that mac units surpassed 1 million in q1 05 and has held out above 1 million since then. Q4 '05, which was supposed to be "apple is teh intel doomed" quarter, resulted in highest ever mac units sold.

mac units sold are not that fantastic in growth compared to of course, the ipod, interestingly, the profit line, goes along with the ipod line


note the steep jump from Q4 '04 to Q1 '05, which shows "christmas frenzy". expect a similar jump next quarter is my guess.

revenue is roughly over $2 billion per quarter in fy2004 and over $3 billion per quarter in fy2005

profit is a crappy $100 million or less per quarter in fy2004, jumping to an impressive $300-$400 million per quarter in fy2005. yay!

[sunilraman]

Originally posted by FireEmblemPride
Has Apple ever sold over a million Macs in any quarter within the last five or so years?

yes, apple has consistently sold over 1 million Macs per quarter in the past four quarters.

[sunilraman]

this 3d graph may show why profit taking happened to push the share price below $47... a cynical view may look at the ipod growth starting to flatten out, with revenue and mac unit sales holding above the $3bil/quarter and 1million units/quarter marks respectively.

nice profit spike this past financial quarter though, so no surprise, apple is doing very well on the profitability side of things. this suggests that apple has identified and moved strongly on new profit centers, and have enough innovation around to have reasonably steady profit growth beyond iPods, iTMS and Mac units.

this concludes my patented deckchairAnalysis™ tonight. the Sunil Group signing out.

edit: final thoughts:
1. ipod "halo effect" : this is possibly contributing to apple holding above 1 million mac units sold per quarter, nicely coming along, albeit, is it growing fast enough for some punters? who knows.
2. macintel announcement: this has obviously no proven effect on apple revenue, sales, growth, whatever whatever. really, it seems no one gives a flying f**k because apple has posted is greatest ever quarter, when the CFO warned that things would be the same compared to the previous quarter and that they "didn't know" what the effect of the intel announcement would be.

[kenaustus]

Somewhere, hidden in the figures, is the fact that selling iPods over $200 will yield as much, if not more, net income than a lot of computer makers get off of they base line PCs. While Apple's "computer" sales are around a million units you can probably add another 4 - 5 million "PC equivalent units" because of the iPod's profitability. Must drive Mike Dell nuts when he thinks about that.

[sunilraman]

nice one ken. also, let us not forget that apple is selling over 11,000 Macs PER DAY worldwide with virtually ZERO advertising of such mac units. i get a frickin' dell flyer in my newspaper every other day

[JeffDM]

Originally posted by kenaustus
Somewhere, hidden in the figures, is the fact that selling iPods over $200 will yield as much, if not more, net income than a lot of computer makers get off of they base line PCs. While Apple's "computer" sales are around a million units you can probably add another 4 - 5 million "PC equivalent units" because of the iPod's profitability. Must drive Mike Dell nuts when he thinks about that.

Comparing the profitability of a base model of one product category with with the profitability of a mid range to high-end model of another product category nets no information of value.

Overall, the PC market has horrendously slim margins, so I'm not really surprised. I am glad I never tried to sell computers as a small business, I think it's an easy and almost guaranteed path to disappointment.

[muchicuchi]

How much cash do they have on hand now? Apple should use this to buy some software companies such as Avid, Adobe, Auto-desk, and Sonic. Those companies can help apple grow when it comes to sales. Also it would eliminate competitors to their existing product lines making more people buy Apple computers in the long run. I am still waiting for Apple Photoshop, Apple Maya, etc...

[melgross]

Originally posted by sunilraman
nice one ken. also, let us not forget that apple is selling over 11,000 Macs PER DAY worldwide with virtually ZERO advertising of such mac units. i get a frickin' dell flyer in my newspaper every other day

Actually Apple's computer sales were substantially over 1 million at 1, 236,000 units. That's almost 25% over 1 million. The computer sales were almost 50% higher than last years quarter. Pretty damn good. I don't think that it will grow at that rate next year though. But Apple's prediction for $4.7 billion in sales is about $1.2 billion over that same quarter last year. Substantial.

If you look at the profit jump, it really shows a correlation with the average of the computer sales and the iPod sales. But what they don't show here (or Sunil doesn't show) is the software sales. Software usually has a much greater margin than hardware and is also responsible for the profit hike.

I lost a HECK of a lot of money after hours. I just hope that everyone comes back to their senses tomorrow. Apple didn't reach the extreme estimate of 3.76 billion in sales but they did awfully well, and their next quarter estimate is pretty good.

edit: corrected a number.

[Carson O'Genic]

A couple of comments:

To Rob Enderle regarding tanked Apple hardware sales - suck on those numbers.

To the few who keep insisting that Apple should drop hardware sales and go software only, $35,000,000 in Tiger sales is nice but just doesn't compare to hardware sales (even without the iPod).

[sunilraman]

Originally posted by melgross
Actually Apple's computer sales were substantially over 1 million at 1, 236,000 units. That's almost 25% over 1 million. The computer sales were almost 50% higher than last years quarter. Pretty damn good. I don't think that it will grow at that rate next year though. But Apple's prediction for $4.7 billion in sales is about $1.2 billion over that same quarter last year. Substantial.

If you look at the profit jump, it really shows a correlation with the average of the computer sales and the iPod sales. But what they don't show here (or Sunil doesn't show) is the software sales. Software usually has a much greater margin than hardware and is also responsible for the profit hike.

I lost a HECK of a lot of money after hours. I just hope that everyone comes back to their senses tomorrow. Apple didn't reach the extreme estimate of 3.76 billion in sales but they did awfully well, and their next quarter estimate is pretty good.

edit: corrected a number.

fair enough.

almost 14,000 Macs per day on average for 90 days during july-september 2005

i've gone back to the mac unit numbers though. each quarter it has grown by
-5.07%, 7.82%, -2.34%, 11.16%, 1.13%, 4.97%, 2.23% when compared with the previous quarter (not year-ago quarter)

these are not fantastic numbers in wall street's opinion but if you compare financial 2005 to financial 2004 the number of mac units sold increased by 15.9% ...again, remember, this is with virtually zero advertising

yup, those profit centers i mentioned definitely includes software sales. didn't have the energy to include them

edit: mel, yeah, quite a number of people are pissed off about the after hours drop. but it will pick up, i think we all agree on that. can apple achieve a 15-20% annual growth in mac unit numbers in financial 2006 compared to the previous year? i think it is very possible provided no macintel transition screwups.

we have to remember though that when looking at mac units sold numbers it is important to consider profit margins. greater units sold at the expense of profit margins may not be so tantalising as more units sold while maintaining margins...

[sunilraman]

Originally posted by Carson O'Genic
A couple of comments:

To Rob Enderle regarding tanked Apple hardware sales - suck on those numbers.

To the few who keep insisting that Apple should drop hardware sales and go software only, $35,000,000 in Tiger sales is nice but just doesn't compare to hardware sales (even without the iPod).

heh. the enderle "group" can go blow me. what a f*kwit.

[melgross]

Originally posted by sunilraman
heh. the enderle "group" can go blow me. what a f*kwit.

Well, I'm going to be writing to him soon. We have a correspondence going for a couple of years.

I'll mention your offer, if you like.

[sunilraman]

ROFLMAO

[melgross]

WTF!!!

Check out Thinksecret. They've changed again.

[rwahrens]

Originally posted by melgross
WTF!!!

Check out Thinksecret. They've changed again.

<Rumors have swirled for months concerning Apple's sale of music videos at the iTunes Music Store, and those plus video podcasts and television broadcasting appear better positioned at this point for a video iPod than feature length films. Apple will be hosting a media event at the BBC's headquarters in London tomorrow to coincide with the media event in California, suggesting a tie-in with that broadcasting entity.> (from ThinkSecret)

Sort of supports the report about BBC's inadvertant release of a Video iPod commercial, huh?

Also supports what I have been saying about music videos as a foot-in-the-door start - see the next quote:

<Apple also appears to be working on a tool that would allow consumers to easily import movies onto their computer, although its functionality might not extend to copyrighted works initially. Think Secret reported Sunday that Apple executives had previously stressed the importance of such a tool in order for a video iPod to really take off.>

Movies are really what people want, I realize, but the music videos will kick it off...

Of course, I'll come back and eat crow if there isn't that vPod tomorrow...!!!

[sunilraman]

5 Hours to go. Is it just me or are we at that stage where I'm like, i'm too tired to predict anymore, let's just buckle up and rock and roll. f**king BRING IT MATE!! YEAHHHH woooooooo

[Relic]

Originally posted by sunilraman
5 Hours to go. Is it just me or are we at that stage where I'm like, i'm too tired to predict anymore, let's just buckle up and rock and roll. f**king BRING IT MATE!! YEAHHHH woooooooo

Yeah, I was like that earlier but I did to many butt keagals and got tired. So I drank a Red Bull to pep me up. Then I got to anxious so I took a qualuid to calm me down. Now I can’t remember who I am or where I’m at, just drooling here, waiting, for what?

"This is the main advantage of ether: it makes you behave like the village drunkard in some early Irish novel ... total loss of all basic motor skills: blurred vision, no balance, numb tongue- severance of all connection between the body and the brain. Which is interesting, because the brain continues to function more or less normally ... you can actually watch yourself behaving in this terrible way, but you can't control it."

[sunilraman]

Originally posted by Relic
... you can actually watch yourself behaving in this terrible way, but you can't control it."

dude, that's exactly how i get when i have had more than, say, 6 shots of jaegermeister in the space of an hour

[rwahrens]

Originally posted by sunilraman
5 Hours to go. Is it just me or are we at that stage where I'm like, i'm too tired to predict anymore, let's just buckle up and rock and roll. f**king BRING IT MATE!! YEAHHHH woooooooo

I've gotta sit back from my keyboard - otherwise I'll get it as wet as the front of my shirt already is!

[nathan22t]

Originally posted by sunilraman
5 Hours to go. Is it just me or are we at that stage where I'm like, i'm too tired to predict anymore, let's just buckle up and rock and roll. f**king BRING IT MATE!! YEAHHHH woooooooo

F-YEAH!!!

[piot]

Just before you all go writing to Enderle.... He did mean the calander 4th quarter, ie THIS current quarter.

That said, he is a dickhead and I expect to see a lot more of his FUD in the run up to the Intel transition and Vista. Apple now has nine months (max) of PPC sales before the first Intel Macs appear. I think there might be a little dip in sales... but who knows how much that will be? Will they drop back below a million a quarter? Even if they do .... they won't be "dropping like a rock"

[rwahrens]

Originally posted by piot
Just before you all go writing to Enderle.... He did mean the calander 4th quarter, ie THIS current quarter.

That said, he is a dickhead and I expect to see a lot more of his FUD in the run up to the Intel transition and Vista. Apple now has nine months (max) of PPC sales before the first Intel Macs appear. I think there might be a little dip in sales... but who knows how much that will be? Will they drop back below a million a quarter? Even if they do .... they won't be "dropping like a rock"

I agree, no dropping like a rock, cause a lot of people are wanting to get the last generation of PPC Macs just to be sure that they can weather the transition. As The Apple Turns put it best yesterday - they've invested a grand in recent software purchases, and want to get their money's worth from it before going to intel. So they buy the last gen PPC, and that'll take em to the intel's 2nd gen when the major bugs are (hopefully) ironed out.

Don't thunk Apple hasn't seen this one coming - cause they seem to have some ideas about making that last generation or so with enough "oomph" to keep that crowd happy till they feel like switching.

After all, look at the sales numbers!

[melgross]

Originally posted by piot
Just before you all go writing to Enderle.... He did mean the calander 4th quarter, ie THIS current quarter.

That said, he is a dickhead and I expect to see a lot more of his FUD in the run up to the Intel transition and Vista. Apple now has nine months (max) of PPC sales before the first Intel Macs appear. I think there might be a little dip in sales... but who knows how much that will be? Will they drop back below a million a quarter? Even if they do .... they won't be "dropping like a rock"

Yes, he did.

I suppose that we may see some evidence of that in the January quarter. But it's hard to tell. The April quarter is where we can expect to see something.

It all depends on the publicity. As this is a rolling changover it doesn't affect the entire product line at once. That might be a good thing for sales.

Also, if the consumer machines are first it might not matter at all. Most consumers don't even know about the changover.

In fact, most consumers don't even know that Apple doesn't use Intel chips NOW.

[rwahrens]

Originally posted by melgross
Yes, he did.

I suppose that we may see some evidence of that in the January quarter. But it's hard to tell. The April quarter is where we can expect to see something.

It all depends on the publicity. As this is a rolling changover it doesn't affect the entire product line at once. That might be a good thing for sales.

Also, if the consumer machines are first it might not matter at all. Most consumers don't even know about the changover.

In fact, most consumers don't even know that Apple doesn't use Intel chips NOW.

What's more, they mostly don't care,and wouldn't know the difference between the two if it bit em on the tush! As long as that keeps the Apple rolling on into the future, that's what counts...

[aegisdesign]

Originally posted by rwahrens
Sort of supports the report about BBC's inadvertant release of a Video iPod commercial, huh?

Huh? The BBC don't show commercials.

More than that, they're even so stupidly careful and fair as to call any iPod they have on screen in their programs a 'digital music player' or mp3 player. Never ever do they mention brand names. It grates every time they do it as you know the presenter just wants to say iPod and finds the whole thing stupid.

If the BBC are involved it could be that they're going to allow downloads of a lot of the free video content they've been putting on their web lately. Only problem there is that apart from the H.264 archive they've got in beta, the free stuff is all Real or WMV.

[melgross]

Originally posted by aegisdesign
Huh? The BBC don't show commercials.

More than that, they're even so stupidly careful and fair as to call any iPod they have on screen in their programs a 'digital music player' or mp3 player. Never ever do they mention brand names. It grates every time they do it as you know the presenter just wants to say iPod and finds the whole thing stupid.

If the BBC are involved it could be that they're going to allow downloads of a lot of the free video content they've been putting on their web lately. Only problem there is that apart from the H.264 archive they've got in beta, the free stuff is all Real or WMV.

The BBC does have commercial channels, but as they name things like Channel 1, Channel 2, ... It's tough to know which is which from here in the States.