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Notes of interest from Apple's Q406 conference call

post #1 of 17
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Apple on Wednesday announced preliminary financial results for its fiscal fourth quarter ended September, reporting revenue of 4.84 billion and net quarterly profit of $546 million, or $.62 per diluted share.

The company said the quarter was fueled by robust sales of Mac notebook systems, an extremely successful back-to-school buying season and continued strength in its music business.

Some notes from the financial conference call with analysts follow:

Apple's Mac business

Apple's Mac business accounted for 58 percent of the company's total quarterly revenue and was "by far" the best quarter for Mac shipments in the company's history.

Apple sold 624,000 desktops during the quarter, and saw unprecedented demand for notebook systems with sales of 986,000 units, representing 61 percent of the total Macs sold.

In all, Macs sales grew at three times IDC's projected PC growth rate for the same time period, Apple executives said.

Apple ended the quarter within its target range of 4- 5 weeks of channel inventory.

The company will continue to air freight some of its notebooks as well as some iMacs during the current quarter due to demand.

Thus far, Mac developers have delivered over 4000 Universal applications. By end of Dec., Apple expects that over 80 percent of the 500 most ciritical applications available for the Mac will be available as a Universal Binary.

Boot Camp downloads have topped a million and Apple continues to have a plan to integrate the dual-booting solution into Mac OS X 10.5 Leopard.

Leopard remains on track to ship "in the spring" of 2007.

Apple maintains just over 7,000 worldwide distribution points for Macs.

Apple's Music business

During the quarter, Apple sold 8.73 million iPod digital music players, representing 35 percent yearly unit growth and 29 percent revenue growth. Sequentially, iPod unit sales were up 8 percent, with revenues from the players rising 4 percent.

Apple said there are now over 3000 accessories for iPod available to consumers.

The iTunes Store now features over 3.5 million songs, 9,000 music videos, 220 television programs and over 20,000 audio books. It continues to account for 85 percent of legal music downloads in the US, according to the latest data from Nielsen SoundScan.

Over 70 percent of new automobiles in the US will offer some form of iPod integration over the next year.

Apple ended the quarter with iPod channel inventory within its target range of 4-6 weeks.

As part of a partnership with Apple Europe, Coke will be giving away 70 million songs over the next few months and will be linking directly to iTunes from its own site.

The new iPod shuffle will ship "by the end of October."

iPod gross margins for the quarter were "over 20 percent" as usual, but Apple has traditionally shied away from offering any color in this area due to competitive concerns.

Despite analyst inquiries, Apple did not offer an update on iTunes music and movie sales, saying it instead plans to offer updates on those areas at a later date. What the company did say is that it hopes to offer movie downloads through some of its international iTunes stores in 2007.

Apple maintains just under 40,000 worldwide distribution points for its iPods.

The PC market in Japan stinks -- it's one of the weakest in the world and Apple remains unhappy with lackluster sales in the region.

Apple's Retail segment

Apple retail stores contributed $936 million in revenue during the quarter, an increase of 41 percent from the year-ago quarter.

Profit for the retail segment came in at about $50 million.

The stores combined to sell a total of 323,000 Macintosh systems, up 60 percent from the year-ago quarter.

Apple opened 10 new stores during the quarter, ending with a total of 165 locations. It opened 41 during the fiscal year.

Based on an average of 158 stores in operation during the quarter, average store revenue was approximately $5.9 million.

Combined, Apple retail stores hosted over 20 million visitors, the second highest traffic in the segment's history, behind only the first fiscal quarter of 2006 (the 2005 holiday quarter).

For the first time, "over 50 percent" of Apple retail Mac purchases were made by customers new to the Macintosh.

Apple executives estimated that the average Apple retail store added 1000 new Mac users during the quarter.

Apple in education

The fiscal fourth quarter of 2006 represented Apple's most successful back-to-school quarter for higher-education in the company's history.

Educational Mac notebook sales rose 49 percent year-over-year due to 1) MacBook demand amongst higher-education customers and 2) the company's back-to-school promotion (buy a Mac get a nano).

Overall, Apple's Mac educational sales rose 20 percent, above IDC's forecast for the same time period.

Other Apple business and segments

Apple Americas accounted for 781,000 Mac sales and $2.297 billion in revenues. These figures are up 23 percent and 30 percent year-over-year, and 22 percent and 5 percent sequentially.

Apple Europe accounted for 342,000 Mac sales and $987 million in revenues. These figures are up 32 percent and 27 percent year-over-year, and 14 percent and 10 percent sequentially.

Apple Japan accounted for 62,000 Mac sales and $286 million in revenues. These figures are up 28 percent and down 13 percent year-over-year, and down 22 percent and up 11 percent sequentially.

Apple's Asia Pacific (and FileMaker Inc) accounted for 102,000 Mac sales and $330 million in revenues. These figures are up 50 percent and 37 percent year-over-year. Sequentially, unit sales rose 15 percent in the Asia Pacific regions and revenues increased 7 percent.

Apple's "Other Music Related Products and Services" segment accounted for $452M in revenue. The figure represents a 71 percent year-over-year increase but a 1 percent sequential decline.

Apple's "Peripherals and Other Hardware" added $297M in revenue, representing no change in revenue yearly but a 26 percent increase sequentially.

Apple's "Software, Service and Other Sales" segment accounted for $316M in revenue, an increase of 7 percent year-over-year and 1 percent sequentially.

Other subjects and Q1 guidance

Apple offered extremely limited forward-looking information related to its products during the conference call.

The company refused to offer any new information on iTV or its expectations for the product aside from reiterating that it will go on sale in the first calendar quarter of 2007.

54 percent of Apple's sales during the quarter were direct sales.

The gross margin for the quarter was 29.2 percent, up from 28.1 percent in the year-ago quarter.

Notebook hard drive pricing is seen as favorable for the current quarter, but DRAM, NAND and flat-panel display demand is currently exceeding supply.

There was no "misconduct" by Steve Jobs related to options backdating. There wasn't much else discussed on this matter.

"We are very confident for what we have in the pipeline, and very excited that our customers will be pleased with it." - Apple exec.

Looking ahead to the first fiscal quarter of 2007, Apple is guiding for revenue of $6.0 to $6.2 billion and earnings per diluted share of $.70 to $.73.
post #2 of 17
"The stores combined to sell a total of 323 Macintosh systems, up 60 percent from the year-ago quarter."

So they are averaging two Macintosh systems sold per store last quarter?
post #3 of 17
Quote:
Originally Posted by JeffDM

"The stores combined to sell a total of 323 Macintosh systems, up 60 percent from the year-ago quarter."

So they are averaging two Macintosh systems sold per store last quarter?

They must have mis-typed - 323,000 would make more sense - 2044 systems per store.

The average computer they sold generated $1743 in revenue, which would be $3.56 million per store from computers at 2044 systems, which is 60% of the per-store revenue of $5.9 million (about the specified revenue mix for computers at 58%).
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post #4 of 17
Quote:
Originally Posted by JeffDM

"The stores combined to sell a total of 323 Macintosh systems, up 60 percent from the year-ago quarter."

So they are averaging two Macintosh systems sold per store last quarter?

That's thousand... Was working rather fast.

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post #5 of 17
Quote:
The PC market in Japan stinks

I wonder if that's a direct quote
post #6 of 17
Quote:
Originally Posted by AppleInsider

The iTunes Store now features over 3.5 million songs, 9,000 music videos, 220 television programs...

does that mean 220 different programs, or 220 different episodes? (in other words, do 20 episodes of the office represent about 10% of the ITMS tv show content?) or if it's programs, how many episodes (I think "shows") does that constitute?
post #7 of 17
Quote:
Originally Posted by rtdunham

does that mean 220 different programs, or 220 different episodes? (in other words, do 20 episodes of the office represent about 10% of the ITMS tv show content?) or if it's programs, how many episodes (I think "shows") does that constitute?

It's 220 unique programs. Multiple-episode-per-week offerings like the Daily Show and Colbert Report must account for several hundred episodes alone. Wikipedia has a partial list.
post #8 of 17
"Despite analyst inquiries, Apple did not offer an update on iTunes music and movie sales, saying it instead plans to offer updates on those areas at a later date."

I hope that later date is also known as an Apple Special Event!!!
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post #9 of 17
Quote:
Originally Posted by DeaPeaJay

I wonder if that's a direct quote

I'm sure it is.

I believe that Apple's one size fits all tactic just doesn't work well in Japan. Apple does not have a sub-notebook or a viable low end Mac. The Mac Mini is expensive and should be lowered by $100 dollars (whatever that converts to yen). Face it, the Mac Mini is kind of ugly. Apple would do well to make Macs specific to geographic areas.

With Sony coming out with a PS3 that does so much of what a PC does there may be less of a reason to by a Mac then than ever in Japan. Space is a premium there, so a system made specifically for game playing that can browse the web, play music files, and movies discs is a winner over any PC and more so the Mac.

Other than Japan, Apple needs to crank out a Tablet for the whole world to absorb. What's the technical and marketing difficulty here? They would sell more than the Mac Pro for sure.
post #10 of 17
Quote:
Originally Posted by mark2005

"Despite analyst inquiries, Apple did not offer an update on iTunes music and movie sales, saying it instead plans to offer updates on those areas at a later date."

I hope that later date is also known as an Apple Special Event!!!


iTv and video iPod before xmas? Sound like a cunning plan to me!
post #11 of 17
Quote:
Originally Posted by Yamas

iTv and video iPod before xmas? Sound like a cunning plan to me!

You're dreaaaaming mate 8)
post #12 of 17
Apple needs to further increase marketshare of Mac OS X first rather than Mac hardware.

Check out: http://news.zdnet.co.uk/business/0,3...9284186,00.htm

The only way to beat Windows. In fact, if Mac OS X market share reaches 10 to 25%, then Windows will be history very soon afterwards...
post #13 of 17
Quote:
Originally Posted by zunx

Apple needs to further increase marketshare of Mac OS X first rather than Mac hardware.

Check out: http://news.zdnet.co.uk/business/0,3...9284186,00.htm

The only way to beat Windows. In fact, if Mac OS X market share reaches 10 to 25%, then Windows will be history very soon afterwards...

Oh no, is Apple doomed again?
post #14 of 17
Quote:
Originally Posted by MacTel

I'm sure it is.

I believe that Apple's one size fits all tactic just doesn't work well in Japan. Apple does not have a sub-notebook or a viable low end Mac. The Mac Mini is expensive and should be lowered by $100 dollars (whatever that converts to yen). Face it, the Mac Mini is kind of ugly. Apple would do well to make Macs specific to geographic areas.

With Sony coming out with a PS3 that does so much of what a PC does there may be less of a reason to by a Mac then than ever in Japan. Space is a premium there, so a system made specifically for game playing that can browse the web, play music files, and movies discs is a winner over any PC and more so the Mac.

Other than Japan, Apple needs to crank out a Tablet for the whole world to absorb. What's the technical and marketing difficulty here? They would sell more than the Mac Pro for sure.

The difficulty is that no one other than a handful of geeks is really interested in a tablet, at least as they exist today. If Apple would come out with a tablet that was really innovative (with a multi touch screen, for example), that might wake the interest of the masses.
post #15 of 17
Quote:
Originally Posted by csimmons

The difficulty is that no one other than a handful of geeks is really interested in a tablet, at least as they exist today. If Apple would come out with a tablet that was really innovative (with a multi touch screen, for example), that might wake the interest of the masses.

Uhhh? I think just about every Photoshop user and artist under the sun would love to have an affordable tablet style computer.
Hmm? If only more artists used Macs.</sarcasm>

The masses are craving a geeky feature like multi-touch?
What are you smoking?</rhetorical>
They don't even know what that is.
The masses wan't simple, well designed and affordable.
Not a desktop OS(Windows) shoehorned into a ghetto-rigged laptop(current state of PC tablets.
post #16 of 17
The Japanese have a knack for buying their own products, but it doesn't mean they'll exclusively by Japanese electronics. I don't think most Japanese have the space for something like a Mac Pro, and their latest laptops are a bit big for Japanese standards. The iPod on the other hand is fairly successful there, but it isn't like it is in the US.

Nintendo's President, Satoru Iwata does use a Mac, though.
post #17 of 17
Quote:
Originally Posted by FireEmblemPride

their latest laptops are a bit big for Japanese standards.

Yeah, the MB is nearly twice as heavy as a typical ultralight. Ultralights are favored in Japan. Apple simply doesn't offer such a unit, which explains their 11% drop in Mac sales in Japan.
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