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Digging down into Apple¿s remarkable numbers

By now anyone reading this will know that Apple reported another blockbuster quarter yesterday. I listened to the conference call last night and heard a number of tidbits neglected in many news stories. But before I give you those, here's a summary of the results and my thoughts on what they mean:

Apple did not set an all-time record for quarterly earnings but did break its record for the September quarter by raking in $6.2 billion in revenue for a profit of $904 million. The profit was a whopping 67 percent year-over-year increase and far exceeded analyst predictions ($1.01 per share versus 85 cents per share).

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All segments contributed. Though overshadowed by the iPod and iPhone in terms of publicity, the Mac chipped in with 2.16 million units, responsible for 62 percent of Apple's revenue. It broke the previous quarterly record for Mac shipments by 400,000 and represented a year-over-year growth rate of 34 percent, a rate consistent with the last four quarters. By comparison, the worldwide PC market grew just 14.4 percent and the U.S. PC market only 4.7 percent, according to Gartner's third quarter market share report. No wonder Mac market share keeps increasing.

The iPod sold 10.2 million units, a 17 percent increase over the year-ago quarter. This is impressive when you consider that the new models weren't introduced until Sept. 5, three weeks before the quarter ended, and that the iPod faced in-house competition from its iPhone cousin.

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The iPhone, for its part, sold 1.1 million units for the quarter. Apple Chief Operating Officer Timothy Cook credited the controversial $200 price drop with helping to spur sales. More on the iPhone later.

Oppenheimer didn't have much to say about its software sales, which includes such items as iLife, iWork, and Final Cut Studio, but that broad category pulled its weight with a 36 percent year-over-year revenue boost.

Apple's "other music-related products and services" category, which includes the iTunes Store, had revenue growth of 33 percent year over year. Oppenheimer said the iTunes Store had an incredible 85 percent of the paid digital download market for music in the United States according to Nielsen SoundScan data.

Apple's retail stores experienced 42 percent growth in revenue (further proving that Gateway simply executed the retail concept poorly). As usual, Oppenheimer noted that 50 percent of the customers buying Macs were new to the platform, which jibes with the boffo sales numbers.

To keep the momentum going, Apple plans to open 40 more retail stores over the next year, both in the United States and abroad, including one in Beijing next summer.

But enough of the basics. Here are some other nuggets I gleaned from the conference call:

Talking up the enterprise: In response to a question about Mac and iPhone sales to small and medium businesses, Cook said Apple is "doing well there and growing" and that "we're providing a solution in iPhone that many businesses love." Given that Apple historically has paid little heed to businesses, preferring to focus on its image as a consumer electronics company, Cook's statement might signal that Cupertino is preparing to actively court the enterprise market.

iPhone sales: Oppenheimer repeated Apple's expectation that it will sell 10 million iPhones in the calendar year 2008. It won't be easy. When Apple cut the price of the iPhone, Piper Jaffray's Gene Munster did a survey on daily iPhone sales, estimating 9,000 phones per day before the price cut and 27,000 per day after. He also called that "unsustainable," offering 13,500 as a more realistic number. For Apple to sell 10 million iPhones in 2008, it will need to average about 27,400 per day. Of course, in 2008 Apple will be selling the iPhone in Europe and eventually Asia.

Unlocked iPhones: Many pundits had guessed the number of people buying iPhones to unlock them for use on a network other than AT&T's was in the 2 to 5 percent range, though Munster earlier this month had guessed 10 percent. Cook said Apple has estimated 250,000 of the 1.4 million iPhones sold were purchased with the intent to unlock -- close to 18 percent of the total.

Cash: Apple now has $15.4 billion in cash and no debt. Last year at this time it had $10.1 billion and in 2005 it had $8.26 billion. Talk about a cash cow.

High guidance? Oppenheimer stunned the analysts on the conference call by offering guidance of 9.2 billion in revenue for the December quarter, $700 million higher than current analyst projections and a 28 percent increase year over year. Apple is legendary for lowballing in its guidance and then beating it handily. With new iMacs, new iPods and the iPhone launching overseas going into the holiday buying season, the company's most lucrative quarter, Apple could be feeling more confident than usual. But consider this: the September quarter revenue it reported yesterday represented a 29 percent increase year over year. Perhaps guiding at 28 percent is not so outlandish after all.

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