Tim¿s in charge at Apple HQ; Mac and iPod sales growing faster abroad

The horrific economic conditions of the fall holiday shopping season slowed the Apple Inc. money machine only slightly, with the company reporting a record profit of $1.61 billion for the December quarter.

Apple had revenue of $10.17 billion, breaking $10 billion for the first time.


Although a few segments lagged, in general Apple did exceptionally well, particularly outside the United States.

Investors reacted positively. After having risen $4.63 to $82.83 during a bullish session yesterday, AAPL surged another $7.87 (9.5 percent) in after hours trading.


Yesterday's earnings conference call -- conducted between analysts and the team of Chief Operating Officer Tim Cook and Chief Financial Officer Peter Oppenheimer --contained the usual smattering of informative tidbits and insights:

Steve Jobs Ben Reitzes of Barclays Capital, the first analyst up, wasted no time in asking about Steve Jobs. He asked whether Tim would run Apple differently with Steve on medical leave.

Oppenheimer delivered the party line about Steve remaining involved in major strategic decisions while Tim minded the store. No mention was made of Jobs' health.

But Cook offered a much longer, more detailed response -- a virtual Apple Manifesto. He clearly intended to remove any doubt about Apple's ability to function with or without Steve, and in doing so came off very much like The Man in Charge. His comments:

Macs up or down? Mac sales overall increased 9 percent year over year, which only looks bad when compared to the 40 to 50 percent growth the Mac enjoyed in late 2007 and early 2008. Mac sales fell 3 percent from the September quarter.

It's more illustrative to view the Mac's numbers in the context of the overall PC market, which Oppenheimer did in his opening remarks. He cited IDC's report last week, which showed negative growth (-0.4 percent) in the worldwide PC market for the December quarter.

Suddenly 9 percent growth looks pretty good.

Surprisingly, international sales propped up the Mac in December. Cook said Mac growth in the U.S. was just 2 percent, while international sales jumped 16 percent. He added that several countries, such as Italy, had Mac unit sales increases of more than 20 percent year over year.

Until now sales of the Mac internationally have not increased at the same pace as sales in the U.S. While the Mac's U.S. market share hit 7.7 percent for all of 2008 according to IDC, its global share has remained stuck at about 3 percent.

So the Mac has plenty of room for growth in the global PC market. With the U.S. market looking grim for 2009, a boost in global sales would give Apple a good chance of maintaining at least some Mac growth.

Netbook Macs Cook reiterated the Apple stance that it is "watching" this nascent market of smaller, low-cost laptops. He's not impressed: "From our point of view the products in there are principally based on hardware that's much less powerful than we think customers want. Software technology that is not good, cramped keyboards, small displays."

But Cook also repeated what Jobs has said about Apple having "ideas" for this segment. Stay tuned.

The iPod lives The iPod's performance contradicts yet again those who believe the product is on its way out. Apple shipped a record 22.7 million iPods in the December quarter, a 3 percent increase year over year. Revenue, however, declined 16 percent. Apparently all those iPod Touches couldn't make up for the scads of cheaper, lower-margin Nanos.

Oppenheimer noted the iPod not only retains its 70 percent share of the U.S. MP3 player market, but also dominates in other countries such as the U.K. and Australia (both 70 percent), Japan (over 60 percent) and Canada (over 50 percent). Cook said iPod sales in the U.S. actually fell 3 percent. In an echo of the Mac results, all the iPod growth came from the global market.

Recession hits retail stores Fewer customers bought Apple products from one of the company's 251 retail stores; revenue per store slid 17.6 percent from $8.5 million to $7 million. Because Apple continues to open new stores, the retail segment managed a 2 percent revenue gain year over year. Oppenheimer said Apple plans to open 25 more stores in 2009, half of them internationally.

iPhone beats target Apple sold 4.4 million iPhones in the quarter, bringing the grand total for 2008 to 13.7 million, well over the 10 million-unit goal the company set back in 2007. Though lower than what some analysts had projected, iPhone sales came close to doubling last December's 2.3 million units.

Cook expressed no concern when asked about potential iPhone competition in 2009, saying that Apple approaches the iPhone as "a software platform" rather than a hardware business. Both he and Oppenheimer seized every opportunity to trump the App Store milestones of 15,000 apps and 500 million downloads announced last week.

Cook said he welcomed competition but warned rivals to mind Apple's patents: "We will not stand for having our [intellectual property] ripped off, and we'll use whatever weapons we have at our disposal."

Apple TV picture brightens While describing Apple TV as a "hobby" – Jobs' exact term when he introduced the product two years ago – Cook noted sales of the device shot up threefold year over year. "We're going to continue to invest in it," Cook said, "because we fundamentally believe there is something there for us in the future."

Fort Knox With an additional $3.6 billion to put in its piggy bank, Apple now has $28.1 billion in cash. Oppenheimer said Apple had "no new update" regarding plans for its stash, which means no dividends for shareholders, no stock buybacks and few if any acquisitions of companies. But he did say Apple would "invest our way through this downturn just as we did the last one."

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