RealTime IT News

Apple Picks A Bushel Of Profits

It was another bang-up quarter for Apple, as the company reported its best sales ever, record profits and tremendous sales of both Macintosh computers and iPod MP3 players.

The company reported revenue of $5.41 billion for the quarter ended June 30, 2007, a 23 percent rise in revenue over the $4.37 billion reported in the June 30, 2006 quarter. Apple's  net income soared to $818 million, or $.92 per diluted share, a 73 percent increase over last year's income of $472 million, or $.54 per diluted share.

As for the newly launched iPhone, Apple CFO Peter Oppenheimer acknowledged in a conference call with analysts that there were activation problems for which Apple has "apologized to customers." He said AT&T has fixed the problems and "customers are experiencing problem-free activations."

The pricey iPhone enjoyed a launch hype to match the latest Harry Potter novel but hasn't exactly sold the same number of copies. The sales research firm Strategy Analytics estimated that only 250,000 iPhone units were sold in the last two days of Q2, the first two days it was on the market, and only 146,000 iPhone consumers chose to -- or were able to -- activate those phones.

"To make the top 10 list of mobile phones sold, the iPhone will have to move approximately 600,000 units in Q3," said Barry Gilbert, vice president of Strategy Analytics in a statement.

Oppenheimer expects to do better than that. He said Apple expects to sell 1 million iPhones this quarter and 10 million in calendar year 2008. Apple will enter the European market in the fourth quarter. It will announce its release plans and schedule later this quarter.

Asked if the $599 iPhone was cannibalizing sales of its $249 iPod, Tim Cook, COO of Apple, said "there is no evidence during the June quarter of cannibalization. We will monitor it this quarter and report on it on next conference call."

Apple shipped 1.7 million Macintosh computers in the quarter, accounting for 60 percent of revenue and 33 percent growth over the same quarter last year. Oppenheimer declared this a "landmark quarter" in the conference call.

He also pointed out that the rate of Mac sales growth was four times faster than PC sales growth, based on the latest numbers from IDC. Macbook laptops were quite a hit, up 42 percent over the same quarter in 2006 and accounted for 64 percent of total Macs sold.

Apple shipped its first Macbook Pro with an LED screen this quarter, which Oppenheimer said has been well-received by consumers. The lower-power LED screens, along with the Centrino Pro "Santa Rosa" chipsets, provide between 30 and 60 minutes of extra battery life for the laptops.

Then there's the iPod, which is showing no slowdown in sales momentum. The company sold 9.8 million iPods in the second quarter, a 21 percent increase over Q2 '06. Oppenheimer said iPod has 71.5 percent of the U.S. MP3 marketshare, according to NPD Group data.

He also said that the "other music" category grew 33 percent, due to iTunes sales. On the conference call, Oppenheimer was asked to break out sales of Apple TV, the company's networking device for digital content in the home, and declined, stating "We don't announce that level of product detail."

Still, Oppenheimer gave plenty of positive details on Mac and iPod sales on the conference call. As for Apple TV, a June article in the San Jose Mercury News said that based on anecdotal reports of tepid sales and mixed reviews, Apple TV "may join the Lisa and the G4 Cube on the computer maker's list of flops."

For the September quarter, Apple is projecting revenue of $5.7 billion with earnings per share of 65 cents, including a 5 cents per share charge related to non-cash stock based expense.

On the retail front, Apple's 180 Apple Stores enjoyed 53 percent growth over the same quarter last year, and Oppenheimer noted that 50 percent of customers buying Macs in stores were new to computers.

Apple plans to expand its presence in retail giant Best Buy. Apple expanded from 50 stores to 75 Best Buys this quarter. It plans to be in more than 200 stores by the end of this quarter and 300 by the end of calendar year.