Apple reports $1.07 billion profit on strong Mac and iPhone sales

Jim Dalrymple
22 July, 2008
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Apple on Monday posted a profit of $US1.07 billion on revenue of $US7.46 billion for its fiscal quarter ending June 30, 2008, making it the best June quarter in the company’s history in both revenue and earnings. In a statement, Apple CEO Steve Jobs also indicated that the company is preparing several other products for release in the coming months, which will help future quarters.

“We set a new record for Mac sales, we think we have a real winner with our new iPhone 3G, and we’re busy finishing several more wonderful new products to launch in the coming months,” said Jobs.

Total gross margin exceeded expectations. Operating expenses were $US1.21 billion, and Apple spent $US112 million in stock-based compensation. Apple also added $US1.33 billion in cash to its coffers in the quarter.

Macs. The company shipped 2,496,000 Macs during the quarter, representing 41 percent unit growth and 43 percent revenue growth over the year-ago quarter. Apple sold 943,000 desktops during the quarter, and 1,553,000 laptop computers. Laptops accounted for 62 percent of total Mac sales.

Mac products and services represented 61 percent of revenue in the June quarter. The quarter also saw the greatest number of Macs shipped by Apple, with 41 percent year-over-year growth, and almost three times the industry standard. Desktop sales grew 49 perecent year-over-year; portables were up 37 percent year-over-year.

The previous record for Mac sales was 2.319 million, set in the first fiscal quarter of 2008.

In the US channels tracked by market-research firm NPD Group, Apple’s computer market share increased to 19.5 percent this year from 15.4 percent last year. Apple also saw the best Mac quarter ever for education business, with unit growth of 25 percent year-over-year. There was also a new all-time high for quarterly Mac sales in the K-12 and higher education markets.

During the quartely earnings call, Apple CFO Peter Oppenheimer said, “We’re thrilled with the momentum of the Mac business.”

iPhone. Quarterly iPhone units sold were 717,000, compared to 270,000 in the year-ago quarter, the company reported. Apple sold its millionth iPhone 3G in just three days, in contrast to 74 days for original iPhone. The company says customer reaction has been overwhelmingly positive.

Apple launched the App Store on July 11th more than 500 applications, and currently offers more than 900. 20 percent of those are free, and 90 percent are less than $US10. The company reported more than 25 million applications downloaded so far.

iPod. While iPod quarterly sales differentials were not as dramatic, Apple sold 11,011,000 iPods during the quarter, representing 12 percent unit growth (10 percent in the US, and 15 percent internationally) with revenue up seven percent year-over-year, related to a lower average sale price due to the iPod shuffle price reduction in February 2008.

Retail. Apple’s retail stores saw $US1.44 billion in revenue. Stores sold 476,000 Macs sold in the quarter, an increase of 44 percent year-over-year, half of which were sold to new Mac users.

Stores hosted a record 598,000 personal training sessions during the quarter.

Apple opened eight stores during the quarter, including the Boylston Street store in Boston and first store in Australia, to bring the total to 216 stores. Apple is also on track to reach 242 stores by the of the fiscal year in September, with the Beijing store just having opened, and with stores in Switzerland and Germany coming in second half of calendar year 2008.

Apple also began selling in about 170 Best Buy stores during quarter, for a total of 570, with a plan to be up to about 600 stores by the end of the northern summer. Globally, Apple now has about 10,300 storefronts for the Mac (not to be confused with Apple-branded retail stores) which is up about 1600 year-over-year.

Other information. In response to an analyst question regarding the health of Apple CEO Steve Jobs, Oppenheimer said, “Steve loves Apple, serves at the pleasure of the board, and has no plans of leaving Apple. Steve’s health is a private matter.”

COO Tim Cook, when asked about the success of the Apple TV, said he was pleased with the Apple TV’s sales since February, but it remains a “hobby” because the business is not nearly as large as others that Apple is involved in, and does not have the potential of the iPhone business.

International sales accounted for 42 percent of the quarter’s revenue.

Looking ahead to the fiscal fourth quarter, Oppenheimer said the company expects revenue of about $US7.8 billion and earnings per diluted share of about $US1.00.
Apple stock ended the day up $US1.14 or 0.69 percent at $US166.29. In after hours trading the stock dropped $US6.96 or 4.19 percent to $US159.33.

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