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January 15th, 2003

[3:45 PM] Apple's Q1 Conference Call Begins At 2:00 PM PST
by Bryan Chaffin

Apple's Q1 Conference Call begins at 2:00 PM, PST (4:00 PM, CST). TMO will be providing live coverage of the event for those who can not catch the Stream. Our live coverage will be carried on this Web page, so refresh often as we tend to update every few minutes. Our coverage is listed from the newest to the oldest, so that the newest additions will be listed on top.

These press conferences tend to be very fast paced. Those people able to listen in while following our coverage are encouraged to add in anything we might miss to the comments below.

[4:52 PM] OK, that's it. The conference call is over. Our apologies for our networking problems at the beginning. We will now clean up this page, fix typos, and add in anything relevant we can that we may have missed.

[4:51 PM] Being asked about non-Mac products. Will the company have any more, other than the iPod? Fred literally says "no comment."

[4:50 PM] Peter Oppenheimer says that Apple managed product availability well in the quarter, but that the company had to pay some premium air freight rates to do so.

[4:49 PM] Being asked about Direct Mix for sales. Fred says that 34% of sales came from direct sales model.

[4:48 PM] Being asked about cash holdings. Fred is saying that Apple reduced working capital, but that a company can't do that every quarter. Cash flow going forward should approximate earnings. Says that he hopes that Apple's investments in R&D and brain power will be paying off.

[4:46 PM] Being asked about Apple comments concerning California antitrust suit. Fred demurs again.

[4:44 PM] Charles Wolf asking about Switchers. Asks if Apple can trace how many of them bought Macs. Fred says he has no idea.

[4:43 PM] Gross margins are up 120 basis points, due to lower component costs, stronger consumer sales, more PowerBooks.

[4:42 PM] Being asked why Apple expects a flat quarter in Q2. Fred says that channel inventory is down, so that this quarter will look good. He also says that Apple's upcoming new products (no details) look good. He offered no other details.

[4:41 PM] Asked about % of customers who are Switchers. Fred repeated his numbers from the Apple Stores, no other information. Now he is being asked about where costs come for the iPod. Repeats 216,000 iPods sold during Q1.

[4:40 PM] Asked to forecast Q2 and Q3 education sales, and Fred demurs from doing so. He cites state budget issues, especially in California, and says Apple will remain cautious.

[4:37 PM] Fred is being asked about Japan. Fred says Japan's economy is weak. Peter Oppenheimer says that Apple's new portable offerings will do well in Japan, which is very true. Makes you wonder why Apple pulled out of Macworld Tokyo. The rest of Peter's answer was a non-answer. Fred says that biggest market in Japan is consumer market, followed by creative markets.

[4:36 PM] He is being asked again about how many stores will be opened. Fred says that the new smaller store design reduces startup costs for each store, but won't expand any more on that.

[4:33 PM] Fred is saying that retail is a key strategy, along with placing Apple employees in CompUSA locations. A key to reaching PC users, that is. He says that the key strategy for growing market share and driving Apple's growth. He's iterating that though Apple lost 1 million in retail operations, those operations contributed to 23 million in manufacturing profits from those sales. That's a big deal, and we missed it earlier. Fred says that the company's retail operations are already paying off. He also says that new locations that can lead to more Mac users are a smart idea (a smart investment), and that the company will continue to pursue that. The overall goal is more Mac users from the PC world.

[4:32 PM] The next questioner has disappeared. Kimberly Alexi is next. She's asking about retail operations and models. Not sure exactly what she is asking as she is being vague.

[4:31 PM] Repeating Xserve progress and R&D spending on Xserve. 6,000 Xserves sold in Q1, which is up fro the previous quarter, though Apple isn't saying that. We ran an article a few months ago on that. No comment on R&D for Xserve.

[4:29 PM] Fred is being asked about component pricing. Asked about Xserves and R&D spending on this area. Fred is turning it over to Peter Oppenheimer. Peter says that hard drive pricing is coming down. The same with flat panel pricing. No other details.

[4:27 PM] Fred is playing mum on how many new stores might be opened. Fred is being asked about the consumer space. Fred says Apple is committed to providing a good value proposition, actually, he said "great value." In other words, he is not going to comment on pricing pressures, and what Apple might do to meet parity on the pricing front.

[4:26 PM] Fred is being asked more about interest rates. He says that there being a lot of dynamics, and that Apple might be making some changes in its investment portfolio.

[4:25 PM] Fred was asked about interest rate revenues. Fred says that lower interest rates from banks will lower Apple's own revenues, especially as old investments come up for renewal.

[4:24 PM] Fred was asked about pricing, and he says that something is in the works, but wouldn't give any specifics.

[4:22 PM] Networking disaster strikes as two, count them TWO, base stations crashed, and would not transmit. Our apologies to everyone counting on us for this coverage. We are taking it up now with analyst questions.

4:02 PM] We are beginning. Fred Anderson is on. Revenues of US$1.47 billion. 7% up from last year. Lost 2 cents a share, due to accounting adjustments and a 17 million restructuring charge. Apple profited other than that. America sales are up 5%, Asia 7%. Europe down 3%. Japan is down 24%. That's not good news. Channel inventory declines 11%. Currently has 4-5 weeks in channel inventory. Pleased with year over year sales increase. Largely came from higher prices.. and beyond the box sales. Average iMac price was US$866, compared to over US$1000 per box this year. iPod and software sales also helped.

58,000 classic iMacs, 50,000 were eMacs, the rest iMac G4. iBook continues to sell very well. Fred says that the 999 iBook helps out. TiBooks were strong. PowerMac sales down 25% from the year ago. Blaming the economy and Quark Xpress. Shipped 216,000 iPods, half of which were for Windows. Best Buy sales of iPod were great, no mention of Target.

Says Apple Store sales were dandy. US$13 million per store, over the entire chain. 6,000 visitors per store per week, and 50% of those buying systems don't own Mac currently.

CompUSA sales are up. Sales were up 42%. Beyond the box sales were up 43%.

[3:50 PM] Testing.


If you are interested in Apple's stock, join our forum members in the Apple Finance Boards, a moderated forum for Apple Investors and people who are interested in Apple's financial dealings. For other stories regarding Apple's stock activity, visit our updated Apple Stock Watch Special Report.



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