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[12:47 PM]
Apple's Q2 Conference Call Breakdown
Yesterday's conference call was very exciting. The company is profitable, sales growth exceeds the industry norm, iMacs are selling like hotcakes, things could hardly be better. The following is our breakdown of the conference call.

Revenues

Apple grosses US$1.53 billion in the 2nd quarter, a quarter that is typically their weakest. Despite this historical precedence, revenue grew 9% over the year before.

The Profit

The overall profit for the 2nd Quarter was US$135 million (US$.84 per share), up 145% over the year ago profit of US$55 million. That profit did include a combined US$42 million profit that included both non-recurring revenue from the sale of ARM stock, and a US$8 million one time charge for a minor restructuring. That means that Apple's real operational profits were US$93 million (US$.60 per share), a 69% increase over the year before, a very impressive number in and of itself.

Gross margins increased over the prior year to 26.3% from 24.8% from last year. They decreased from the 1st quarter however as the iMac became a larger percentage of the product mix. Mr. Anderson stated that the margins were higher on the new 333 MHz iMacs than they were on the original crop. This is likely due to R&D costs having already been paid for, as well as manufacturing efficiency increases and lower production parts costs.

Cash

Apple ended the quarter with US$1.9 billion in cash! That represents a steady increase in Apple's Cash supply since Steve Jobs took over as iCEO in 1997. Cash on hand is an important indicator in a company's health. Cash on hand also effects the flexibility of a company. US$1.9 billion is a healthy level.

The Numbers

Apple shipped 827,000 units in the 2nd Quarter, and this number was up 27% over last year.

Overall, Apple claimed some 32% of all iMac buyers as first-time computer buyers. In Japan that number was 46%! Im addition, Apple saw 11% of iMac buyers as PC converts while in Japan 18% of iMac buyers were PC converts.

Blue & White G3s accounted for 43% of the product mix.

At the beginning of the quarter, Apple shipped 80,000 Rev B. 233 MHz iMacs. At this time there are no more 266 MHz units being produced. Mr. Anderson was unclear if any remaining 266 MHz units were being shipped.

Market Share

Apple has been enjoying much success in the consumer market as the retail situation continues its major turnaround from a year ago. PC Data says that Apple claimed some 11.3% of the retail market in January and February, while Ziff-Davis says Apple garnered 12.5% of retail surveys in February.

Channel Inventory

Apple said that the Channel ended the quarter with less than 3 weeks of inventory, this is down from the previous quarter.

Apple Inventory

On-hand inventory ended the quarter at a tiny one-day on-hand. See our story on this for more.

The Future

Mr. Anderson said that Apple expected growth in the 3rd quarter. Though he would not talk in any way about future products (such as the P1), he did say they expected to see excellent educational channel sales. If this is so, Apple should see a big increase over Q3 of 1998 as the iMac was not released at that time last year.

The Mac Observer Spin: A fantastic quarter for Apple! It is their 6th consecutive profitable quarter as well as the 3rd quarter in a row where they have exceeded analysts predictions.

Perhaps most importantly, Apple has shown that the iMac is NOT a fad despite numerous statements from numerous pinheads that this was the case.

Perhaps another 3 or 4 years of this and we can even stop hearing about how Apple is near death. :-)

Apple

Other Mac Observer Stories On This Subject:

Japan Sales Up 50% With 64% New Apple Customers

Apple's On-Hand Inventory Hits All Time Low



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