by , 8:00 AM EDT, April 15th, 2004
Probably more than any quarter in recent memory, the details of Apple Computer's on-going successes appear to be just as important as the bottom line of a US$46 million net profit for the fiscal second quarter. From handheld music players to walk-in, retail stores, the PC maker with the smallest market share is having big time success.
"The profit numbers are quite impressive," Merrill Lynch analyst Steven Milunovich told The Mac Observer, Wednesday. "To increase your net revenue from the [year-ago] quarter ($14 million) more than three times is something to be proud of."
To be exact, revenue for Apple March-ending quarter was $1.909 billion - up 29% year-over-year - representing the third consecutive quarter of double-digit revenue growth and Apple's strongest March quarter in four years.
On a conference call with analysts, out-going Apple Chief Financial Officer and Executive Vice President Fred Anderson said the company's quarterly growth was not an accident.
"Revenue growth is being driven by a much more diversified portfolio of hardware, software and service products than we have delivered in the past, as well as expanded distribution through the channel, and our online and retail stores," he said. "It is clear that the investments that we have made over the past few years in research and development and in our retail initiative are paying off," Anderson said.
iPod to the rescue
And it will come as no surprise that Apple's successful gems - the iPod and iPod mini - were a big part of the Q2 success.
"CPU sales were okay, but not that strong from the last quarter," Milunovich said. "So strong iPod sales really helped to improve the financial picture."
In-coming CFO Peter Oppenheimer told analysts that Apple sold 807,000 iPod and iPod mini units in Q2, accounting for about half of the company's 29% revenue growth, on $264 million in sales. Mr. Oppenheimer said he expects iPod and iPod mini gross margins to stay at 20% for Q3.
For more details on Apple's quarterly iPod performance, see TMO's companion report, For Apple, Success Is Spelled 'i-P-o-d'.
CPU Concerns?
While Apple's quarterly results showed iPod success, however, its traditional computer products showed primarily dismal growth quarter-to-quarter. Unit sales of Macintosh computers over the quarter grew just 5% from a year ago, compared with a 15% increase for the PC industry overall, according to independent research securities firm, Fulcrum Global Partners.
Apple sold over 749,000 Macs worldwide, or 5% more than the year-ago quarter. Breaking the numbers down for the quarter, the company sold 217,000 iMacs (15% less than the year-ago quarter), 201,000 iBook units (up 51% over the year-ago quarter), 174,000 Power Mac systems (up 11% from the year-ago quarter) and 157,000 PowerBook professional laptops (a decrease of 5% from last year). 48% of all Macs sold were portables.
While the company sold more Power Macs than last year, the goal of 200,000 Power Mac systems to be sold in the quarter was not achieved. It was, however, the second biggest quarter for iBook in the company's history.
Mr. Oppenheimer played down the falling CPU numbers, saying the company is focused on "growing revenue, not world-wide market share."
Retail store sales picking up
Mr. Oppenheimer said Apple's 78 retail stores are looking strong, with revenue of $266 million for the quarter. He said each store is averaging $3.5 million in revenue, up from $2.6 million year-over-year.
"(Senior Vice President of Retail) Ron (Johnson) is really focused on growing the top and bottom line of our retail initiative," Oppenheimer said. "He is really trying to drive productivity into our existing stores and is focused on opening new stores that will be profitable in the first year."
The company said it opened five new stores during the quarter and will open 10 additional stores before the end of the calendar year, for a total of about 88 stores. The plan, said Mr. Oppenheimer, is to open 25 stores each year for the foreseeable future. He said 5.7 million people visited Apple Stores in Q2, or 5,800 visitors per store per week. The company's only other planned flagship store in London will open by year's end, the company said.
Other highlights of the analyst conference call included:
Looking forward, Anderson said the company expects its fourth consecutive quarter of year-over-year, double-digit growth again in the third-quarter. He said revenues are expected to reach $1.925 billion, and earnings per share of 12 cents or 13 cents. Gross margins will be flat sequentially at about 28%.