Apple Execs: iPod+iTunes Juggernaut Shows No Sign of Slowing Down

| Reports

With nearly nine million iPods sold last quarter, Appleis iPod+iTunes gravy train doesnit seem in danger of running off the rails anytime soon. The companyis CFO, Peter Oppenheimer, and COO, Tim Cook, ran down the key statistics during their quarterly conference call with analysts on Wednesday.

During his prepared remarks, Mr. Oppenheimer noted that music products represented 42% of Appleis US$4.84 billion in revenue during last quarter, a 36% jump over the previous yearis fiscal fourth quarter. The release of new iPods on Sept. 12 helped, of course, as did a back-to-school promotion that helped clear out old inventory. Overall channel inventory of iPods is now four to six weeks, which is within the CFOis comfort zone. The popular MP3 player is available at almost 40,000 places around the world, compared to the Mac product line, which is available in a little more than 7,000 locations.

Apple also added a library of over 70 movies, all from Disney and its affiliated studios, to the iTunes Store last quarter, complementing the more than 3.5 million songs, 220 TV shows, 9,000 music videos, and 20,000 audio books it already carries. Mr. Oppenheimer said that iTunes makes up 85% of the music purchased over the Internet in the United States. Over 3,000 accessories are now available for the iPod, and he estimated that more than 70% of the 2007 model year cars sold in the U.S. will have iPod integration as an option.

During the question-and-answer session with analysts, Mr. Oppenheimer revealed that the iTunes Store is "running at above-break-even levels. Our view continues to be that selling music and TV shows and now movies helps us to sell iPod and accessories. And as it related to international iPod results, we continue to be happy with our progress. In the U.K., Canada, Japan, and Australia, our market share ranges from 40 to 50% and in many western European countries, weive picked up market share year-over-year, typically 6 to 7 points in place like France and Germany and Italy and Spain."

However, he wouldnit say how well iPod games and movies have sold since their introduction last month, promising only that he would do so "at a future date." Speaking in broad terms, he said: "We are very happy with the performance of the iTunes store, with everything that itis selling, and as I said, we think itis a big reason why people are buying iPods and accessories and certainly think itis helping us in the Mac business."

When an analyst asked about rolling out the iTunes Store into more foreign countries, as well as when movies will move beyond the United States, Mr. Oppenheimer replied: "We today have the iTunes music store in 21 countries, which is covering close to 90% of where music is legally purchased. We look forward to bringing movies International in 2007."

When an analyst asked about the impact of cheaper iPods on the lineis blended ASP (average selling price), Mr. Oppenheimer acknowledged the fact that that number will be down during the current quarter, but he is "looking forward to the holiday season and confident." He later said that the redesigned iPod shuffle will ship by the end of October.

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