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April 19th, 2000

[3:20 PM] Mac Observer Live Coverage Of Apple's Q2 Results
by Staff

Live coverage of Apple's fiscal Q2 Results press conference will begin here at 4:00 PM CDT.

[4:00 PM] The press conference has begun.

[4:01 PM] Apple announced US$233 million profit..

[4:02 PM] Beat last year soundly. Gross margins up to 28.2%, up from 26.3% last year.

[4:04 PM] Fred Anderson, Apple CFO is on now.

[4:04 PM] Revenue increased 27% to US$1.94 billion.

[4:05 PM] Unit shipments WAY up. 100,000 PowerBooks, 350,000 PowerMac G4s in this quarter alone!

[4:05 PM] Europe grew the fastest in the quarter, followed by US, Japan, and Asia, in that order.

[4:06 PM] Gross margins attributed to lower shipping costs, richer product mix, and lower DRAM pricing.

[4:07 PM] Apple's headcount increased "primarily to an increase in temp manufacturing workers."

[4:08 PM] Apple gained some US$73 million from the sell of shares in ARM. Apple sold some 1.5 million shares of ARM.

[4:09 PM] Capital expenditures were US$27 million. The company did NOT purchase any more shares of AAPL. There is still some US$384 left in the original US$500 million authorized for the buyback program.

[4:09 PM] Less than one day of inventory on hand!

[4:10 PM] Fred announced that the Board had approved a 2-for-1 stock split.

[4:10 PM] Fred opening floor to questions from analysts.

[4:11 PM] Question: Asking about Sears deal with Compaq and component availability. Fred says that availability is currently good and will continue to be good. The Sears deal being asked about includes Apple and therefore does not affect the company.

[4:13 PM] Question: About gross margins from Bear-Stearns analyst: Mr., Anderson will not comment on future gross margins due to inherent instability in some aspects of component pricing.

[4:14 PM] Also asks about "Internet Strategy." Fred says Apple is pleased with current services and says they are making changes. This was a complete non-answer from Fred.

[4:15 PM] Analyst asking about users or other measurables for their current Internet Strategy. Feed says that current users are growing for iTools. KidSafe is doing "well." iReview is improved (NOT ENOUGH IN OUR OPINION!). iCards is streamlined. New Members Portfolio feature, which is actually not "new" at all.

[4:16 PM] Fred says that Apple is tracking users for iTools.

[4:17 PM] Richard Gardner asks about Channel Inventory, target markets, and Microage distributor which just filed for Chapter 11: Channel INventory stands at 5 weeks. Pro line is below 5 weeks, consumer line is above 5 weeks. Microage did file for Chapter 11, but Apple has some inventories insured. They do not expect a big impact. "Beyond the Box Strategy" will not be specifically commented on. Fred talks about DV markets and FileMaker Pro markets. Talking about AppleWorks. In all these cases, Apple is "pleased" with current progress.

[4:19 PM] Mr., Gardner asks about QuckTIme Streaming, but Fred has no news.

[4:20 PM] Mr., Kuntzler asks about customer base of Pro line. Fred says that Pro line is doing well. Specifically says that iBook sales have not seemed to cannibalize PowerBook sales and comments that they are pleased. Fred says that the company is getting new customers in the G4 and PowerBook line.

[4:22 PM] Mr. Kuntzler is asking if iBook sales have increased after Apple bumped up the RAM. Fred says yes. Says that iBook SE has been very popular.

[4:23 PM] Analyst asking about education sales. Fred says that Apple is entering buying season for education now. Apple is "pleased" with education sales for Q2.

[4:24 PM] Analysts asked about Apple Store. Fred says that Apple Store saw US$400 million in online sales! US$100 million was from individuals. That is excellent!

[4:25 PM] We seem to have lost the broadcast a second or 20.

[4:25 PM] Connection regained.

[4:26 PM] Analyst asking about increasing number of customers in their EarthLink ISP service deal. Fred says that Apple is working on this, but won't comment. It is going "well."

[4:27 PM] Analyst asking why Japan sales only went up 12%. Fred says that it is because the previous quarter was so strong in Japan.

[4:29 PM] Analyst asking about iMac pricing mix and Earthlink. Also asks how Apple is working on the explosion of Internet Appliances (meaning handheld market). iMac: Average selling price is close to what it was in the prior quarter. Fred says the iMac DV SE is still selling well. Earthlink: The program wasn't fully ramped in the March quarter, so it won't be until the next quarter when it has a big impact on Apple's bottom line. Not surprisingly, Fred will not comment on future products regarding an Apple handheld.

[4:32 PM] Kevin McCarthy asks about margins next quarter. We missed Fred's answer.

[4:33 PM] Analyst asks silly question "Are you being conservative with 3rd Quarter guidance?" Fred says "no." What else would he say?

[4:35 PM] Analyst asking about Earthlink deal. Fred expects Earthlink deal to contribute US$20-30 million in *profits* during the next quarter.

[4:36 PM] Analyst asking about pre-installed Mac OS X on systems. Fred says that there is no change in expectations and that it will be in early 2001.

[4:37 PM] Analyst thanks Fred for a great quarter. Asking about International ISP deals. Fred will not specifically comment. Go figure.

[4:39 PM] Daniel Kuntzler asks about inventory on hand. Fred says that he does not foresee any reasons why there should be any change on in inventory management and maintain the industry leading inventory on hand levels of 1 day on hand.

[4:39 PM] Press Conference is over. Congratulations to Apple for another great quarter!


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