Apple Posts Record Quarterly Profit

Macs Rose 33% to 1.8 million and iPods climbed 21% to 9.8 million

Forbes / AP 25jul2007

SAN JOSE, Calif. — Apple Inc.'s fiscal third-quarter profit soared more than 73 percent, fueled by demand for its Macintosh computers, the strength of its iPod media players and the sales of 270,000 iPhones in the first two days on the market.

For the quarter ended June 30, Apple's profit rose to $818 million, or 92 cents per share, up from $472 million, or 54 cents a share in the year-ago quarter.

Sales grew to $5.41 billion from $4.37 billion last year.

Analysts polled by Thomson Financial expected Apple to report earnings of 72 cents per share on sales of $5.28 billion while Apple itself had projected earnings of 66 cents per share on quarterly sales of $5.1 billion.

"We're thrilled to report the highest June quarter revenue and profit in Apple's history, along with the highest quarterly Mac sales ever," said Steve Jobs, Apple's CEO. "IPhone is off to a great start — we hope to sell our one-millionth iPhone by the end of its first full quarter of sales — and our new product pipeline is very strong."

The gadget maker's highly anticipated iPhone launched on June 29 and sold out within days. Wall Street analysts and investors have had lofty expectations for the multimedia cell phone, driving up Apple's stock more than 30 percent during the quarter.

Apple's silence on how many iPhones were available at launch added to the frenzy and analysts were hoping to gain some insight on the iPhone's initial sales impact and outlook when the Cupertino-based company was to discuss its quarterly earnings during a conference call late Wednesday.

Shares of Apple tumbled more than 6 percent Tuesday after AT&T Inc. — the iPhone's exclusive U.S. carrier — said it activated 146,000 iPhones on June 29 and 30, a number that disappointed investors following some analyst forecasts that Apple would sell 500,000 or more iPhones in its first weekend.

Apple shares rose $2.37, or 1.8 percent, to close at $137.26.

source: 25jul2007

Apple Earnings Climb 73%
On Strong iPod, Mac Sales

Wall Street Journal 25jul2007

Apple Inc.'s profit climbed 73% as the company continued to see strong demand for its iPod music devices and Macintosh personal computers.

In its earnings release Wednesday, Apple didn't say exactly how many iPhones it sold during the product's first two days, saying instead that it sold a total of 270,000 iPhones and related accessories, which includes such things as headphones and carrying cases. Apple said it expects to sell one million iPhones by the end of the current quarter.

Apple posted net income of $818 million, or 92 cents a share, for the fiscal third-quarter ended June 30. That compares with $472 million, or 54 cents a share, a year earlier. Revenue climbed 24% to $5.41 billion from $4.37 billion in the same quarter last year.

Mac shipments rose 33% from a year earlier to 1.8 million, while iPod shipments climbed 21% to 9.8 million.

"We're thrilled to report the highest June quarter revenue and profit in Apple's history, along with the highest quarterly Mac sales ever," said Steve Jobs, Apple's chief executive, in prepared remarks.

The Cupertino, Calif., company enjoyed much hype throughout the quarter leading up to the debut of its iPhone device, though much of the phone's impact won't be felt until upcoming months due to its late June launch, just days before the quarter ended.

The phone has been a focus for Apple. In April the company delayed the public release of Leopard, the new version of its Macintosh operating software, from June to October so that it could reassign its staff to its iPhone rollout.

AT&T Inc., the sole provider of service for the iPhone, reported Tuesday that 146,000 buyers signed up for service in the first two days of its launch, much lower than some analysts were hoping. The news sent Apple shares skidding Tuesday.

Apple shares rose $2.37, or 1.8%, to close at $137.26 on Wednesday.

source: 25jul2007

Apple Quarterly Profit Rises on Mac Strength

Reuters 25jul2007

SAN FRANCISCO — Apple Inc. posted a higher quarterly profit on Wednesday and an unexpected rise in its profit margin as the company saw strong sales of its Macintosh computers and also sold 270,000 iPhones.

Chief Executive Steve Jobs also said the company hoped to sell a million iPhones by the end of the first full quarter of sales.

"Apple destroyed numbers for this quarter. Its Mac numbers were very strong and above expectations. Guidance on the EPS

(earnings per share) was weaker than expected but the question is what are they factoring into that. Their gross margin at 37 percent was extremely strong and bodes well for HP and Dell from a commodity-price perspective," said Shannon Cross, an analyst at Cross Research.

Apple's net income for its fiscal third quarter was $818 million, or 92 cents per share, compared with $472 million, or 54 cents per share, a year earlier. Revenue was $5.41 billion, up 24 percent from $4.37 billion a year earlier.

Apple had been expected to earn $644.4 million, or 72 cents per share, on revenue of $5.29 billion, according to the average analyst forecast on Reuters Estimates.

Gross profit margin was 36.9 percent, up from the 35.1 percent the company achieved in the previous quarter, a show of strength that the company had not predicted.

Apple also estimated earnings of about 65 cents per share on revenue of about $5.7 billion for its fiscal fourth quarter.

Apple said it shipped 1.76 million Macintosh computers in the quarter, a rise of 33 percent from a year earlier.

Shipments of iPods were 9.82 million, up 21 percent from the same period a year earlier.

The iPhone went on sale on June 29 but its impact on Apple's results was limited because it was available only in the last two days of the quarter and sales will be booked as subscription revenue over two years.

Shares of Apple have risen 62 percent since the start of the year, when Chief Executive Steve Jobs unveiled the iPhone and announced a goal of selling 10 million units in 2008. The shares trade at 30 times its expected 2009 profit, a level most analysts say represents a rich valuation.

Reporting by Scott Hillis, editing by Richard Chang

source: 25jul2007

Apple Flagships Pull Their Weight,
Crown New King on Fifth Ave

GARY ALLEN & KASPER JADE / Appleinsider 23jul2007

Apple's enormous investment in high-profile retail stores continues to pay off, with its five U.S.-based flagship locations combining for 13 percent of the total revenues generated by its U.S. retail sector latest quarter.

According to people familiar with the matter, the spacious multi-floor outlets logged over $105 million of the approximate $810 million in sales generated by Apple retail stores in the United States during the company's third fiscal quarter of 2007.

Topping the list of highest-grossing locations during the quarter was Apple's subterranean outlet on Fifth Avenue in New York City, which sold over 5 Macs every hour and 1 iPod every two minutes on its way to generating a whopping $45 million in revenues. Following in a distant second was Fifth Ave's neighboring store in downtown SoHo with approximately $23 million.

On the West Coast, Apple's high-profile shops in San Francisco and Los Angeles saw more modest sales of approximately $14 million and $12 million, respectively. Both were edged slightly in the rankings by the company's Chicago flagship outfit, which ranked third amongst U.S.-based high-profile stores with sales in excess of $14 million.

Most telling is that the five high-profile stores contributed as much revenue as the next 13 best-performing stores in Apple's chain, including those that have been open from the beginning and some open less than two years.

In total, Apple operates eight high-profile stores in three countries that are intended to provide a sales point for both locals and travelers. Just as important, they are expected to project and publicize the Apple brand with their architecture and interior design. Each year, the company spends an undisclosed sum on marketing costs for the these locations, ranging up to $10 million.

According to the Apple's last annual report, leases on the high-profile stores are longer than other stores, ranging from 10 to 14 years. Lease costs are consequently higher, the company says, ranging from $4 million to $33 million per location, per year as of Sept. 2006. Construction costs for the bigger stores are also higher, ranging up to $12 million for the Fifth Avenue store. Once the stores open, their size results in higher operating costs because of increased staffing, and in the case of Fifth Avenue, its 24-hour operation.

Comparing the high-profile store revenues with the same quarter of 2006, the Fifth Avenue store had the largest percent increase, tied with the North Michigan Avenue (Chicago) store at 15 percent. At the bottom, the SoHo store's revenues declined from 2006 by about 17 percent, no doubt because the May 2006 opening of the Fifth Avenue stores siphoned off some of its business.

The high-profile stores also contribute heavily to sales of Macs and iPods, although not in equal numbers. The five stores last quarter accounted for about 30,000 desktop and notebook computers, along with over 127,000 iPods. But each store seems to have a "personality" for sales of the two categories: Fifth Avenue sells more iPods than computers by 5:1, while The Grove (S. Calif.) sells in the ratio of about 2:1. The other three stores are somewhere in the middle of these figures.

Ranking after the high-profile stores in revenues is the oldest store in Apple's chain, Tysons Corner (Virg.), with over $9 million in sales for the third fiscal quarter of 2007. It's followed by long-open stores at Third Street Promenade (S. Calif.), The Westchester (NY) and South Coast Plaza (S. Calif.).

Despite their high revenues, the flagship stores don't excel in another category: attach rates for AppleCare, .Mac, ProCare and One to One services. The chain of U.S. stores sells AppleCare service to an average 64 percent of those who purchase a computer. But the high-profiles stores successfully push the high-margin service on just 57 percent of computer buyers, people familiar with the matter have said.

Other attach rates are similarly lower for high-profile stores: .Mac averages 27 percent at all U.S. stores, but comes in at about 20 percent at high-profile stores, while ProCare sells at 11 percent (13 percent for all stores) and One to One at 11 percent (16 percent for all stores).

Looking ahead, Apple remains committed to the extra cost of its high-profile stores, with plans for at least four more massive outlets around the world: Sydney (Australia), Glasgow (Scotland), Boston (Mass.), and one more in Manhattan (New York).

Gary Allen is the creator and author of ifo Apple Store, which provides close watch of Apple's retail initiative. When Gary isn't busy publishing news and information on Apple's latest retail stores, he finds himself hanging out at one.

source: 25jul2007