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  • Apple Vanquishes Expectations One More Time!

    April 25th, 2007

    While considering what I was going to write once Apple's quarterly financials were released, I thought of what I had said previously, that sales and profits would exceed Wall Street expectations, and that the financial community would react in its usual unpredictable fashion.

    Over the past few months, it has been variously claimed that sales of Windows Vista would eat into the sales of new Macs somewhat, all without any real evidence, or that sales would otherwise stagnate. But as reports of first quarter PC sales appeared, it was clear Apple would do far better than expected.

    Indeed, Apple has reported their most profitable March quarter in the company's history. According to their statement for the fiscal second quarter, sales were $5.26 billion, compared to $4.36 billion last year. Net profit was $770 million, or $.87 per diluted share, compared to $410 million, or $.47 per diluted share last year.

    Rather than bore you with lots of raw numbers, let me point you to Apple's site where you can read the official figures for yourself. I'll refer to some of them, but I've a lot more to say about what they mean.

    Take the iPod, which a lot more people did, as some 10.5 million were sold. Mac sales amounted to 1.52 million, again surpassing what many analysts had expected. The largest portion of those numbers went to notebooks again, amounting to 891,000. Unfortunately, Apple doesn't break down sales among models as it used to, so we're only left to guess how many MacBooks and MacBook Pros were apportioned across those figures. I'll have to assume more bought the former than the latter, strictly on affordability alone.

    Indeed, with computer sales growing at 36 percent, it doesn't appear that the arrival of Windows Vista has made any perceptible dent on sales of new Macs. And there has, so far at least, been no noticeable pause because Mac users eagerly await the arrival of Leopard, and don't want to pay an upgrade fee of $129 or greater.

    In fact, I often wonder just how much the operating system counts these days, now that Mac OS X seems to work so well for so many people. These days, the recent arrival of Adobe's Creative Suite version CS3 probably accounts for a far greater impact, particularly among Mac creative professionals who have been waiting patiently for the Intel-savvy versions of InDesign, Photoshop and all the rest.

    Oh yes, there's that cash hoard that Apple's been sitting on for so many years. It's currently at $12.6 billion, and there are no immediate plans to do anything with it. I wonder how many stockholders are beginning to feel they deserve their cut, unless, of course, Apple can define some crucial reason for keeping so much cash at hand.

    As far as the current quarter is concerned, Apple's guidance is again very conservative, promising total sales of "about $5.1 billion and earnings per diluted share of about $.66." And, once again, they look to beat those predictions.

    Surely Wall Street took immediate notice. Apple's stock price soared to over $100 per share in after-hours trading, and I just wonder how long it'll take for the price to reach $125, unless, of course, Apple's board decides on another stock split.

    There is just one more thing to add, and that's a statement made by Apple's Board of Directors that they stand behind their man -- Steve Jobs -- and that they aren't "going to enter into a public debate with Fred Anderson or his lawyer" over claims that Anderson was simply following the orders of his boss when he engaged in that stock options backdating affair.

    In any case, Anderson has apparently paid his SEC bill, and there's little to indicate that Apple faces much more in the way of serious inquiry in the months to come.

    I think most of you are probably more interested in the iPhone, which is still reportedly on track for a June release. Brand new Macs and Mac OS 10.5 Leopard don't seem to be near as important these days. It's not that Apple is no longer interested in personal computers or operating systems. But everything seems to be chugging along so nicely that perhaps the pressures to stay ahead of the competition have subsided.



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