• From the Expo Floor #3: So Apple is Walking on Water

    January 15th, 2005

    These days, Apple appears to have discovered the magic formula of exceeding expectations. This was particularly true as Wall Street analysts began predicting just how much money it made in the last quarter. I doubt even the company’s own money people could have come up with the end result, since it exceeded their guidance as well. In fact, it was the most profitable quarter ever. Without boring you with all the details, I’ll just cover the basics here. You can check Apple’s own report if you want to know more.

    Take revenue, which totaled $3.49 billion, up 74 percent from the same quarter a year ago. That’s an awful lot of cash registers singing a happy tune. Net profit was $295 million, or $.70 per diluted share.

    The results were filled with shining stars. Of course, there was the iPod, and who could have predicted it would sell 4,580,000 units in a single three month period? With over 10 million of the things out there now, and the iPod shuffle already spreading across the land, I doubt anyone knows what the numbers will total this quarter. Sure, they should be less, but Apple is somehow changing the laws of financial physics here.

    Of course, Mac sales were pretty good too. With 1,046,000 sold, it represented a 26 percent boost over last year. What’s more important, though, is that it appears the aura of the iPod has begun to pay off. The rest of the personal computer industry apparently had a 10 percent increase overall, which means, of course, that Apple’s market share has finally increased. I’ll be curious to see the actual numbers when they are posted, real curious.

    Now with the Mac mini poised to hit the ground running, a Mac has become, for the first time in its sometimes shaky history, an impulse purchase. I just wonder how many people will visit an Apple dealer, perhaps to buy an iPod or some accessories, and spot the diminutive computer and its tiny box and decide on-the-spot to buy one more thing.

    I supposed you could say that Apple should have done this long ago, but the stars were aligned just right this time, apparently. Just having a cheap computer isn’t enough. But today’s climate, with Microsoft doing its best to scare off customers with its rampant security problems, has encouraged many Windows users to look to the iPod maker’s other products.

    Now this doesn’t mean all products had sales increases. On the positive side of the financial ledgers, combined iMac/eMac sales were 456,000, up a whopping 101% from last year. Too bad Apple’s bean counters don’t break down the figures, but you can almost bet the iMac G5 had the lion’s share. The iBook did OK too, with 271,000 units sold, up 35% over last year. Not too shabby either, and don’t forget there was a recent product refresh, which probably helped boost sales.

    On the other hand, Power Mac sales dipped to 167,000, down 19% from last year. So what went wrong? Well, there are still some undelivered dual 2.5GHz models, so supply problems may have contributed to the shortfall. Also, the iMac G5 probably cannibalized sales to some degree, but a sale is a sale. It’s also been a while since the last speed bump, so many some potential buyers felt a faster model was forthcoming. Well, no doubt, but you’ll probably hear about it with a simple press release and the sudden appearance of the speedier version at Apple’s Web site. When? I won’t go there.

    The PowerBook G4 is also a mite long in the tooth, and here sales were 152,000, down 22%. There are also published reports that we’ll have to wait quite a while before Apple can find a way to stuff a G5 into such close quarters, so the next update is expected to be just another G4, but performance is pretty good as it is, so I suppose you shouldn’t be disappointed. At least not yet.

    For the current quarter, Apple’s numbers people are estimating sales of $2.9 billion, which would appear to be conservative, assuming the iPod shuffle and Mac mini really fly off the shelves. But lowering expectations is a good practice. That way Wall Street can feel amazed when the actual figures are higher.

    Back to reality, the scuttlebutt on the Expo floor was that Apple may be forced to rename the event iPodworld. But the most fascinating news didn’t come from San Francisco or Apple’s headquarters. According to a story in The Harvard Crimson, the notorious Nick dePlume, of Think Secret frame, has been unmasked as a 19-year old Harvard student, one Nicholas M. Ciarelli. He’s apparently been running the rumor site since he was 13, and that raises the question of how a teenager is getting all this inside information about new Apple products. Does he have a family member or friend working at the company? Sure Apple looks like a villain to sue a mere student, but don’t forget that the founders of that company were themselves teenagers when they got started in this business, so perhaps they figured they ought to stop this errant behavior now. Or perhaps they just wanted to generate higher expectations for the Expo.

    I just wonder how this experience is going to look on Ciarelli’s resume.

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