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  • Apple’s Financials: Wall Street Blows it Again!

    July 20th, 2006

    This is getting to be an old story. In the quiet period before Apple releases its financials, you often hear the doom and the gloom from certain people on Wall Street. The psychological impact throws the stock price into a tizzy, and the end result is a price drop of some sort.

    In recent days, some claimed that iPod sales would be less than expected, that perhaps Macs still weren’t gaining much traction after those lofty expectations. It doesn’t matter what they said, really, because you have to wonder what psychics these so-called analysts were visiting, because the readings were way off the mark.

    Apple itself has been mighty conservative of late as to what it expected to deliver. But in the end, with its second highest earnings in history, who has a right to complain? Well, maybe the folks who sold the stock prematurely, expecting the bears to take over.

    Without going into the same details that every other tech site is reporting, I’ll just stick to the basics. In the quarter ending June 30th, which is Apple’s 3rd, they earned $472 million net profit on revenue of $4.37 billion, which adds up to $.54 per undiluted share.

    Last year, the results came in at $3.52 billion revenue, a net profit of $320 million, or $.37 per diluted share. So revenue growth was 24 percent and profits growth was 48 percent, since the latter is the second best in Apple’s history. Not too shabby.

    While some of those misguided analysts speculated that sales of iPods were suffering, Apple actually sold 8.111 million of those iconic music players, which is 32 percent more than last year. Mac sales grew 12 percent, to 1.327 million. If you want to pour through some more numbers, check Apple’s own quarterly statement. I’ll confine this commentary to figures that warrant some further comment.

    One that really caught my eye is that Apple moved 798,000 note-books and only 529,000 desktops. While they no longer break down this stuff by specific models, it’s fair to say that Power Mac sales are quite tepid, and that’s not going to change until the Intel-based models ship and more Universal applications accompany them. Another factor is that, according to Apple, more and more people are giving up on desktop computers.

    As far as the Intel transition is concerned, 75% of Macs sold used the new processor. I used the figure of 80% in a recent commentary, so I suppose I got a little closer than some of those high-paid Wall Street scribes in guessing what Apple was doing.

    While many of us are still expecting an announcement about a Mac Pro and an Intel-based Xserve at the WWDC in August, Apple is still saying it’ll happen before the end of the year. But remember their fiscal year ends on September 30th, and the products could be announced in August, ship a few weeks later and still meet that deadline. That is, unless Apple wants us to believe they’re referring to the calendar year instead. Ah, the tricks of the financial world.

    In any case, another fascinating figure is the claim that 50% of the folks buying new Macs at an Apple Store are new to the platform. This is up from the 40% or so figure usually touted, and it may indeed mean that those Get a Mac” TV ads are having some traction, and Microsoft’s recent troubles figuring out how to get products out on time no doubt contributed to the switching phenomenon.

    The sales figures might have been even better, but it seems that while a “significant number” of MacBooks shipped last month, they’re still backlogged.

    As usual, Apple’s earnings conference with financial analysts was slim on some key specifics. They wouldn’t define, for example, what they meant by the statement that a “significant” number of people downloaded Boot Camp. When the dearth of iPod upgrades was mentioned, Apple’s executives would only say, “We’re not sitting around doing nothing.”

    Well, that’s good to know, so we can now all continue speculating with abandon about what they’re doing.

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