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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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    13 Responses to “Apple’s Financials: Wall Street Blows it Again!”

    1. brent lee says:

      hear! hear! I never sell my apple stock!

    2. brent lee says:

      this is why i hate wall street! this is why i hate anyone who does not know what their talking about!! but yet they find a way to sound retarded – and people believe them!! how dumb is that!! The stupid leading the stupid!!!!!!!!!!!!

      but yet they play with money go figure!!

    3. Joe says:

      I wonder why the “street” is so consistantly wrong in the same direction? Could there be a bit of stock price manipulation going on? Drive the stock price artificially low, buy a few options and clean up as the stock rebounds within a month. Nah, never. I must be dreaming.

    4. gopher says:

      The Street obviously doesn’t understand the computer market. It doesn’t help that Apple likes to be so secretive except at their financials report. It also doesn’t help that financial reports aren’t monthly to give a better indication of how things are fairing. The dynamics of the computer market are such that 3 months can create a huge change in demand and supply. It would help Apple do more surveys of its own customers to see what satisfaction people are getting. Consumer Reports surveys are so limited, I’ve never been included! All you hear is the naysaying on boards. People rarely brag about their good computers.

    5. Consumer Reports surveys are so limited, I’ve never been included!

      If you are a paid subscriber, you should get one every year. Now I’m not enamored with the quality of the surveys, and I think some of the questions of far too general to elicit sufficient information. But that’s another story.

      Peace,
      Gene

    6. Robert Pritchett says:

      The general graph indicates a steady growth as Apple moves forward in time. I’m more interested in last quarter vs. this quarter rather than current quarter vs. last year, same time because this industry is so dynamic.

      Depending on when Apple decides to release the Mactel towers (post WWDC), we will see another growth blip. And as Intel releases the chips for the Xserves, another growth blip and then….

      We really are riding the Apple Tsunami!!

    7. Max says:

      So, Apple is moving its pieces with the correct order on the chess table.

      First Intel transition os the low cost line, iMac and MacMini. Then, bring some MacBook´s to put some fire into the high end portable market. Of course, introduce 5 months later (begining of school calendar) the all new MacBook.

      Well, now the quarter closes, they have good numbers, awesome numbers. They got all the attention of the street and tech investors. Now lets bring the new MacPro to put some pressure and all new iPods, to increase the sales of those who believe iPod is not so “cool” anymore.

      Launch the new Xserve with a taste of the super fast instatantaneous Leopardrd and they´ll be so close to the chek-mate.

      Increase in every line of product will pump the stocks even more, bring consistance and solidness to the company and maintaining a high stock price even when Vista is lunched.

      Please state a position if im dreaming too much… =)

      Everything points to the perfect end of the fiscal year.

    8. Scott says:

      Of course, you’re also talking about the same people who are sure M$ “iPod Killer” or “Zune” is about to pounce and turn One Infinite Loop into a smoldering crater. They give tons of product details, many of which would send Apple’s lawyers into the stratosphere for patent violations, all quoted as absolute fact. Never mind the fact that M$’s only comment on the matter came from one exec in Europe who said, basically, they weren’t doing that. Not to mention all the absurd arguments about Apple’s movie rental business (of which Apple has said absolutely nothing, if it exists at all).

      Stock analysts and MBA’s tend to live in their own little fantasy worlds, which usually bear little resemblance to reality. Now that all their doom and gloom FUD turned out to be 100% wrong, they’ll either claim they never said that or starting complained about how “closed” Apple is. Anything but admit a mistake.

      Go Apple!

    9. sal says:

      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

      Where is this coming from and even if true, it doesn’t mean all of those folks are switchers. My guess is most would be first time buyers.

    10. Where is this coming from and even if true, it doesn’t mean all of those folks are switchers. My guess is most would be first time buyers.

      I said new to the platform, not necessarily switchers. In any case, it appears Apple does the surveys of its customers after the sale.

      Peace,
      Gene

    11. woz says:

      Somebody ought to create a website with a timeline and all these ‘stock analists’ and MBA’s with their (company’s) name on it. Then we can see who said what and how much of it was actually GOOD advice. Next time some ‘Wall Street guy’ pops up and says ‘this or that’ we can see what his ‘advice’ was last time around. We’ll soon be seeing a pattern I think 😉 (A pattern of BS)

    12. Ian Betteridge says:

      First of all, it would be kind of nice if you actually cited these analysts who supposedly claimed Apple was on to a bad quarter. Otherwise you’re just attacking straw men.

      Secondly, there’s two things to consider when looking at Apple’s results. The first is how the growth in Mac sales compares to the growth in sales for the rest of the industy. If Apple’s sales are growing at 12%, but the industry average is 16%, that’s a market share loss for Apple. Sales growth on its own is only part of the story. It’s also worth considering the historical data. While Apple is now selling 1.3 mill Macs a quarter (a good result), this means that it’s only now matching the sales numbers it had back in 2000, when the iMac was leading a resurgence in the company. The company slumped in 2001, hitting a low of 650,000 machines in Q1 (iirc)

      I’m not saying that these weren’t good figures for Apple – they were, and all credit to the company for doing well – but without the context of what the rest of the industry is doing and without citing the analysts you’re disagreeing with, I think your article is pretty shallow.

    13. 12.

      First of all, it would be kind of nice if you actually cited these analysts who supposedly claimed Apple was on to a bad quarter. Otherwise you’re just attacking straw men.

      Secondly, there’s two things to consider when looking at Apple’s results. The first is how the growth in Mac sales compares to the growth in sales for the rest of the industy. If Apple’s sales are growing at 12%, but the industry average is 16%, that’s a market share loss for Apple. Sales growth on its own is only part of the story. It’s also worth considering the historical data. While Apple is now selling 1.3 mill Macs a quarter (a good result), this means that it’s only now matching the sales numbers it had back in 2000, when the iMac was leading a resurgence in the company. The company slumped in 2001, hitting a low of 650,000 machines in Q1 (iirc)

      I’m not saying that these weren’t good figures for Apple – they were, and all credit to the company for doing well – but without the context of what the rest of the industry is doing and without citing the analysts you’re disagreeing with, I think your article is pretty shallow.

      So, then, I presume you did not read ANY of the stories about the cut in the stock price because of analyst expectations of a subpar quarter? I felt this was something so blatantly obvious it did not warrant anything more than a passing mention.

      Peace,
      Gene

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