Apple released their second quarter 2007 financial results today.
Apple posted revenue of $5.26 billion and net quarterly profit of $770 million, or $.87 per diluted share. This compares to revenue of $4.36 billion and net profit of $410 million in the year-ago quarter (Q2 2006).
Apple shipped 1,517,000 Macs and 10,549,000 iPods this quarter, representing a 36% increase in growth in Macs and 24% increase in iPods compared to the year-ago quarter.
"The Mac is clearly gaining market share, with sales growing 36 percent -- more than three times the industry growth rate," said Steve Jobs, Apple's CEO. "We're very excited about the upcoming launch of iPhone in late June, and are also hard at work on some other amazing new products in our pipeline."
Apple will broadcast the financial results live at 5pm ET. Highlights posted below.Conference Call Notes
iPhone is "years ahead of the competition". Plan to continue to develop new software features and entirely new applications and incorporate them into the iPhone. We want to provide many of these new features and applications at no additional charge to users. As a result, Apple will be accounting for the iPhone income over a 24 month period rather than an up-front amount.
Plans to periodically provide periodic enhancements and updates at no charge to Apple TV customers, so Apple TV will be accounted for with the same 24-month linear spread.
Q/A:
The reason why Apple TV will be accounted for on a subscription basis. A number of ideas/improvements to the Apple TV which will be deployed in the future.
Q: How should be think about the potential of iPod in face of iPhone. How do you think the delay on Leopard will have an impact on Mac sales.
A: Re: iPod. No obvious effect on iPhone announcement on iPod. In terms of Leopard, we are shipping the best Macs we've ever shipped before. The upgrade to Leopard is simple/straightforward to do, don't know if customers will delay or not.
Q: Given the lead time for the iPhone announcement, any advantage on ramping for June?
A: Working hard on iPhone. Can't predict the ramp at this point.
Q: Pre-orders for iPhones?
A: Currently not, we will announce later the date at which we are taking orders.
Q: Your retail staff is typically waiting for products. Are they going through training now?
A: A number of things are different. Sometimes products are secret until announcement. iPhone is different in that it was preannounced.
Q: So they will be fully trained at day 1?
A: They are putting a lot of energy into the launch.
Q: Fully staffed support for the product?
A: We have award winning support for the Mac and iPod and going after the iPhone with the same rigor.
Q: Any more distribution partners re Best Buy / Circuit City?
A: Best Buy to over 200 stores now. will take place by the fall. We are very excited to do that. Still determining Circuit City role.
Q: Any uptick in professional customers?
A: We do think that CS3 has delayed pro customer purchases. Too early to tell.
Q: Why not passing along more component savings during the quarter?
A: We believe our products are very competitively priced.
Q: On the new EMI deal. Assuming some of the other labels join with there be any change in iTunes revenue?
A: Our philosophy has been to run the music store as a little over break even. We think that selling music/videos helps us sell iPods/accessories.
Q: On the channel side, direct sales vs indirect mix?
A: The direct sales (online, stores, and direct) was 50% in the quarter and close to expectations.
Q: iPhone worldwide?
A: Europe: 4th Calendar Quarter. Asia: 2008.
Q: iPhone sold where?
A: Cingular stores, Apple.com, Apple stores.
Q: Better understanding of the internal design strategy. With the drop in NAND flash, has that influenced product design and what you plan on introducing in the future?
A: We don't comment on the future products.
Q: On Japan, they continue to lag/be flat. What are you going to do?
Q: Under expenses, you're guiding expenses up a little, what plans on programs?
A: Japan is very challenging market for us. The MP3 market isn't growing, and stable marketshare for iPods. We have a number of initiatives. Mac/PC ads. The only major market that we are not doing as well in. Very frustrating. Continuing to invest for long term growth. Increasing spending in our engineering. Also in other marketing, and stock based compensation.
