Apple Clobbers the Street!

ByMike Moffit

By Don@Smalldog.com

You go figure! Apple announced its quarterly earnings after the market closed on Wednesday and posted a profit for the quarter (that’s three months for those with scorecards!) of $1 Billion! This was far in excess of even the “whisper numbers” and was the record earnings for any quarter in Apple’s history! Soon afterward, eight brokerage houses increased their estimates for Apple stock (Soleil—to $115 from $100; Goldman Sachs—to $110 from $102; Bear Stearns—to $130 from $125; Prudential—to $100 from $90; PiperJaffray—to $124 from $99; UBS—to $124 from $118; Citigroup—to $105 from $98; ThinkEquity—to $120 from $110) but by the next day (Thursday) Apple stock had fallen by over $5 to under $90.

Apple had given guidance for their next quarter (January through March) and those numbers were not nearly as spectacular as the numbers for the holiday quarter. Duh! As Apple’s product lines become more consumer focused with iPod, iTunes Music Store, AppleTV and now the iPhone, I think you will see an even greater seasonality to Apple’s revenues. With all that said, however, Apple is targeting revenue of $4.8 to $4.9 billion and per share earnings between 54 cents and 56 cents for the quarter. I remember well when Apple’s revenue for the year was close to those numbers and they weren’t posting any profit!

Here’s some more financial highlights from Apple’s holiday quarter:

The Mac side of the business:

Apple shipped 1.606 million Macs during the quarter, representing 43 percent of the company’s total revenue. This included sales of 969,000 notebooks and 637,000 desktop systems.
The quarter showed surprisingly strong MacBook Pro sales.
The 1.6 million Macs shipped during the quarter blew away Apple’s internal projections. The company is “thrilled” with Mac shipments.
The Mac has outgrown the overall PC market for 8 of the last 9 quarters.
Boot Camp downloads have exceeded 1.5 million. T
A survey of student buyers shows that their intent to buy a Mac portable has increased from 17 to 28 percent in the past year.

The iPod music side of the business:

Apple sold 21.066 million iPods during the quarter, representing a 50 percent increase in the number of iPods sold year-over-year.
All three iPod models did exceptionally well during the quarter.
The iPod share of the US digital music player market was 72 percent in December.
iTunes continues to lead the legal download market, with an over 85 percent share.
The iTunes Store now contains over 4 million songs, 350 television shows, and 250 movies.

Apple Retail Stores

Sales at Apple’s retail stores came in at a record $1.1 billion with record sales of 308,000 Macs. Apple opened 5 new retail stores during the quarter to end with 170 stores. With an average of 169 stores open during the quarter, per-store revenue was about $6.7 million.
The company expects to open 7 stores during the March quarter and 35-40 overall in fiscal 2007.

The Numbers

Gross margin for the quarter came in at 31.2 percent, due primarily to a favorable commodity environment across the board.
Operating expenses for the quarter were $898 million, including $40 million for stock-based compensation.

And in another amazing accomplishment – Apple increased its cash balance during the quarter by a staggering $1.75 billion to end with $11.9 billion. Not too shabby to put $1.75 Billion in the bank in a short 3-months. It sure gives Apple a nice nest egg to comtemplate.

The Apple story of success driven by Steve Jobs and the extraordinary management team at Apple continues. Innovative design of tools that we instinctively know how to use has made Apple one of the most outstanding American business success stories. With Apple’s success comes a great responsibility. A business is a member of society and has responsibilities that go well beyond making a profit or accumulating wealth. As a very vocal advocate of socially responsible business practices, I would like to see Apple talk more about their commitment to people, the environment and community.

by Don@Smalldog.com

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