Well, folks, Apple did it all over again. They confounded those alleged Wall Street analysts by beating the street and pretty much disproving any lingering skepticism about their ongoing success.
Here’s what I mean: Sales estimates for new Macs were as high as 2.85 million for the last quarter, but Apple sold 3.0.5 million, breaking another company record. Where the skeptics suggested that iPhone sales would be considerably lower than expected, because of supply constraints, Apple actually moved 7.4 million, a seven percent growth over last year.
Well, in the latter case, the critics were partly right. During the quarterly phone call with analysts, Apple admitted there were problems meeting demand, which they claim to have largely resolved earlier this month. So that surely augers well for the current quarter.
All in all, Apple’s sales totaled $9.87 billion with profits of $1.67 billion or $1.82 per diluted share for the quarter, which actually ended September 26th. Last year, sales for the comparable period were $7.9 billon, with profits of $1.14 billion or $1.26 per diluted share.
Not everything came up roses, however. Sales of desktop Macs continue to shrink compared to note-books. Some 787,000 desktops were sold, a 16 percent decline in unit sales. Portable sales soared 35 percent. However, other PC makers are suffering from the same problems, as sales trend portable. Worse, those companies are finding most of those increases are confined to the low-profit netbook category.
Apple, at least for now, still hasn’t announced any intention of entering the cheap note-book category. Even the reports of a tablet-based computer speak of something that will cost more than twice what the base-level netback sells for. In any case, I don’t think anyone expects such an animal to emerge from Apple’s contract production facilities until some time in 2010.
As to operating systems: In the first five weeks on sale, Snow Leopard is shipping at twice the pace of Leopard. Apple claims demand is actually higher than they expected, which might be true considering the 10.6 upgrade is not feature rich. On the other hand, $29 is surely a cheap price to pay and the upgrade process, particularly compared to the Windows XP to 7 mess, is almost seamless.
The iPod continues to command over 70% of the U.S. market, but sales were held to 10.4 million units, an eight percent decline compared to last year. Once again, though, even the skeptics agree that some of the lost sales are simply going to the iPhone. So long as Apple continues to cannibalize itself, few will complain. Well, maybe Microsoft, since their Zune HD is off to a typically lackluster beginning, at least based on sales rankings at Amazon.
With the Windows 7 coming out party happening later this week, I wonder if anyone truly believes that’ll change anything when it comes to Apple’s ongoing market share increases. You see, with every previous Windows release, Mac sales have actually increased. Again, that’s contrary to what the analysts want you to believe. What’s more, you can bet that Apple will go after Microsoft’s horrendous XP upgrade process.
As most of you no doubt expected, the session with financial analysts produced the typical softball questions. Maybe they hold back because they don’t expect Apple to accept the difficult queries, or they lack the journalistic chops to probe. So as you might expect, folks, Apple wasn’t asked about the infamous Snow Leopard Guest account bug, which may soon be resolved anyway in the next 10.6 maintenance release.
Now it’s not our habit to simply repeat an Apple release and quote lots and lots of numbers. If you are interested in probing the figures more carefully, feel free to check Apple’s press release [1] on the subject for all the information you need to get the sense of their performance in the last quarter.
Meantime, while Apple remains coy when they’re asked about anything that might give a clue about new products, a response from Chief Financial Officer Peter Oppenheimer provides a strong hint, when he explains that profit margins are about to decrease in part because of “new products we have and will announce, delivering greater value, lower gross margin than predecessors.”
Update: Apple’s product updates occurred without fanfare Tuesday morning. First, to recap the speculation: The aging MacBook might be replaced with a slimmer form factor, accompanied by a price cut ranging from $200 to $300. The iMac may also be trimmed down somewhat, to take advantage of ongoing parts miniaturization. Some are actually hoping that Apple will install the low-power quad-core Intel processors on some models, and perhaps provide a little more external expandability to satisfy the needs of folks who find the Mac Pro to be much too expensive. The Mac mini? If it gets an update, it’ll probably be minor, although it would be nice to see a small price cut to pull in extra sales from skeptical buyers who continue to suffer from financial distress as the holiday season approaches.
In the end there were no price cuts, but every upgraded product offers more value for the money. We’ll cover this in more detail in a separate article.