Apple Q3 Conference Call - Live Update

This concludes Macworld’s coverage of Apple’s third quarter conference call with analysts. Please visit Macworld.com for more details on this and other Apple news.

Apple on Wednesday announced a profit of $818 million for its fiscal third quarter, which ended June 30, 2007. The company reported earnings of $5.41 billion for the quarter, with record-high Mac sales for the quarter. Macworld has posted more details.

Apple handily beat analyst predictions for the quarter. Analysts polled by Thomson First Call expected Apple to report $.72 per share of $5.28 billion in revenue; instead, the company reported $.92 per share.

The iPhone

Apple only sold iPhones during the final 30 hours of the quarter, as they went on sale on June 29th. Despite AT&T’s recent news that it only activated 146,000 iPhones for the quarter, but Apple CFO Peter Oppenheimer revealed that the company sold 270,000 iPhones through its stores and AT&T stores during those 30 hours.

During a question and answer session with analysts following Peter Oppenheimer’s preamble, Apple COO Tim Cook said that AT&T reports that it sold more iPhones during the first weekend than it had sold in a month of any other wireless device in its history.

Apple CEO Steve Jobs also revealed that he anticipates Apple will sell its one millionth iPhone by the end of its fourth quarter—the first full quarter of iPhone sales. Oppenheimer noted during his preamble that it took Apple seven quarters to sell its first million iPods.

Cook said that based on the demand the company has seen thus far, Apple is confident it will sell 10 million iPhones by the end of 2008.

Oppenheimer acknowledged that iPhone buyers had activation problems during the first week the iPhone was out in the world, and apologized on behalf of Apple for those difficulties. He indicated that AT&T has corrected “the most common cause” of those problems, and since then, iPhone customers haven’t had many problems getting their iPhones to work.

Apple will reveal who its international partners are for iPhone sales later this quarter, said Oppenheimer. Apple will expand iPhone sales first to Europe in the fourth calendar quarter, with Asia to follow in 2008.

Cook noted that Apple “saw absolutely no evidence” of iPod cannibalization during the quarter—no indication that users purchasing iPhones might otherwise buy an iPod.

Pressed for details on the iPhone’s future in Europe and how its lack of “3G” support may affect its popularity, Cook repeated that Apple considers the iPhone “a breakthrough product” and expects it to be received well in the European market as well.

Cook told an analyst that the early iPhone sales during the June quarter skewed towards the $599 8GB models.

Mac sales are up, way up

Oppenheimer said that Mac shipments in the U.S. grew 32 percent year over year—2.5 times what IDC’s predicted industry growth rate for the quarter. Mac products and services represented 60 percent of Apple’s total quarterly revenue for the year—1.76 million Macs were sold.

Music products and services represented 40 percent of Apple’s total quarterly revenue, said Oppenheimer. The company shipped 9.8 million iPods for the quarter, up 33 percent year over year.

Sales of Mac notebooks—MacBook Pros and MacBooks, combined—accounted for 64 percent of all Macs sold, said Oppenheimer.

Apple also saw very strong sales in its Education channel. It set a new all-time record for quarterly Mac sales there, too. The MacBook saw particularly strong sales in the K-12 and higher education market, said Oppenheimer. Apple reported a 36.9 percent gross margin for education.

Oppenheimer said that the June quarter—what Apple reported Wednesday—is historically driven by the start of the Education market buying season. The company’s fourth quarter has been mixed, sometimes the company sees an increase, sometimes a decrease.

Store sales

Apple retail store sales saw 33 percent year over year growth for the quarter, said Oppenheimer. The company has remodeled 15 of its store and eight new stores—185 in total, worldwide. Apple expects to open 12 new stores for the current quarter—197 all told.

Direct sales revenue represented 53 percent of Apple’s annual sales, versus 49 percent for the same quarter a year ago.

Apple saw $5.1 million in average revenue per store, up from $4.7 for the same quarter a year ago. 330,000 Macs were sold through the stores. more than 50 percent of Mac buyers were new to the Mac, he said. 21.9 million people visited Apple stores this past quarter.

Apple is also expanding its relationship with electronics retailer Best Buy, according to Tim Cook. The company started with 50 stores nationwide that carried Macintosh hardware, and should end the year with almost 300. Both Apple and Best Buy are very happy with their burgeoning relationship, said Cook, and that’s why Apple and Best Buy continue to expand their partnership.

(Updated 7/27 to clarify 60 percent revenue figure from "Mac products and services.")

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