MacCentral’s live coverage of Apple’s second quarter conference call has concluded. Check our headlines below or on our home page for the latest details.
Asked about life expectancy of CRT-based iMacs, Anderson said that 152,000 CRT iMacs shipped last quarter. Won’t discuss if or when the CRT iMac will be discontinued, citing Apple’s longstanding policy of not discussing future product plans. But he added, “We need a product [for consumers and education] particularly in that sub $1,000 space. Long live the original iMac.”
Government is a small segment for Apple, but it grew 60 percent year over year. Anderson said that the company has more government opportunities thanks to OS X robustness and security. Thinks it’ll be a high percentage growth opportunity going forward. Doesn’t want to commit to another 60 percent year over year growth but wouldn’t be surprised — calls it “strong double-digit” growth for this year too.
14 inch iBook did “quite well” for the quarter as well. Most laptops — both PowerBook G4 and iBook — are air-freighted, because of the size and weight.
Pleased with all geographies — nice rebound in Asia/Pacific and strong numbers from Europe.
iPod — expected decline with normal seasonal pattern. Decline was less than marketplace — 50 percent dropoff versus more than 70 percent for MP3 player demand industrywide.
Hopeful that retail business will see profitable quarter by end of year. Intentional to take a breather after the first 27 stores opened to evaluate business model and make any tweaks as appropriate. “Absolutely the right decision” to put stores in upscale malls and high-traffic upscale lifestyle areas.
Apple believes close to 40 percent of the Apple Store customers are non-Mac users. Said that close rate is higher on Mac than PC customers.
More than 3 million systems have shipped with Mac OS X installed since last May.
Said that big educational deals have had be deferred because of tax revenue issues.
60 more CompUSAs now have Apple-badged employees working at Store-Within-A-Store locations. Also piloting programs in Europe (UK with Dixon) to “replicate the Comp USA success”).
“Very good quarter” in video segment — DVD Studio Pro, Final Cut Pro, etc. “Our primary strength.” Pro business was flat quarter to quarter, however. Admitted that demand is weak in graphics and publishing.
Production rate on iMacs increased substantially in the past 10 days — almost double what Jobs cited in Tokyo (at the time, 5,000 per day, which Anderson says is now more like 9,000 per day).
Typically, June and September quarters are strong for education. The biggest K-12 quarter is June. Believes gross margin in iMac will increase in September quarter due to the full-quarter benefit of the $100 price increase and cost reduction initiatives implemented by the company’s Ops group. Less air freighting expected in September quarter too.
Order backlog “significant” without any fall-off in sales after price increase. “A lot of Wintel users” buying iMac, but admits it is anecdotal.
Anderson then opened to analysts’ questions.
“Very optimistic” about future. Extremely pleased about iMac — shipping in volume and hope to be caught up soon.
September is looking better for gross margins and operating expenses, according to Anderson.
$4.3 billion in cash. -41 day cash conversion cycle, “best in industry,” according to Anderson. EPS to be flat to up for quarter due to lower gross margins. $1.6 billion expected in quarterly revenue. The $100 increase in iMac price isn’t expected to impact quarterly revenue much in June quarter.
Apple gross margins down to 27.4 percent. Air freight, RAM costs and LCD costs factored into margin reduction.
Unit inventories down 14 percent from December quarter. Retail store totalled $70 million; loss down to $4 million. 1.7 million people visited the stores during quarter. 20 more retail stores to be opened during 2002.
CompUSA retail initiative expanded during quarter. 75 more VARs added during quarter, doubling pro video coverage. Noted that Photoshop 7 shipped yesterday; expects OS X to grab more pro customers accordingly.
Mac OS X transition gains momentum. 3,600 products on OS X so far. Government agencies, research universities, science and tech are all interested in it. Tax revenue shortfalls have negatively impacted educational sales.
220,000 iMacs shipped in quarter. “Significant backlog” exiting the quarter. Expects to meet demand this quarter. Production ramped up. 22 percent increase in PowerBook G4 and iBook shipments year over year.
Anderson: Q2 generated revenues of 1.5 billion, 11 cents EPS consistent with guidance. Revenue was up 9 percent sequentially, contrary to the usual trend this time of year. Year over year, revenues were up 4 percent and units 8 percent.
Director of investor relations Nancy Paxton opened call. Restated the information in the press release. Peter Oppenheimer and Gary Whippler joins CFO Fred Anderson for the call.