Apple’s third quarter proved to be challenging because there was no “seasonal uplift” as usual, according to Chief Financial Officer Fred Anderson in a press conference following the announcement of Apple’s most recent financial results.
He said that industry data indicates that there was market weakness everywhere. The IDG research group is forecasting a 20 percent slump in Japan, 16 percent in Europe, and 2 percent in the US. The research group also shows a worldwide decline of 15 percent decline in the consumer market and 6 percent in the corporate world.
About half of this quarter’s shortfall in revenues and sales were in Europe. The rest was split between the US and Japan. Education sales are still slow. However, Anderson said that Apple’s share of the market is approximately 20 percent, which is flat from the year-ago quarter.
IDC predicts that overall education sales were down 18 percent while Apple’s dipped 17 percent. Anderson said that Apple expected the September quarter to be comparable to the June quarter.
And while Apple expected flat sales in the previous quarter, they weren’t expecting sales of systems such as the iMac to slow.
“I had incredible confidence going into the June quarter,” he said. “Regarding the flat panel iMac, we had about a 70,000 unit backlog and over $100 million in value. We felt it has a great market value and strong legs. We had refreshments on the iBook and PowerBook lines, introduced the Xserve, and made the eMac available to a wider audience. Still, we didn’t make our original guidance, and we’re disappointed. But we think it’s an entire market situation, not something unique to Apple.”
One particular area of concerns is pro sales. Such sales are flat in Europe. There wasn’t the expected uplift in sales due to the release of Photoshop 7 for Mac OS X and some pro users are apparently delaying upgrading their systems until the release of the next version of Mac OS X, codenamed Jaguar, Anderson said.
As a result, there are about 6.5 weeks of channel inventory at the current time. The company plans to reduce that to 4-5 weeks over the next two quarters. Sales are anticipated to be flat in the June quarter, and revenues down due to price reductions on certain units, Anderson said.
Expenses will be up due to the opening of more retail stores, spending on research and development, and on new acquisitions such as eMagic. Though there’s been no major layoffs and none are planned, Apple has reduced the manufacturing work force in Sacramento by 7 percent and may continue to “fine tune” the organization, Anderson said.
Apple’s investments in EarthLink and Akamai investments were down. The company will continue to evaluate its investments in the firms, Anderson said.
Still, Anderson said the company is optimistic about the future. The “Switchers” ad campaign, new retail stores, and strong products (“some of which you’ll see tomorrow”) bode well for Apple’s future, he said. And the company remains rock solid financially with a balance sheet showing US$4.3 billion in cash.