Apple’s US$19 million profit for its most recent fiscal quarter (which ended in June) saw the company achieve its highest level of revenue in 11 quarters, according to Apple Chief Financial Officer Fred Anderson. Overall, laptop and iPod sales soared, iMac sales dropped, and Power Macs flatlined.
“The fiscal Q3 quarter was a great one for Apple in terms of new product introductions and business execution,” Anderson said.
The company sold 771,000 hardware units, up 8 percent from the previous quarter, but down 5 percent from the year-ago quarter. iBooks remained popular, and sales of the PowerBook (both 12-inch and 17-inch models) were very strong. Portable products represented 46 percent of the Mac systems sold during the June quarter.
Approximately 287,000 iMacs were sold compared to 387,000 in Q3 of 2002. However, Anderson felt the decline was to be expected.
“The flat panel iMac is in its sixth quarter of availability,” he said. “It’s still performing well, but there’s clearly a shift going on from desktops to portables. And the iMac’s price point starts at $1,299, so we fell we’re still capturing a significant and reasonable market share in this price band.”
Faring much less well was the pro desktop line, which sold only 127,000 units. Anderson believed that the new Power Mac G5s and the long-awaited release of QuarkXPress 6 will lay the foundation for a turnaround for the high-end desktop. In fact, Anderson said that customer response to the G5 line has been “strong.”
Apple still expects to begin shipping the new systems next month with August and September being “very busy.” However, Anderson doubts Apple will again hit the 300,000-plus per quarter sales of Power Macs as in some years past.
“We don’t think we’ll reach that level because of the popularity of powerful new laptops that many pro users will prefer instead of a desktop,” he explained. “The G5 will cause a rebound in pro desktop sales; the question is how much. Will sales get north of 200,000? We certainly think so.”
Q3 saw a record number of iPod sales: 304,000 units, way up from 85,000 sold in the March quarter. And in the past quarter, Apple sold their one millionth iPod. Overall, over six million tunes have been purchased at the iTunes Music Store. Anderson said the store was close to breaking even after one full quarter of operation.
“The Windows version is still on track to be launched before the end of the year, which will certainly help the sales of songs,” Anderson said. “We think it will also server as a Trojan horse to spur the sales of more iPods to Windows users. Hopefully, over time those users will have such a good experience with their iPods that they’ll decide on Macs when deciding to purchase a new or a second or a third computer.”
Also bringing cheer to Mac lovers was the news that educational unit shipments were up five percent over the same time period in 2002. Anderson contributed the improvement to a focus on mobile computing (portables comprised 47 percent of all educational units sold) and enhanced educational product coverage of the market (Apple added 67 agents to sell products to selected institutions).
Apple’s retail initiative is still going strong. The company opened six new retail stores during Q3. The number is now up to 62 and will hit 70 by Thanksgiving. Apple will also open its first non-US retail store next year in Tokyo.
Q3 revenue for the retail stores was $145 million, up $10 million from the March quarter and ahead of expectations. The average revenue per store was $2.6 million. Traffic to the stores is also on the rise; 3.1 million people visited the retail establishments during the quarter. The retail initiative is also closer to breaking even; the quarterly loss was $3 million compared to $2 million the previous quarter.
Anderson reiterated the importance of the stores to Apple’s future. He said that Apple’s surveys showed that 50 percent of those buying Mac systems at them didn’t currently own a Mac.
The US market remained the strongest for Apple. The Asia-Pacific and Europe markets were weak, due to poor economic conditions and the fear of SARS, Anderson said. Apple’s international sales accounted for 39 percent overall compared to 42 percent a year ago. Despite such financial speed bumps, Apple’s cash value is up to $4.54 billion, a fiscal year-to-year increase of $208 million.
For the current quarter, which ends in September, Anderson forecast a high single digit percentage increase in revenues and a “slight” increase in earnings. G5s, accompanying displays, retail growth, back-to-school sales, and continuing strong showings by portables and iPods will contribute to the bottom line, he said.
“As we look to 2004, we hope to accelerate the company’s growth to a double digit level,” Anderson said. “Conceptually, there should be some good operating margin expansion.”