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New priced and configurations of eMac shouldn’t have a significant effect on margins.
Apple is focused on growing revenue, not market share.
Increased store could by end of fiscal year from 80 to 88. That’ll put Apple at 23 new stores for fiscal year.
Expect to hear an update about how well the Pepsi iTunes promotion did closer to the one-year anniversary of the iTunes Music Store (April 28, 2004).
13 percent sales to small and medium sized business, up from 5 percent a year ago and 10 percent sequentially.
Apple “could not have been happier” with iBook results; second biggest quarter for iBook in company history. Attributed to the introduction of the iBook G4 and corresponding upgrades.
“Not happy” with Japan results, and taking steps to help sagging sales. “Absolutely expect it to improve.”
“Very minimal” cannibalization of white iPod sales with advent of mini, but that may change as mini distribution and availability increases.
iTunes albums still priced at $9.99 for the most part. Apple is charged more on some albums by the record labels, which is why there are some higher-priced albums.
“iPod is in reasonable supply/demand balance in every geography right now. On the mini it is not in balance,” (noting the previously announced plan to wait on international deliveries). Fiscal Q4 is when Apple will achieve balance on that, and “will do whatever it takes” to make that happen.
“IBM is working very very hard” to bring supply demand in balance for (Xserve) G5 chips, expects to catch up with demand this quarter. IBM is the only supplier that’s delaying the shipment.
“Highly confident” of iPod minis that they’re shipping. Number of complaints “extremely small” reported to AppleCare regarding static or distorted audio.
Positive commodity cost environment, strong software sales, direct sales all add up to good gross margins.
Power Mac – 174,000 units, below 200K bogey previous announced as Apple’s quarterly goal. Total channel inventory reduced 10 percent. Delayed in shipping Xserve G5 until last week of quarter. “True” sales 190K for the quarter when that’s factored in.
12,000 iPod distributors/retailers, compared to about 8,000 a year ago — most expansion happened outside the US.
iPod gross margin was 23 percent as they began to ship the iPod mini. 20 percent is the bogey for iPods going forward. 42 percent of total sales made direct. 35 percent for year ago quarter.
(What appears below represents the extent of the prepared comments. What appears above includes Q&A with analysts.
Cash on hand: $4.594 billion. The company is debt-free. Expecting double-digit growth again in the next quarter. Gross margin will be flat sequentially – 28 percent. Fiscal 04 capital expenditures to be about $190 million, with about $110 million in Apple Store-related expenses.
Japan revenue down 21 percent.
Educational CPU sales up 10 percent. Higher education drove the growth. K-12 flat from year to year. Increases in 1-to-1 implementations, however.
Apple Retail Stores: 5 new stores were opened, total 78. $266 million revenue — almost double the year ago quarter. Average quarterly revenue per store — $3.5 million, up from $2.6 million year over year. $5 million is segment profit. 5.7 million people visited the stores for the quarter. Plan to open 10 stores in fiscal 04. Store in London, England open before end of year.
48 percent of all Macs sold were portables. 201,000 iBooks, 157,000 PowerBooks.
Oppenheimer: Strongest March quarter in four years. Sold over 749,000 Macs and 870,000 iPods. CPU revenue up 6 percent. 29 percent revenue growth about half driven by iPods. Panther continued to sell well, and very happy with iLife 04 sales as well.
Anderson offered a farewell; he will retire in June. Turned call over to Oppenheimer, who will succeed him.
Anderson: “We are exceptionally pleased with the results of the March quarter for a number of reasons.” 29 percent year over year revenue growth. Driven by diverse product portfolio of hardware, software and service products, as well as expanded distribution through channel and online stores. Operating margin was 3.2 percent for the quarter.
Nancy Paxton, senior director, opened the call. Fred Anderson and Peter Oppenheimer provide the play-by-play information.