Apple on Wednesday
announced the financial results for its fiscal 2006 second quarter, which ended on April 1, 2006. The company posted revenue of $4.36 billion and a net quarterly profit of $410 million, or $.47 per diluted share. These beat predicted earnings of $.38 per share. It was the second highest quarter in terms of sales in Apple history.
Apple has cumulatively shipped more than 50 million iPods now, said Apple CFO Peter Oppenheimer
“We continue to be very happy in our progress in the Intel transition,” said Oppenheimer, who said that the transition would be completed by year’s-end.
In a topic the company touched on during the last quarter, Oppenheimer noted that the pause in Mac sales was more pronounced this quarter, as customers waited on both a complete transition of all Mac systems, and the transition to universal binaries by third party software vendors.
The company also generated $485 million in music revenue; this was driven by iTunes Music Store sales, iPod accessories, and the iPod Hi-Fi. The company noted that the iTunes Music Store now accounts for 87 percent of all legally purchased and downloaded music in the United States, offering more than 2.9 million songs and 70 television shows.
Oppenheimer noted that NPD Techworld shows that the iPod’s market share has increased to 78 percent in March, up from 71 percent in December, and claimed that the company estimates 30 percent of new cars sold in the United States will offer direct iPod integration.
In addition to the United States, the iPod is also the leading MP3 player in England, Canada, Japan, and Australia, and it views the rest of Europe and Asia as places to grow market share.
“The MP3 player market has a lot of room to grow,” said Oppenheimer, comparing its market penetration with digital cameras.
Apple generated $336 million at its brick and mortar retail Apple Stores, opening six new stores during quarter. The company said to expect 40 new stores in fiscal 2006, of which roughly 30 will be in the United States.
The company is targeting between 4.2 billion and 4.4 billion in revenue for the quarter ending in June 2006, factoring a continued pause in demand in its Mac business, and lower margins for Macs and iPods due largely to education sales and an iPod shuffle price reduction.
Q&A with analysts
In response to analyst questions about iPod demand — sales dropped to 8.5 million from 14.1 million the previous quarter — Apple attributed this to an extra week in the previous quarter which fell between Christmas and the New Year — a key week during the shopping year.
Despite the decline, “we’re very, very happy with it,” said Apple’s Oppenheimer.
In response to a question on how it planned to grow its international iPod market share, Apple revealed that market share increased in the UK to 40 percent, Japan to 54 percent, Canada to 45 percent, and Australia to 58 percent.
“If you look outside the international countries, such as Italy and Spain, China and Korea, market share is much less than in [the UK, Japan, Canada, and Australia]. We are focused on increasing that share by increasing out local advertising and points of distribution,” said Oppenheimer.
In response to an analyst question as to when the pause in sales would end, Apple COO Tim Cook refused to predict when that would happen, but noted that the company is on track to have all of its products shipped on time. He also alluded to Adobe, noting that once Photoshop and the Creative Suite were Universal apps it would help encourage Mac sales,
In response to an analyst question as to what Apple’s eventual plans were with Boot Camp, Cook noted, “we have no desire and no plan to support Windows.”