Apple delivers exceptional quarter


Apple has announced results for its second quarter, which ended March 26. The results have hit or exceeded both guidance and analyst expectations.

"We are delighted to report a record second quarter for Apple in both revenue and earnings," said His Steveness. "Apple is firing on all cylinders and we have some incredible new products in the pipeline for the coming year, starting with Mac OS X Tiger later this month."  

"We're very pleased to report 70-percent revenue growth and a 530-percent increase in net income," said Peter Oppenheimer, Apple's CFO. "Looking ahead to the third quarter of fiscal 2005, we expect revenue of about $3.25 billion and earnings per diluted share of about $0.28."

Here's a breakdown of the numbers:

• $290-million profit or $0.34 per share
• Revenue of $3.24 billion, up 70%
• Gross margin up from 27.8 to 29.8 %
• Direct sales now account for 48%, up from 44%
• Apple shipped 1.07-million Macs (62% of revenues)
-- Unit growth up 43% (4X the overall market)
-- 608K desktops, up 55%, including 141K PowerMacs
-- 467K combined iMac/eMac/Mac mini units
-- 462K combined portable units, up 29%
-- 251K iBooks, 211K PowerBooks
-- Inventory came in at four-to-five weeks (within guidance)

• Apple shipped 5.322m iPods, +558 percent
-- Music generated 38% of revenues, up 238%
-- iPod shuffle took 43% of Flash-player market (ie No 1)
-- iTMS surpassed 350m songs sold last week
-- iTMS market remains at or above 70%
• Retail revenues doubled to $571m
-- Saw now seasonal decline, actually increased sequentially
-- Average-store revenue was $5.6m, up from $3.5m (+60%)
-- Store profits of $42m, manufacturing profit of $102 million
-- Store traffic of 13m or about 9K visitors per store, per day
-- 103 stores open now; expect to end fiscal w/ 125 stores, including outside the US

• Education revenues highest in 5 years at ???
-- Revenues increased 25%
-- CPU units increased 21%
-- Higher-ed revenues up 45%
-- K-12 revenues up only 5%

• Revenues in core markets all way up
-- US revenues up 72%
-- Europe revenues up 64%
-- Japan revenues up 72%

• Cash reserves stand at $7.057 billion, up over $600m

You can hear the entire fiscal Q2 conference call here.

Editor's note: The "halo effect" would appear to be not only real, but also accelerating. Apple's Mac unit volume outgrew the market by a factor of about four in Q2, up from 2X in Q1.

Talk of growing competition in music appears to be just so much FUD as the company grew iPod unit volume and revenues over the holiday quarter--unheard of. Apple reports its share of HDD-based players actually increased and, of course, the company went from zero to 43 percent of the Flash-based market.

It may be true that the competition is making more noise, but one wonders how long the also rans can maintain these high-marketing expenses.

The only dim spot in the company's results were Power Mac unit sales (including Xserve), which decreased by 19 percent from the year-ago quarter to 141,000.

However, with new PowerMacs, iMacs, eMacs and iBooks as well as a slew of new pro apps and Tiger all coming this quarter, the upside for the remainder of the year would appear to be flipping brilliant.

What's your take?