updated 07:10 pm EDT, Wed July 19, 2006
2900 Universal Apps
During the company's third quarter conference call, Apple told investors that it had the best Mac unit sales in any 13-week quarter in the company's history as, which along with iPod sales, helped the company achieve $472 million in profit, the second best quarter in the company's history. Aple said that its favorable operating margin, over 13 percent, was attributable to its revenue growth, a very favorable component environment, and "solid" expense management. Macs represented 55% of total quarterly revenue, increasing 11 percent year-over-year by 12 percent unit growth. As noted in the June quarter breakdown, Mac laptop sales--both unit and revenue--were up a hefty 61 percent year-over-year and doubled in retail US marketshare (see later) while Apple's desktop sales declined as professionals held off purchase. The company said the decline was due to the shift in overall computer sales to laptops and the company's compelling laptop offerings.
Apple's ending Mac channel inventory was 4-5 weeks, within the expected range, but the company said it exited the quarter with a backlog of MacBook orders. The company said it expects to meet this backlog in the coming weeks and that it expects to exit the September quarter without a backlog.
2900 Universal Applications now available
In addition, to shipping all of its consumer and professional applications as native Universal Binaries, Apple noted that 2900 Universal applications were now available from third-party developers. It also estimated that over 70 percent of the 500 most critical applications to consumers will be available by end of September 2006.
Apple said that 75 percent of quarter's Mac shipments were Intel-based Macs and that it has doubled its portable marketshare in US retail, increasing from 6 percent in January to 12 percent in June, according to NPD.
Apple said it is very happy with its Get a Mac ad campaign, which it believes is contributing to its momentum--especially consumers. The campaign, which launched in April, was expanded in early June. Apple noted, however, that its creative professional customers are holding off on purchases as they wait for Intel-based professional Macs and the release of certain Universal applications.
Sales up in all geographies, higher education
The company said it generated the highest quarterly revenue in its education channel in over 10 years and shipped more Macs than in any other June quarter in the company's history.
In each of the geographies--including sales from its retail stores--quarterly revenue in the Americas, Europe, and Japan was up 27 percent, 22 percent, and 13 percent, respectively. This compares Apple's overall year-over-year revenue increase of 24 percent. Gross Margin was 30.3 percent, up about 190 basis points higher than guideance primarily due to very favorable component pricing environment and secondarily due to a more favorable mix due to direct Mac pricing.
Repatriation of earnings lowers taxes
Apple realized a tax-benefit of $0.03 per diluted share due to the repatriation of foreign earnings. The repatriation of earnings dropped the company's effective tax rate from the expected 32 percent to 29 percent, saving the company $24 million. The company increased its cash balance in the quarter by about $950 million, ending the quarter with about $9.2 billion--primarily from a cash flow of just over $1 billion.