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Mac, iPod sales surprise analysts

updated 01:20 pm EDT, Thu October 19, 2006

Mac, iPod sales

Apple's fourth quarter financial results, which the company released yesterday and discussed via a conference call, caught analysts by surprise with higher than expected Mac and iPod sales. "On the strength of the Mac's forthcoming ability to run Windows applications, we thought 2007 would be a breakout year for Mac sales," said Needham & Company analyst Charles Wolf. "We were wrong. The breakout appears to be already occurring." Apple's revenues of $4.837 billion were up 32 percent year-over-year, easily beating the analyst's estimate of $4.612 billion, as did GAAP earnings per share of $0.61 vs. Wolf's estimate of $0.49 -- which was partially due to a $0.06 lower tax rate. As Apple Store Mac sales rose to 323,000 units, up from 202,000 a year ago, Needham & Company cites Apple's note that over half of the sales were to first-time Mac owners. The firm raised its 2007 earnings per share estimate from $2.50 to $2.60 on a $22 billion revenue estimate.

"The migration appears to be resulting from dynamics unrelated to the Windows-on-Mac phenomenon," the analyst said. "Mac sales should be higher than we previously forecast but iPod revenues should be lower because of an anticipated mix shift to the new $70 iPod Shuffle."

Wolf points to a possibly more "tepid" response on the part of Windows users than anticipated with regard to the Mac's ability to run Windows applications as the major potential risk to Apple investors moving forward.

UBS also taken off-guard

UBS Investment Research was also surprised by Apple's positive performance for its September quarter, admitting that those results were well above expectations. "Upside was driven by better than expected sales of Macs and iPods and a $0.06 benefit from a lower tax rate. Revenues of $4.8 billion were $218 million above our estimate driven by solid sales of new iPod and Mac products," wrote UBS analyst Ben Reitzes in a research note obtained by MacNN.

Reitzes believes iPod sales were the big surprise, versus Needham & Company's assurance that Apple's "blowout" Mac sales took center stage, but notes that Mac sales also beat expectations. "Despite concerns, Apple sold 8.7 million iPods (vs. our lowered estimate of 8.1 million) representing 35 percent growth year-over-year, driven by solid reception to the new line announced [in] September," Reitzes said. Most industry watchers agreed that Apple would report below its guidance on iPod sales due to NPD data released this month, suggesting a slump below expectations. "Mac unit sales of 1.61 million (up 30 percent year-over-year) also beat our optimistic estimates of 1.48 million units, as the MacBook saw solid demand during the back to school season and the "multiplier effect" seems to be taking hold."

UBS is maintaining its 1Q07 earnings-per-share estimate of $0.78 on revenues of $6.3 billion -- up 10 percent year-over-year and up 30 percent quarter-over-quarter. The firm is raising its revenue estimate for Apple's fiscal year 2007 to $23.2 billion (which was $23.1 billion) based on growth of 20 percent, and is also raising its earnings-per-share estimate to $2.75 (which was $2.70), reflecting higher Mac and iPod unit sales. UBS estimates fiscal year 2008 earnings-per-share of $3.15 -- previously $3.10 -- to reflect revenues of $26.7 billion -- up from $26.4 billion. The firm reiterated its "Buy 2" rating ahead of Apple CEO Steve Jobs' Macworld keynote in January of next year, and raised its price target to $95 from $92.




by MacNN Staff

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Comments

  1. cherrypop

    Joined: Dec 1969

    0

    Why are they surprised?

    Why would analysts be surprised at the continuing popularity of the iPod?

    Apple is absolutely scientific about issuing new iPods with new and better features, so it's logical that upgrade purchases added to first-time iPod purchases would continue to lift iPod sales figures. -apple-project.com

  1. ADeweyan

    Joined: Dec 1969

    0

    Nothing surprising...

    ...about the analysts being surprised by Apple's performance.

    It's like a passage from a Douglas Adams book (forgetting which one -- So Long and Thanks for All the Fish, maybe) about the sheep who are surprised every morning by the sun coming up, then every evening when the sun goes down.

    After a while you'd expect them to start expecting to be surprised, and trying to take that into account.

  1. Will53

    Joined: Dec 1969

    0

    Maybe they're right...

    ... in assuming that 2007 will be the breakout year? The problem is more that they don't understand Apple at all as they try to analyze it as they would do any other company, going for profit at all costs. Therefore it should, according to them, pursue the iPod and the other hardware should be second to the successful, little musicmachine. They don't see that the iPod is just a means, not an end for Apple. It came to be in order to lift up the company and to make it easier for them to concentrate on their main goal; to make the best possible computers running the best possible OS with the best possible applications - 'best possible' within ceratin limitations which implies that it shall still be affordable and not only something for supergeeks.

    And they don't understand what Jobs intentions are. I am convinced that he wants to set things straight again in this market, where the business tactics of Mr. Gates et consortes, have left us with this absurd world dominated by one softweare giant, which for too long only has been motivated by dominance and profit.

    And neither do they understand design. They think that Macs are just pretty computers, products with a nice, sleek look. They don't understand that design is letting the usefulness of a product to be reflected in how it is built and shaped. That is the essence of design.

    Maybe when they would understand something of this, they would not be so surprised anymore?

  1. David Esrati

    Joined: Dec 1969

    0

    Good Advertising? Finally

    Maybe the "Get a Mac" campaign- coupled with the ability to run Windows- coupled with good design was all it took. Why do analysts always blame advertising when sales go down- but never look at it when sales go up?

  1. testudo

    Joined: Dec 1969

    0

    Good thing, too

    I hear those analysts had a severe case of the hiccups. Luckily Apple's numbers shocked them away.

  1. jdonahoe

    Joined: Dec 1969

    0

    What's UBS smoking?

    Where did they pull that price target from? h***, if they want to sell me some AAPL stock right now at $92 or even $95 a share, bring it on. I can handle a $50 profit per share. Or ...... did someone s**** up and the target was supposed to be $195.

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