Conference Call: Macs sales surge 28%

Apple's record profit of $1.1 billion surpassed the company's previous record holiday quarter on what it called "staggering" demand for the iPod and continued strong demand for Macs, which accounted for 43 percent of all Apple revenues. Mac sales, the company said, have outpaced market growth in eight of the last nine quarters and grew at about 3 times IDC's published growth rate for the PC market during the quarter. The company shipped 1.61 million Macs, ahead of its own expectations, on "particularly strong" MacBook sales. The company laptop unit sales surged 65 percent during the quarter, while revenues were up by nearly 80 percent--based strong sales of the higher-priced MacBook Pros. Mac unit sales in the Americas, however, were down 20 percent sequentially due to the drop-off in institutional sales during the traditionally strong September quarter.

As noted in the previous conference call, Apple had noted two particularly large educational institutional sales during the September quarter. Apple noted that the sequential drop-off in sales is normal for the December quarter, but that overall strong Mac sales in all regions help off-set the anticipated decline to keep overall sales steady at near 1.6 million.

Apple also continues to expand the number of locations that sell Macs. Apple told investors that the company had increased the number of locations selling Macs by nearly 1500 to 7500 during the year. The company did not provide an update on its Best Buy expansion program, but said it would evaluate the program following the holiday season.

The company said that Mac Pro sales met its internal expectations, but that the market was soft due to lack of native professional applications. Apple also aknowledged a slowdown in sales to its traditionally strong pro market. Adobe Photoshop CS3, the first Universal version for Intel-based Macs, was released as a beta in December and Apple said it hopes to see more sales to the Pro market, following its final release in second calendar quarter of 2007.

The company, however, does not believe that more aggressive pricing. Responding to an analyst question, it said that its Mac products continue to deliver better-than-market sales growth.

"We grew at three times the market. And underneath that, if you look at some specific markets, like the US, we grew at 31 percent versus market growth of three percent--so just substantially above," Apple executives told investors. "Portables grew 65 percent versus IDC forecast of 23 percent. Eight of the last nine quarter the Mac has outgrown the market. I believe we have very competitive product offerings that are delivering substantially above market growth. We have no reason to change.

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