Apple Chief Financial Officer Fred Anderson kicked-off the company's second-quarter earnings conference call Wednesday with a recap of the company's second quarter earnings. The computer maker reported profits of $45 million, 11 cents per share, on $1.5 billion revenue. Despite an 8 percent increase in overall Mac sales, gross margins were down to 26.9 percent in the year-ago quarter -- attributed to rising component costs. International sales were 45 percent of the quarter's revenues and Anderson said the new iMac was a success in Europe with a "nice rebound" in the Asian-pacific. Significant financial savings include a 21 percent reduction in operating costs for the second quarter.

Anderson noted that Apple shipped 57,000 iPods and 220,000 new iMacs, but said there was still a significant backlog of orders. Anderson said that the demand for the iMac was still present despite the price increase, and
that expects that Apple will fill all backorders by early May. The production rate of the new iMas has almost doubled since Macworld Tokyo, when it was at 5,000 per day. In response to press inquiries, Apple said that the sub-$1000 market is still important: "Long live the original iMac." Apple sold more than 150,000 CRT iMacs in the quarter.


iPod sales declined 50 percent from the previous quarter, compared to an industry-wide MP3 player sales drop of 70 percent. Power Mac and PowerBook sales continue to fall by as much as 34 percent over the last fiscal year; analysts suggest that Apple will need to push the envelope on hardware development to maintain its place in the consumer PC market.

Apple is targeting another sequential increase in revenue to $1.6 billion for the third fiscal quarter and EPS to be flat to up slightly with the March quarter. Gross margins were down to 27.4 percent in the quarter due to higher component costs and air freight costs of the new iMac ramp, while operating expenses were down 21 percent to $381 million. Gross margins are expected to continue to decrease with higher component costs, delivery of backorders of the new iMac at the older price point, continued air freight charges for the new iMacs, and the upcoming educational buying season, which focuses on lower-margin products. Gross Margins are expected to increase in FYQ4. Apple achieved signficant cost savings in the

Apple's retail operations generated $70 million in revenue with a net loss of $4 million. Anderson said that 1.7 million people visited the stores this quarter and that it opened two new stores (with 20 more expected by the end of year). Apple hopes to have its retail segment profitable by the end of the year and maintains that the placement of retail stores in upscale malls was the "right decision." Apple said that 40% of system sales at retail stores were to non-Mac users and that 99% of people who visit the stores would recommend it others. Apple said it also staffed 50 new CompUSA locations with Apple workers. The company exited the quarter with 4.5 weeks of channel inventory, down almost 14 percent from the December quarter.



Apple reported that 250,000 downloads of iPhoto 1.0 digital image organization software had taken place since the announcement of the one-millionth download several weeks ago.

[Apple Q2 summary PDF - requires Adobe Acrobat Reader 4.0]

by MacNN Staff