World of Apple

During today’s financial conference call, Apple’s chief financial officer Peter Oppenheimer noted that Apple will make a “product transition” during the next quarter.

The comment came after concerns that Apple predicted gross margins of just 30% down from 34.8% in the June quarter. According to Apple a future product transition will cause a drop in gross margins.

The chief was short on details but did explain that price will be a significant driving factor. He continued that Apple often introduces products with new technology at a high price, but seeks to drive the price lower over time.

When referring to the unnamed product the CFO described the product as having “technologies and features that others can’t match”.

In today’s press release Steve Jobs spoke of “several more wonderful new products”.

Apple is widely expected to be revising the MacBook Pro and MacBook in the coming quarter. In addition the company is rumoured to introducing a multi-touch tablet sometime in the future.

Apple today announced their third quarter 2008 financial results posting revenue of $7.46 billion and net quarterly profit of $1.07 billion (or $1.19 per diluted share).

Apple also held a conference call covering the details of the quarter as well as answering questions from analysts.

Notes from Conference Call

• Highest June quarter earnings in Apple’s history
• Highest quarterly Mac shipments in Apple’s history
• 38% growth in revenue year-over-year
• 11 million iPods sold, up 12% year-over-year
• iPhone 3G off to great start, 1 millionth iPhone sold in just 3 days, available in 22 countries
• Over 900 applications on App Store, 20% free, 90% under $10. Over 25 million apps downloaded so far
• iTunes now offers 8 million songs, 20,000 TV shows, and 2,200 movies, with 450 of those movies offered in HD
• 476,000 Macs sold via retail stores, over half sold to customers new to Mac
• 216 retails stores around the world at the end of quarter, stores coming to Switzerland and Germany in coming months
• Expect to sell more iPhones in Q408 than any other quarter
• Gross Margin expected to be down to 31% in September quarter, in part because of new product introduction, no further details available

Question and Answer Session Highlights

• Beijing Apple store doing very well already
• 170 Best Buy stores added in quarter. Total of 570 currently, 600 by the end of the Summer
• Steve Jobs has no plans to leave Apple and his health is a private matter
• Apple continues to invest in Apple TV, even though it remains a “hobby”
• iPhone 3G sold out due to overwhelming demand. Pleased with production ramp, trying to catch the demand by shipping units as fast as they can
• iPhone 3G launching in additional 20 countries on August 22
• Reiterated that Apple will introduce state of the art new product at prices their competitors can’t match
• App store not a huge revenue generator, instead makes the iPhone and iPod touch more attractive

Apple today announced financial results for its fiscal 2008 third quarter ended June 28, 2008. The Company posted revenue of $7.46 billion and net quarterly profit of $1.07 billion, or $1.19 per diluted share. These results compare to revenue of $5.41 billion and net quarterly profit of $818 million, or $.92 per diluted share, in the year-ago quarter. Gross margin was 34.8 percent, down from 36.9 percent in the year-ago quarter. International sales accounted for 42 percent of the quarter’s revenue.

Apple shipped 2,496,000 Macintosh computers during the quarter, representing 41 percent unit growth and 43 percent revenue growth over the year-ago quarter. The Company sold 11,011,000 iPods during the quarter, representing 12 percent unit growth and seven percent revenue growth over the year-ago quarter. Quarterly iPhone units sold were 717,000 compared to 270,000 in the year-ago-quarter.

“We’re proud to report the best June quarter for both revenue and earnings in Apple’s history,” said Steve Jobs, Apple’s CEO. “We set a new record for Mac sales, we think we have a real winner with our new iPhone 3G, and we’re busy finishing several more wonderful new products to launch in the coming months.”

“We’re extremely pleased with the growth of our business and the generation of almost $5.4 billion in cash in the first three quarters of fiscal 2008,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the fourth quarter of fiscal 2008, we expect revenue of about $7.8 billion and earnings per diluted share of about $1.00.”

Apple will be live streaming its Q3 2008 financial results. The live webcast will begin at 2:00 p.m. PDT on Monday, July 21, 2008 at www.apple.com/quicktime/qtv/earningsq308/

Within the next few hours Apple will unveil its third-quarter results and many analyst are expecting a strong performance from the company despite poor results from industry giants such as Microsoft and Google.

On average analysts appear to be reporting that Apple will earn $1.07 a share on $7.36 billion in sales, up from 92 cents a share on $5.41 billion in revenue during the same period a year ago. Apple itself has said it expects to earn $1 a share on $7.2 billion in revenue.

Gene Munster of Piper Jaffray has recently stated in a research note that Mac sales will be “the key to the quarter,” and that he expects Apple to report Mac sales of 2.35 million units during the quarter.

Andy Zaky of Bullish Cross, a blog on Apple’s financial dealings expects Apple to report $1.20 in EPS on $7.720 billion in revenue along with sales of 2.54 million Macs, 10.5 million iPods and 700,000 iPhones in the quarter.

Apple has today announced that it will hold its fiscal year 2008 third quarter financial results call on Monday July 21 at 2pm PDT/5pm EDT.

The live audio webcast will be accessible through Apple’s website at here.

Six months ago Apple announced that it would standardise the price of iTunes purchases in he UK to be in line with other European stores.

According to a report today, Apple has decided not to adjust the pricing on the UK iTunes store.

“The announcement was that we would match the UK price to that of other lower priced European countries”, an Apple spokesman said. “This is no longer necessary as exchange rates have effectively done it for us”.

At the time of the decision the exchange rate would have meant that a song costing 0.99 euros would be 74p, but as the Euro has risen against the pound in the last few months a 0.99 euro purchase now equals 0.79 pounds.

Top Apple executives including CEO Steve Jobs are once again facing legal action over the backdating scandal.

Last year Apple had the high profile case against the company dismissed after both the US Securities and Exchange Commission and an internal investigation.

Apple shareholders Kenneth Mahoney and Martin Vogel last week filed a new lawsuit that accuses co-founder Steve Jobs, other executives, and board members with damaging the company’s share value through backdating, causing a 14 percent drop in the company’s stock value during 2006 that wiped out about $7 billion of Apple’s worth on the market in just two weeks.

According to the claim executives dated stocks that weren’t revealed to shareholders and also falsified records.

It has been revealed in an SEC Form 8K filing that Apple will not receive follow-on revenue from most of its new carriers that it has signed agreements with to distribute the iPhone.

Item 8.01. Other Events

Apple assumes no obligation to update any of the statements in this Form 8-K regarding the iPhone, iPhone 3G and iPhone 2.0 software.

SeekingAlpha.com reports on a slight slump in AAPL shares on Thursday afternoon after a rumour began circulating that the 3G iPhone would be delayed.

On Thursday AAPL closed $2 down from its opening and has since recovered in Friday trading.

Apple today filed it’s quarterly 10Q (Download PDF) with the SEC, within the filing the company revealed some key details of the past quarter in particular the companies growth factors and rising costs of retail space and R&D.

During Apple’s second fiscal quarter which ended March 29th the company experienced a 51-percent rise in Mac unit sales compared to the same quarter in the previous year. According to todays filing this steep increase was mainly thanks to sales of the MacBook Air which was announced in January and the iMac which was refreshed in August 2007.

Apple also attributed a $228 million net sales rise on “music related products and services” at its iTunes Store to “heightened consumer interest in downloading third-party digital content, as well as the expansion of third-party audio and video content.”

As of the end of September 2007 the company’s total future minimum lease payments under noncancelable operating leases were $1.4 billion, of which $1.1 billion related to leases for retail space. As of March 29th 2008 this increased $192 million to $1.3 billion, and Apple Retail as a whole employed approximately 12,000 full-time equivalent employees.

In the quarterly filing Apple also noted that Research and Development increased by 59-percent or $90 million to $273 million in its second fiscal quarter, and increased 41 percent or $152 million to $519 million during the first six months of 2008 compared to the same period in 2007.

The company attributed the rise to an increase in R&D headcount for the current year to support expanded R&D activities and higher stock-based compensation expenses.

“Although total R&D expense increased 49 percent, it remained relatively flat as a percentage of net sales given the 43 percent and 38 percent increases in revenue in the second quarter and first six months of 2008 compared to the same periods in 2007,” Apple noted. “[Apple] continues to believe that focused investments in R&D are critical to its future growth and competitive position in the marketplace and are directly related to timely development of new and enhanced products that are central to the Company’s core business strategy. As such, the Company expects to make further investments in R&D to remain competitive.”