World of Apple

According to data released by the market research firm NPD, Apple claimed 91 percent of the revenue market share for computers costing upwards of $1000 during the month of June.

The data which is gathered only through “brick-and-mortar” retail channels shows a continuing trend for Apple, during May 2009 Mac sales made up 88 percent of PCs selling for more than $1000. The data also showed that while the average Windows PC sold cost $515 the average Mac came in at $1400.

Overall Apple’s market share is estimated to be 8.7 percent in the US market.

Following the release of Apple’s third fiscal quarter earlier today the company held a conference call for media and analysts. Below is a list of notes from the conference call.

• 4% year-over-year Mac unit growth (4% quarterly decrease)
• Notebooks make up two thirds of all Mac sales
• iPod sales down 4% year-over-year, channel inventory reduced by 400,000 units
• Saw decline in sales of iPod classic
• 50% of recent iPod purchasers are buying their first iPod, including in traditional strong iPod countries
• iPod touch sales grew 134% year-over-year
• Unable to keep up with iPhone 3GS demand
• Last week Apple saw the 8 billionth song puchased and downloaded from iTunes
• Around 50% of Mac sales still to switchers
• Retail stores saw 22% increase in visitors year-over-year
• Stock of low-end MacBook models constrained
• K12 sales weak, expected to be down to low budgets
• $99 iPhone 3G saw sales increase significantly
• iPod touch expected to grow significantly in Q4
• Component pricing rising in many areas but Apple intends to be competitive
• 1.83 million iPhone units in inventory
• Apple remains a debt-free company
• $2.3 billion in cash flow in Q3
• 258 Apple Stores now open; average of 254 stores open during the quarter, $5.9 million per store
• iPhone 3GS currently in 18 countries
• Apple’s goal is to build the best computers in the world
• Apple has pre-paid $500 million to Toshiba to secure NAND flash supplies
• In last quarter Apple shipped a new version of the most advanced mobile operating system (iPhone OS) with an install base of 45 million
• Goal is not to build the most computers but the best computers
• Unable to work out how to build a computer for the netbook market
• Many cheap netbooks are slow, small displays, cramped keyboards and Apple thinks people won’t be happy with such products
• Apple want to build product they’re proud of
• iPhone in China continues to be a priority project and wishes to be in the country within a year

Apple today announced financial results for its fiscal 2009 third quarter ended June 27, 2009. The Company posted revenue of $8.34 billion and a net quarterly profit of $1.23 billion, or $1.35 per diluted share. These results compare to revenue of $7.46 billion and net quarterly profit of $1.07 billion, or $1.19 per diluted share, in the year-ago quarter. Gross margin was 36.3 percent, up from 34.8 percent in the year-ago quarter. International sales accounted for 44 percent of the quarter’s revenue.

Apple sold 2.6 million Macintosh computers during the quarter, representing a four percent unit increase over the year-ago quarter. The Company sold 10.2 million iPods during the quarter, representing a seven percent unit decline from the year-ago quarter. Quarterly iPhones sold were 5.2 million, representing 626 percent unit growth over the year-ago quarter.

“We’re making our most innovative products ever and our customers are responding,” said Steve Jobs, Apple’s CEO. “We’re thrilled to have sold over 5.2 million iPhones during the quarter and users have downloaded more than 1.5 billion applications from our App Store in its first year.”

“We’re extremely pleased to report record non-holiday quarter revenue and earnings and quarterly cash flow from operations of $2.3 billion,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the fourth fiscal quarter of 2009, we expect revenue in the range of about $8.7 billion to $8.9 billion and we expect diluted earnings per share in the range of about $1.18 to $1.23.”

On Monday Piper Jaffray analyst Gene Munster issued a note to clients containing his concerns over Apple’s Mac sales during its third fiscal quarter of 2009. Munster’s note told clients that preliminary computer shipment data from NPD due Monday afternoon would be key to his expectations of Apple shipments for the quarter which the Street expects to be around 2.45 million.

“Mac NPD for the month of June needs to be flat in order for the entire quarter to be tracking in line with Street Mac consensus,”

A few hours after the note NPD released data suggesting that Mac sales were up 16% in the quarter, following this Munster released a second note adjusting his prediction to 2.6 million Mac units during the quarter.

On Tuesday July 21, Apple will release its Q309 fiscal earnings, naturally towards the end of this week and no doubt on Monday and Tuesday of next week analysts and the street have been hedging bets on where Apple will land.

To recap during the 3rd fiscal quarter of 2009 Apple released the new iPhone 3GS slashing the price of the iPhone 3G to $99 and at WWDC Apple refreshed and lowered prices across the entire notebook lineup.

The street is expecting Apple to announce earnings of $1.16 a share on revenue of $8.2 billion, to give some perspective Apple predicted revenue in the range of $7.7 to $7.9 billion on an earnings per share price between $0.95 and $1.00.

Some analysts have concerns over lower than expected Mac and iPod shipments but are overall still expecting between 2.3-2.5 million Mac unit shipments and 10-11 million iPod shipments. iPhone shipments are expected between 4.5 and 5 million.

Apple will announce its third fiscal quarter 2009 results on Tuesday July 21 at 2:00 p.m. PDT/5:00 p.m. EDT. This will be followed by a live conference call. Join World of Apple for live coverage.

Bloomberg has recently revealed that Apple has been steadily increasing its ownership interest in UK company Imagination Technologies, tripling its ownership interest from the end of 2008 to 9.5% at present. Imagination Technologies is a graphics manufacturer of products that are used in smartphone, including the iPhone (and the Palm Pre). Intel is also a significant investor at over 16%. Amid speculation that either company might be planning a takeover, Imagination and Intel has both denied that there is any such intention. Apple, of course, has been silent. As some analysts have noted, this may be simply an investment for both companies which is typical business practice.

Following yesterdays news that the North Carolina General Assembly had approved a tax break for an unnamed company who was believed to be Apple it has now been finalised by Governor Perdue.

In an official announcement it was revealed that Apple had selected North Carolina as the location for a new data centre which will see the company invest $1 billion over a nine-year period.

Gov. Bev Perdue today announced that Apple has selected North Carolina as the location for a new data center. The company is expected to invest more than $1 billion in the project over nine years.

“North Carolina continues to be a prime location for growing and expanding global technology companies,” said Perdue. “We welcome Apple to North Carolina and look forward to working with the company as it begins providing a significant economic boost to local communities and the state.”

It is expected that the data centre will employ 50 full-time employees and the legislation requires that the average wage exceed that of the county.

On Monday the General Assembly approved changing North Carolina state tax laws in the hope that Apple will invest $1 billion into the area. The Senate voted 40-8 in favour of the changes.

The bill will now go to Governor Beverly Perdue who is expected to pass it into law with no qualms.

The bill itself names no company as the beneficiary of the tax break but a story last week pinpointed Apple as the company that would be building a data centre in a rural area of the state.

Apple today has submitted to the SEC (Securities and Exchange Commission) a correct Form 10-Q that it originally filed on Thursday April 23. The original filing incorrectly reported the voting percentages for shareholder-submitted proposals because abstentions were counted as “No” votes. Very shortly after the original filing, the company learned that these votes had been incorrectly tallied and an internal investigation confirmed the mistake was due to human error, which Apple regrets. Today’s amendment correctly reports the voting results.

As a result of the corrected vote count, Shareholder Proposal No. 5 Regarding Advisory Vote on Compensation, known as “Say on Pay,” was approved with a majority of votes cast.

Proposed at this years annual shareholder meeting by the AFSCME Employees Pension Plan, a public health union which holds over 21,000 Apple shares, the resolution will give all company shareholders an advisory vote on executive pay packages.

Following the release of Apples fiscal second quarter 2009 financial results the company held a conference call to answer questions from industry analysts and members of the media. Present during the call were CFO Peter Oppenheimer, COO Tim Cook and treasurer Gary Whistler.

• Apple began and ended the quarter with between 3-4 weeks of inventory.
• Quarter was a tough comparison year over year because of 51% y/y growth during last year’s Q1 because of MacBook Air launch. Positive about Mac sales.
• Over 70% market share in MP3 players says NPD.
• Very excited about iPhone OS 3.0 this coming Summer.
• All iPhones sold on or after March 17th until iPhone 3.0 is released this summer will be recognised over 24 months.
• $1.47 billion in revenue from retail stores, 438,000 Macs sold through stores with “about half” new to Mac.
• Opened one store during the quarter taking the total to 252.
• Retail customers increased 33.7 in the year ago quarter to 39 million.
• Avg revenue store $5.9 million compared to $7.1 million year ago quarter.
• Cash in back is $28.9 billion at the end of March quarter.
• Apple is very excited about their product pipeline
• International sales accounted for 46 percent of the quarter’s revenue
• Company paid about $1.3 billion in taxes in the March quarter
• Tim Cook on netbooks: “For us, it’s about doing great products. When look at netbook, cramped keyboard, terrible software, junky hardware, very small screens, just not a consumer experience. Not something that we would put the Mac brand on, quite frankly. It’s not a space, as it exists today, that we’re interested in or that customers will be interested in long term. But do look at the space and see how customers respond to it. People who want a small computer that does browsing and email might want to buy an iPod touch or an iPhone.”
• Apple has interesting ideas in the netbook space.
• Hours away from sale of billionth app on App Store.
• Platform of iPhone and iPod touch is at 37 million units.
• Cook: Apple views AT&T as a very good partner, very happy with relationship and do not have plans to change it.
• Verizon is CDMA. GSM works for the world. That’s why AT&T works better for Apple right now.
• iPhone in Brazil, India and Russia but not China. Apple “working on it”.
• Peter Oppenheimer: “We look forward to Steve Jobs returning at the end of June.”
• Apple is very focused on the iPhone product plans.
• Apple considers Wal-Mart a key partner for sales of both iPhone and iPod.
• iPhone 1.83 million units in inventory at end of quarter.
• 21 million iPhones sold to date.
• On Palm Pre, “It’s difficult to comment of products that aren’t shipping.”
• No update on new campus construction, Cook: “We’re very busy on constructing new products.”
• Sakes of iLife and iWork exceeded expectations.
• Cook: “We think that Apple’s innovation in iPhone is leading industry by years. We think competition is great – as long as companies invent their own stuff.”
• Conference call ended.