Notes from Apple’s Q2 2005 Conference Call will be updated live in reverse chronological order:
– End of Conference Call.
– Q1 is normally very strong in Europe and Q2 in Europe normally shows a decline historically.
– Apple cash on hand is maintained for flexibility to invest in the business.
– iPod inventory is roughly 4-6 weeks. iPod shuffle hit full throttle production in February. Supply/Demand in balance.
– Japan revenue increased fairly significantly in Q2. 72% growth year over year. iPod has done “extremely well” in Japan.
– Apple will not project iPod sales.
– iPod shuffle expanded “total opportunity.” Impossible to measure cannibalization of other iPod lines.
– Hard drive iPod market share is 90%, Flash-based iPod share already at 43% as reported by NPD. About 70% overall market share in portable music players.
– iTunes Music Store operated “a little above break even” for the quarter.
– Positive impact on iPod Windows customers can be seen in Mac units shipments. Low to mid 40% on CPU sales through retail stores were to Windows users.
– “Apple iPod by HP” made up less than 3% of all iPod shipments last quarter.
– NAB begins next week, “pro” business usually picks up afterwards.
– Power Mac G5 sales largely driven by “Pro” business. It is an important part of Apple’s lineup.
– Mac mini at Best Buy: units began to be sold in beginning of April, now in all Best Buy stores.
– Apple has no comment on new products in pipeline.
– “Made for iPod” logo program terms are confidential.
– Displays, Airport line, other accessories are strong direct sellers.
– “iPod Halo Effect” – iPod sales to Windows users “played a very strong role” in Mac unit sales.
– Higher Ed. continues to be strong for Apple.
– K-12 Education impacted negatively by state budget issues, especially California.
– “Mother of all thermal challenges” = PowerBook G5. No news to report.
– Air freight was “not abnormal” for Q2. Not expected to be abnormal for Q3.
– Anecdotally, Mac mini sales were strong to both Mac and Windows users. Apple will not break out Mac mini unit sales.
– Apple will not breakout individual iPod line unit sales for competitive reasons.
– Direct unit sales 48% online, compared to 44% in year ago quarter.
– iPod gross margin overall was just above 20% in Q2.
– Component prices were lower than anticipated. Q3 looks favorable for component pricing, as well.
– PowerBook trackpad issues were isolated and are now resolved. Call AppleCare if you have a problem.
– Difficult to tell whether Mac sales were negatively impacted as customers waited for Tiger.
– Q3 begins the education season, especially for K-12. Lower margin units such as iMac and eMac sales.
– iLife and iWork sales were very successful in Q2.
– Gross margin of 28.5% percent for June.
– 2Q margin (30+%) was better than expected due to strong direct sales, especially on PowerBook and accessories.
– Supply/demand balance for iPod, channel inventories: Apple is in balance with supply/demand on all iPod lines.
– Apple looks forward to Mac OS X Tiger release and a strong second half of 2005.
– Apple is very pleased with the Q2 2005 results.
– Next quarter, Apple will report CPU units only as “desktops” and “portables,” not broken down by model, in Q3 2005.
– Apple expects revenue of about $3.25 billion and earnings per diluted share of about $.28 for Q3 2005.
– Apple now has $7.05 billion in cash on hand.
– 70 percent revenue growth and a 530 percent increase in net income year over year.
– Education revenue is strong.
– 103 Retails stores now open. Foot traffic continues to grow in stores.
– iTunes Music Store now has sold over 350 million songs; 70% market share.
– 43% of flash player market share worlwide
– Shipped over 5.3 million iPod units in 2nd quarter; strong iPod shuffle sales.
– Music business generated 38% of total Apple revenue.
– CFO Peter Oppenheimer: strong Mac sales: we shipped record number of Mac units for a second quarter: 1,070,000 Macintosh units.
– Conference call begins.
Conference Call webcast reply will be available at approximately 5pm Pacific here.