Apple Q2 2006 Conference Call notes

Live notes taken during Apple���s conference call discussing Q2 06 financial results in reverse chronological order.

– End of Q2 2006 Conference Call
– Apple will acquire approximately 50 acres about 10 minutes from Apple campus for second campus
– Cost of second Apple campus? $120 million to acquire new data center and first of several properties for second Apple campus – not further comment on that at this time
– Apple Retail Stores’ “new to Mac customers” percentage rose to 50% for the quarter
– 7,000 Macintosh retail storefronts worldwide
– Apple believes there are more opportunities for iPod channel partners worldwide
– Over 35,000 storefronts across the world carry iPod models
– Apple continuing “to be conservative with cash” looking forward
– “There is nothing holding us back – we are on target to complete Intel transition by end of year”
– iTunes Music Store operated “above break-even” for the quarter
– France DRM proposed law: Apple believes it will result in “state-sponsored piracy.” Apple doesn’t think that the proposed law will benefit anybody.
– No significant constraints on components on upcoming quarter
– No significant discounting of PowerPC G4 Mac models during the quarter
– Apple looking for feedback by releasing Boot Camp as Public Beta
– Apple thinks Boot Camp makes the Mac attractive to Windows users thinking about switching to Mac
– Apple has no desire or plan to sell or support Windows
– Apple’s NAND flash advantage one main reason for higher gross margin
– Apple will not disclose gross margins for iPod due to competitive reasons
– 1,500 apps are now Universal
– Apple working closely with Adobe on Universal version of Photoshop, other Adobe apps
– Heavy users of Photoshop likely not satisfied with Rosetta performance
– Casual users of Photoshop may be satisfied with Rosetta performance
– iMac Core Duo did “very well” in quarter
– Intel-based Mac mini only shipped for last 4 weeks of quarter
– “High level of interest in Boot Camp Public Beta – Apple will not release download numbers for the beta product
– Will Apple add virtualization into Leopard? Apple will not speculate about that at this time
– Apple is “seeing a high level of interest in” Boot Camp
– Apple thinks Boot Camp makes the Mac more appealing
– Intel-based Macs outsold PowerPC Macs in month of March
– Customer response to Intel-based Macs in “enormous”
– Apple believes iTunes Music Store continues to gain momentum
– iTunes Music Store music sales higher in March than December quarter
– Apple ended the quarter with 4-5 weeks of inventory in channel
– Apple pleased with sales of all iPod models
– iPod gross margins were above 20% in March quarter
– 30 of the 40 Apple Retail Stores planned in 2006 will be in the U.S.A.
– MacBook Pro supply was severely constrained during Q2
– Supply constraints in the past for iPod mini do not give a good basis for Apple to predict Q3 iPod seasonal sales
– Apple has no comment on iBook successor
– Apple traditionally starts to see Education sales in late June, but main buying in in July and August
– Apple views Mac mini as an incredible value – the lowest-priced way to get into the iLife suite
– Germany up 10% to 21%, France up to 11% in Feb. iPod market share
– iPod market share in February: UK 40%, Japan 54%, Canada 45%, Australian 64%
– Customers were not discouraged to wait for Intel-based Macs in Apple Retail Stores
– Retail stores very focused on Intel transition
– Apple very excited about what’s in the iPod pipeline going forward
– iPod sales less than previous quarter due to seasonality (holiday quarter vs. post-holiday quarter)
– Apple very pleased with iPod sales in Q2
– Component pricing on LCD, flash memory and software sales of iLife and iWork helped increase gross margin for the quarter.
– Apple outlook for Q3 06: $4.2-4.4 billion.
– Apple spent about $120 million for new data center and start of second Apple Campus in Cupertino, CA
– Gross margin was 28.9-percent for quarter
– Apple plans to open about 40 new stores in fiscal 2006
– 10,000 visitors per Apple Retail Store per week
– NPD shows Apple’s share of U.S. MP3 player market up from 71% in December to 78% in March
– Over 70 TV Shows now available via iTunes Store.
– $485 million music revenue – strong iTunes Music Store sales, iPod Hi-Fi sales, and iPod accessories sales
– Intel pause was observed during the quarter due to Mac Book Pro ramp up, customers waiting for announcements, Universal app availability
– Apple on track to have entire Mac line transitioned to Intel by end of calendar year
– Q2 06 was a 13 week quarter vs. a 14-week quarter for Q1 06
– Apple said that it sold 1.11 million Mac computers, almost 4% higher over the 1.07 million units it shipped a year ago
– Apple reported total iPod sales of 8.5 million units, up from 5.3 million in last year’s second quarter; the company now gets 39% of its revenue from iPod
– Revenue climbed almost 35% to $4.36 billion, up from $3.24 billion
– Apple earned $410 million, or 47 cents a share for the quarter ended April 1, up from $290 million or 34 cents a share a year earlier
– Waiting for start of conference call

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24 Comments

  1. confused and disapointed,

    you are correct. However:

    -Intel pause was observed during the quarter

    – Intel-based Macs outsold PowerPC Macs in month of March (with only 3 models! Therefore, sales of PPC Macs are falling off, as you would expect)

    -MacBook Pro supply was severely constrained during Q2

    All in all, 4% growth under those circumstances is not too bad.

    Apple does have to solve its supply issues, however. Intel Macs will sell very well if there is supply.

  2. Re: Can someone explain to me why a 4% increase in Mac sales is anything short of a huge disappointment

    Wait until all Mac computers are transitioned to Intel, keep in mind that MacBook was in tight supply, and remember that for the last many quarters Mac sales have far outpaced the PC industry’s sales as a whole.

    If Mac sales were growing at 4% per quarter for 4 years in a row, yes be very worried, but it’s one quarter only. Everybody needs a short rest once in a while.

  3. imagine if your hair grew 4%, would you even notice it?
    apple had HIGH expectations to take over world, whats 4% gonna do?
    no wonder noone has made their sites safari competible, not even google.

    fact of the matter is people are buying the stock simply because tomorrow it will open green and they are hoping they can sell it in the premarket at a high price.

  4. I’m personally happy because Intel have been able to ramp up and provide way more processors than if IBM or Moto were the supplier. Once Intel really get going with these new chips we’re going to see less of this backordered stuff from Apple. In terms of greater sales this is going to be a big deal.

    It’s like surfing – most of the time Apple only partially catches the wave cos of chip supply issues when a new sexy product comes out. Now they have the opportunity of selling a lot of product right when they announce it and catch of all that good publicity. Just like the iPod – make it sexy and anyone will buy it.

  5. Why are you so fearful and insecure, Hype?

    I can see you lower lip trembling from here. You are about to cry because you don’t have a Mac.

    Let it out.

    Your head will clear and you will soon be able to think for yourself. And you’ll stop posting things that make no sense–and that EVERY person reading knows make no sense.

    We’re so sad for you.

  6. “Apple thinks Boot Camp makes the Mac attractive to Windows users thinking about switching to Mac”

    “Apple has no desire or plan to sell or support Windows”

    “Apple views Mac mini as an incredible value – the lowest-priced way to get into the iLife suite”

    Will Dvorak now please shut the fsck up?

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