Apple Q3 2006 Conference Call notes

Live notes taken during Apple’s conference call discussing Q3 06 financial results in reverse chronological order.

– End of conference call.
– Once again: Apple is very confident in and excited about the products in the pipeline.
– Music phones aren’t ready to compete with iPod now, but that is likely to change in the future. Apple is “not sitting around doing nothing.”
– Apple is very confident in their ability to compete and excited with what’s in the product pipeline.
– Apple hopes that governments will be hands-off and let the market decide on music players and online services.
– Apple has seen no impact from Sony products on iPod that they can comment on.
– Apple will not comment on iPod shipments on a geographic basis.
– It takes longer to deploy a new product (MacBook for example) in Europe than in USA.
– Schiller is interim Japan marketing chief.
– Is Japan performing up to expectations? Apple looks to improve in Japan. Japan marketing team will report to Phil Schiller.
– Will there be any surprises at WWDC? Apple says you’ll have to wait and see.
– Has action in France posed any threat to iTMS? Apple thinks such actions will result in “state-sponsored piracy.”
– Boot Camp makes the Mac “even more appealing” for them to switch.
– Boot Camp downloads are “significant.”
– Apple broke 50% iPod share in Japan.
– Apple saw iPod share gains in several countries in Europe.
– Apple does not break out individual products for competitive reasons.
– Apple does not disclose information about the size of the “Pro” market.
– Mac OS X Tiger sales were “good.”
– Apple believes that Mac OS X is the best operating system and a reason why they’re gaining share.
– Best Buy pilot program in a “few” of their stores underway for “about two months” with Apple employees in the stores. Pilot program still be evaluated.
– Mac with free iPod promo not significant to iPod sales for the quarter.
– Apple very happy with Intel processors.
– MacBook supply vs. demand looks balanced for Q4.
– Apple will continue to be “aggressive” in Mac and iPod pricing.
– iPod gross margin up sequentially in the quarter due to favorable commodity market. Same for Macintosh.
– Approx. 7,000 Macintosh reseller distribution points worldwide.
– Approx. 40,000 iPod reseller distribution points worldwide.
– Total revenue from stores up 29%.
– Apple looks forward to showing Mac OS X Leopard at next month’s WWDC.
– Apple does not discuss unreleased products.
– Apple Computer shares up over 8.0% to $58.44 in after hours trading on heavy volume of 8.23 million shares.
– Macs in retail were up 40% year-over-year. Strong MacBook Pro and MacBook sales.
– Education: College Students Buy a Mac & get a free iPod nano promo doing very well.
– Pro customers are waiting for pro apps (read: Photoshop) that are Universal and for an Intel-powered desktop “Pro Mac.”
– Very robust consumer and higher education demand.
– DRAM market is “relatively balanced” market.
– NAND flash, flat panel displays, hard drives are favorable.
– Apple going into first full quarter of MacBook availability.
– Apple expects favorable commodity market to continue.
– Apple extremely excited about future iPod products in pipeline.
– Apple very confident of products in pipeline.
– Apple pleased with Intel transition.
– Apple expects GAAP earnings per diluted share of about $.46 to $.48, including an estimated $.03 per share expense impact from non-cash stock-based compensation, translating to non-GAAP EPS of about $.49 to $.51.
– Apple expects revenue of about $4.5 to $4.6 billion for Q4 2006.
– Apple education sales highest in a decade.
– 154 Apple retails Stores now open with 14 opened during quarter.
– 50% of Mac buyers at Apple Retail Stores are new to Mac.
– A total of 17 million customers visited stores during quarter.
– $715 million revenue from Apple Retail Stores.
– iTunes Store has 85% market share according to Nielsen/Soundscan.
– Apple feels Mac ad campaign is working.
– iPod continued to earn a US market share of over 75 percent.
– Intel-powerd Pro Mac and Xserve due by end of 2006.
– International sales accounted for 39 percent of the quarter’s revenue.
– Gross margin was 30.3 percent, up from 29.7 percent in the year-ago quarter.
– Apple shipped 1,327,000 Macintosh computers and 8,111,000 iPods during the quarter, representing 12 percent growth in Macs and 32 percent growth in iPods over the year-ago quarter.
– The Company posted revenue of $4.37 billion and a net quarterly profit of $472 million, or $.54 per diluted share.
– Second highest earnings and revenue in Apple’s history.
– Apple CFO Peter Oppenheimer and Apple COO Tim Cook are present for the call.
– Apple Computer shares have surged 7.7% to $58.25 in after hours trading on heavy volume.
– Awaiting beginning of conference call.

Related article:
‘Fantastic quarter’ helps Apple double share of U.S. retail notebook market to 12% – July 19, 2006
Apple reports third quarter results: $0.54 per share on $4.37 billion in revenue – July 19, 2006

30 Comments

  1. Just got off the phone with a PC-only friend who happens to follow tech/market news religiously. HE IS FINALLY CONVINCED that his next TWO computers (portable and desk) will be Macs, primarily because of the “buy one, get two” factor. (He’s also scared spitless that Vista either will not ship on time next year, or–when it does–will be so bug/virus filled that it will be unusable until SP1. How prescient he is!)

    Truly, I believe the next holiday buying season will be spectacular for AAPL, which brings me to this point:

    Where are you, Mac Realist? Are you a foul-weather friend only? Surely you have something wise and vitriolic to say about today’s news. Come on, dude; climb out from under your rock and let ‘er rip! I need a good, hard laugh.

  2. “Will there be any surprises at WWDC? Apple says you’ll have to wait and see.”

    I’ll have to listen to get the direct quite, but this is classic.

    “If we told you, it wouldn’t be a surprise…”

  3. Extrapolating Numbers

    Given…

    1,327,000 Macs sold in this quarter.
    50% are to new customers.

    Therefore…

    663,500 Windows boxes were NOT sold.
    That is 5 new Mac users every second, 24/7.

    Did you also note that Mac sales kept pace with iPods sales 1-to-6. As hot as iPods are, I think that shows a very hot Mac market.

  4. Mac Sales will Continue to Grow:

    1. MacBooks will have a full quarter of sales, going into the quarter with a slight backorder (further helping inflate this September quarters numbers).

    2. Mac Pro will arrive, bringing a definte boost to an almost stagnant product line. With or without Adobe, sales will move up with this line.

    Look for 1.45+ million Mac’s to be sold this coming quarter.

    Once Adobe shows up with the Universal apps, the MacBook Pro and Mac Pro will see another boost in sales, and Merom will boost MacBook Pro sales starting in October.

    IMHO – If Apple were “really” smart, and ready to go, they should launch “Image” (which would be their “Fun House” test application turned into a true PSD competitor). Fun House has been used to show and test the power Core Image.

    Fun House contains many of the elements needed for Apple to deliver a real-time PSD competitor…

    Apple should launch “Image” at the WWDC along side the new Mac Pro and monitors – giving the Pro user something to gobble up (Pro towers with a native PSD application NOW – not in 9 months or so from Adobe!), while “Image” also gives developers a new and powerful application to start writing/adapting plug-ins for…

    This is a complete win/win/win scenario (Apple/Dev/Pro).

    One could argue Adobe may leave the platform if Apple moves into this category, but this would be an unrealistic analysis.

    Emotionally, Adobe may wish to do so, but financially and strategically they cannot leave the Mac OS.

    M$ is starting to fire into Adobe space in taking on PDF (Vista) and the creative market. Thus, Apple is wise to do the same, leaving Adobe in no-mans land, becoming week for an Apple or M$ buyout/bidding war.

    IMHO II: Adobe should be moving ALL their applications to Linux, and with that, building several Linux-only tools. In essesence, building a platform to which Apple and M$ cannot control. Pro creatives are more reliant on Adobe than they are to an OS by a mile.

    But of course, Adobe is dumb (and arrogant), which will lead them to their long and slow decent – Apple could make that decent even faster.

    Please Apple, surprise us with “Image” for $299 at the WWDC, and ensure it’s market grab, by throwing us a bundle: Mac Pro+Monitor = Image for FREE!!!

    Then snap out some new iPod goodness in September, along with a Conroe iMac rev. and finally the MacBook Pro (merom) in October.

    This should give all children some Santa goodness ending 2006 ; )

  5. The only issue with the “pro” “desktop” Macs is the delay before all the universal apps are ready.

    I still need my Dual G5 for fast Photoshop, Maya etc. I’m sure I’m not alone.

  6. Just a quick repost since like Hmmm said everybody will be checking out the notes:

    “International sales accounted for 39 percent of the quarter’s revenue.”

    —> Excellent news on that front. I’m surprised by the high international sales figures. Nice!

    “Apple shipped 1,327,000 Macintosh computers and 8,111,000 iPods during the quarter, representing 12 percent growth in Macs and 32 percent growth in iPods over the year-ago quarter.”

    —> Wow. Mac sales MUCH higher than I was anticipating. I’m usually *extremely* conservative in that regard, but Apple definitely blew me away with those figures. Great news.

    @ Hmmm…: I particularly like the trend in Mac sales. iPod sales were pretty damn good, but I’m more interested in the Mac sales figures climbing (not that I discount iPod sales totally – they make a tidy profit. I just like seeing those Mac numbers grow). More notebook sales than desktops as well – but that is the industry trend – mobile.

    I’m really surprised by these numbers. Very cool.

    One other quick thing – </i>”Apple does not discuss unreleased products.<i>:

    They don’t need to. Shaw Wu does that for them, he also delays them as well. ” width=”19″ height=”19″ alt=”wink” style=”border:0;” />

  7. “This is a complete win/win/win scenario (Apple/Dev/Pro).”

    A complete Win(dows) Win Win situation would be a Designed for Windows Mainstream dual processor dual core Xeon box, Windows XP and, Native Photoshop for Windows.

    All available today, no waiting.

    “Emotionally, Adobe may wish to do so, but financially and strategically they cannot leave the Mac OS.”

    Havn’t you heard of Boot Camp and parallels? Any Mac software developer can now abandon Mac OS X yet still sell to Apple customers.

  8. WinWin– you state: “Havn’t you heard of Boot Camp and parallels? Any Mac software developer can now abandon Mac OS X yet still sell to Apple customers.”

    Adobe or others can try that gambit, but they’d lose. Mac users want to stay in the Mac OS; Parallels and BootCamp are exciting only to support current Win-only apps. Any current Mac apps that go Win-only will lose Mac support immediately, and Adobe and others know this. Look at the trend in application support for Macs. You will see lots of previously Win-only apps showing up as Mac versions now. Software publishers see that the trend to Macs is real and it is building. Smart publishers are going to want to be part of the Mac Universe as it continues to grow.

  9. “Adobe or others can try that gambit, but they’d lose.”

    Appears Adobe are trying it already, delaying native Photoshop support for Intel Macs. They obviously don’t believe they need to move too fast on that product, as they already have an identical product (albeit Windows based) for people who want fast native Intel support.

    “You will see lots of previously Win-only apps showing up as Mac versions now”

    Like what major apps exactly?

    “trend to Macs is real and it is building”

    I think the jury’s still out on that one. Apple introduces a new notebook, releases a bit of pent up demand in people who knew the Intel switch was coming and were holding off purchases waiting for a better Mac notebook. Apple get a lift in US market share of 0.3% and much less in worldwide share. Not saying it couldn’t happen, but I think the big boys are going to want to see something a bit more impressive than that if they are going to invest in native Apple software big time.

    Now if Apple could make those 0.3% gains consistently every quarter for the next few years, or boost that gain higher, there might be something for people to get excited about.

  10. Pro Apps like Photoshop aren’t out yet… Okay,

    But the big pro boxes aren’t out yet either.

    Possibly Adobe knows about Apple’s deployment schedule & doesn’t feel the need to push out a new version until the pro desktops are being sold…

    Adobe already said that next versions will come out in the upgrade cycle.

    Things seem to be moving as they should.

    MDN magic word is “way” as in “Dude, yes-way!”

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.