Apple Financial Results Conference Call Q4-2006 Live Notes

Apple Financial Results Conference Call Q4-2006 Live Notes (in reverse-chronological order):

End of conference call.
• Apple has about 5,800 retail store employees.
• Apple has a “reasonable handle” on commodity costs.
• Apple will continue to air freight portables this quarter as wella s a portion of iMacs due to strong demand.
• Generally speaking, the economy is slowing due to multiple Fed hikes. Economy appears to be heading for soft landing. Apple agrees with that outlook.
• iTV announced early to give customers an idea of how movies and content will get to large screens in home.
• Apple looks forward to bringing “movies” to international iTunes Store locations in 2007.
• iTunes Store in 21 countries: cover close to 90% of whewre music is legally purchased.
• Apple working with Coke in Europe (UK, Germany) with Coke website linked directly to iTunes: Coke will give away 70 million songs in next few months.
• Are there new Leopard features that haven’t been shown, specifically Windows virtualization built-in? Apple: No comment. Shipping in spring 2007.
• Apple taking orders for iPod shuffle. “Really excited” to begin shipping the model.
• Back-to-school promotion (Buy a Mac, get iPod nano) was a key factor in excellent back-too-school results. Apple won’t quantify iPod and/or Mac results due to promo.
• Apple believes “video will be big” in portable space.
• Mac gross margins in Sept. QTR: Apple “quite happy” with those margins. Will not comment further.
• Game and movie sales via iTunes Store to be released at later date. Apple “pleased” with sales.
• Apple has “plan to integrate Boot Camp into Mac OS X Leopard next spring.”
• Boot Camp downloads: over 1,000,000 downloads.
• Mac results due to completion of Intel transition, strong back-to-school sales, retail stores.
• Traffic in Apple Retails Store just above 20 million. Mac sales up 60% in retail stores.
• iPod gross margin above 20% in September quarter.
• iPo has just under 40,000, Mac a little over 7,000 points direct and indirect channels worlwide.
• 54% direct sales up from 50% in June and 52% Y-O-Y. Apple happy with direct and indirect channels.
• Desktop growth up 4% Y-O-Y; result of widespread move by customer to portables.
• iPod nano customer reception “excellent.”
• Oppenheimer: Mac OS X Leopard will be shipping in the spring of 2007.
• Macs below 4-5 week mark for inventory levels.
• Apple believes iTunes+iTunes Store helps drive iPod sales.
• Apple running iTunes Store “at above break even” levels.
• Special committee found no misconduct of any Apple Board member including Steve Jobs.
• Japan Mac sales: PC market in Japan one of the weakest in the world, still Apple is not happy and working to bolster Mac sales to Japan.
• Inventory up about 100 million Y-O-Y: Due mainly to increased numbers of new stores’ inventory.
• Summer usually not the best quarter for music sales / new album releases.
• Apple “very confident with what is in product pipeline.”
• Apple pilot programs continue at select Best Buy and Circuit City locations.
• Apple skillfully executed the Intel transition within the last year.
• 70-73 cents per share forecast for Q1 07.
• Apple targets $6-6.2 billion revenue for Q1 2007 (2006 Q 4 holiday quarter).
• Apple now has over $10.1 billion in cash on hand.
• Education store: most successful ever, shipments increased 49% year-over-year.
• Over 50% of customers buying Macs are new to Mac at Apple retail stores.
• Apple retail stores: 165 with 10 new stores opened during quarter.
• Nielsen SoundScan: iTunes accounts for 88% of music downloads in U.S.
• Apple very confident in current iPod lineup for holidays.
• 42% of total company revenue from “music” products.
• 61% of all Macs sold during quarter were portables. nearly 1 million portables sold during quarter.
• Oppenheimer: Best Mac shipments “BY FAR” in the company’s history. 1.38 million Macs was previous best record in Q1 2000.
• These results compare to revenue of $3.68 billion and net profit of $430 million, or $.50 per diluted share, in the year-ago quarter.
• Gross margin was 29.2 percent, up from 28.1 percent in the year-ago quarter.
• International sales accounted for 40 percent of the quarter’s revenue.
• Apple shipped 1,610,000 Macintosh computers and 8,729,000 iPods during the quarter, representing 30 percent growth in Macs and 35 percent growth in iPods over the year-ago quarter.
• Apple posted revenue of $4.84 billion and net quarterly profit of $546 million, or $.62 per diluted share.

Related articles:
Apple shares rocket 6.5% in after-hours trading on stellar earnings report – October 18, 2006
Apple Q4 earnings results: $546M net profit on $4.84B revenue, sold 1.61M Macs, 8.729M iPods – October 18, 2006


  1. “Game and movie sales via iTunes Store to be released at later date. Apple “pleased” with sales.”

    Could this imply that a new product announcement will be right around the corner? You know sometimes Steve likes to announce numbers like that at the beginning of some new product anouncement.

  2. “Could this imply that a new product announcement will be right around the corner? You know sometimes Steve likes to announce numbers like that at the beginning of some new product anouncement.”


    Could be… But it could also mean that the numbers are not very impressive..

  3. Yeah, remember that article from a few days ago? ‘The ads aren’t working, blah blah blah’… who’s eating their words now!

    This is just the beginning!

    Magic Word: Best. As in best quarter for Macs ever. How does it do that?!

  4. simple, buy AAPL, we all know what’s in the pipeline, oh yes we do, the phone and the widescreen iPod are going to be farking huge. I love AAPL.


    Actually, a widescreen iPod will probably have limited appeal because of the price… It will obviously be the most expensive iPod and quite frankly, the masses are buying nanos.

  5. Allen,

    When using phrases like “obviously” and “quite frankly” caution is advised; they can turn around and bit you. Especially when they negatively reflect on the electronic gizmo of the 21st century!

  6. I agree that an Apple iPhone will be huge… And I’m not saying that a widescreen iPod won’t be popular, I’m sure it will do well… I just don’t believe that there is a market for portable video as there is for portable music. You can listen to music on an iPod anywhere, anytime, while you’re doing other things.. Video on the other hand requires the users full attention.. I mean a widescreen iPod would be great for travel or an airplane, but how many places do you honestly think you’ll be where you would rather watch a video on an iPod instead of on a tv? For me personally, I enjoy my fifth gen iPod, but I only occasionally use the video portion of it and it’s not because the screen is too small, it’s because there just are not that many places outside of the house where I feel the need or have the time to watch a movie or video….. And I honestly don’t believe I would watch more videos on it if the screen was bigger.. If I’m home, I watch movies on my tv.. If I’m traveling my 2.5 inch fifth gen screen is fine..

    I’m not attacking the idea of a widescreen video iPod, I just believe it is a device with limited usability and will face limited appeal compared to a cheaper music-only iPod.

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