Apple Q3 2008 by the Numbers

[Editor's Note: This post was a live document, starting at 4:31 p.m. EDT and ending at 6:29 p.m. EDT. Updating is generally finished.]

After market close today, Apple announced results for its fiscal third quarter, which ended on June 30. Quarterly revenue reached $7.46 billion, up from $5.41 billion a year earlier. Net profit jumped from $818 million a year earlier to $1.07 billion, or 92 cents and $1.19 earnings per share, respectively.

In April, Apple forecast fiscal third-quarter revenue of $7.2 billion, up 33 percent year over year, and $1 earnings per share.

Even as the U.S. economy slows and Apple offers computers at $1,000-plus premium pricing, Mac shipments just keep on growing. Apple shipped 2.496 million Macs during the quarter, with units up 41 percent year over year and revenue up 43 percent.

New Product Bombshell
Gross margins were 34.8 percent for the quarter, respectable compared with the 33 percent guidance, but down from the year-ago quarter's nearly 37 percent.

During a conference call this afternoon, Peter Oppenheimer, Apple's CFO, made a startling statement about the future in offering fiscal fourth-quarter guidance. For the fiscal fourth quarter, Apple expects revenue to be $7.8 billion, or 25 percent year-over-year growth, with $1 earnings per share.

Here's Peter's bombshell: Apple expects 31.5 percent gross margins in the fiscal fourth quarter, impacted in part by a future product transition that "I can't discuss today." OMG! Apple's CFO just set off another round of wild rumors. The man has no marketing charm (no disrespect intended), yet the statement is sure to trigger lots of free marketing from blog and Mac enthusiast rumormongoring.

During today's conference call, analysts fixated on the future product's impact on margins. Peter indicated margins would be 30 percent during fiscal 2009. The lower margins led to speculation—reasonable, I'd say—that Apple might offer some future lower-cost Mac. Company executives tried to deflect such speculation by analysts.

It's reasonable speculation, particularly considering that iPhone 3G should offer some margin boost. So let me start those rumors going: How about a sub-$1,000 Mac portable? Or sub-$1,000 Mac a whole lot better than the mini?

Bloggers and Mac enthusiasts will join analysts speculating about what the new product could be. Apple is talking a major shift downward in margins. Surely, the mystery product has got to be something major. What could sink margins from nearly 35 percent to 30 percent?

Aug. 22: iPhone 3G's Next Big Day
Macs and services accounted for 61 percent of the quarter's revenues. Music accounted for 33 percent of revenues. Apple sold 11 million iPods and 717,000 iPhones during the quarter. Revenues for iPod fell 8 percent sequentially, mainly because of lower iPod pricing.

Sales of iPods grew 10 percent in the United States year over year and 15 percent everywhere else. Apple does expect some iPod cannibalization, which it wants to go to iPhone.

Apple has not recognized any iPhone revenue since March 6, when it announced the iPhone 2.0 software. Apple began realizing iPhone sales on July 11. So iPhone shipments reported for the fiscal third quarter are from before March 6.

The iTunes App Store is going gangbusters. There have been 25 million downloads from the App Store, which Peter called "years ahead of the competition." I wonder: Are those separate applications, or does Apple include updates? I've had four in the last couple of days.

Apple plans to launch iPhone 3G in 20 additional countries on Aug. 22. The company reiterated its commitment to have iPhone 3G in 70 countries by the end of the calendar year. Apple still expects to sell 10 million iPhones this year.

What About the Channel?
Geographically, Apple saw significant weakness quarter to quarter, which could be early signs of weakening world economies—even in areas benefiting from the weak dollar. In Europe, sequential revenue dropped 7 percent and 8 percent for units. In Japan, sequential revenue and unit shipments each declined 14 percent. Yet, from another perspective, Apple looks immune, for now, to the slowing U.S. economy. In the Americas, unit shipments grew 28 percent sequentially and 5 percent in revenue.

Apple ended the quarter with three to four weeks of inventory. Apple's target is four to five weeks. Macs are available in about 10,000 retail outlets worldwide and 45,000 for the iPod. Apple ended the quarter with mini-stores in 570 Best Buy stores, up 170 during the quarter. Apple expects to be in 600 Best Buys by the end of the fiscal year.

Apple Stores sold 476,000 Macs during the quarter. "Over half were sold to customers that have never owned a Mac before," Peter said.

Retail revenue surged 58 percent sequentially but was flat yearly. "We opened eight stores in the quarter," Peter said. Average revenue per store, based on an average of 211 stores, was $6.4 million, up 33 percent from $5.1 million in the year-ago quarter. Store traffic was 32 million during the quarter, up about 10 million year over year.

Apple plans to have 242 Apple Stores open by the end of fiscal 2008.

[Please send your tips or rumors to watchtips at live.com].

Posted by Joe Wilcox on July 21, 2008 4:31 PM