Apple CFO Fred Anderson has offered more comment on Apple's second-quarter performance.
In discussion with analysts he maintained an upbeat mood. Despite a 13 per cent decline in unit sales and a 26 per cent decline year-on-year sales of Power Mac G4s, he said: "We're pleased to have achieved our revenue target despite an increasingly challenging and unpredictable economic environment."
Asked about the effects of the Iraq war on Apple's finances, he said: "We're not able to separate the impact of the war from other geo-political and economic factors."
The year of the portable
He continued: "Steve Jobs believes this is the year of the portable for Apple. Laptops made up 42 per cent of sales for the previous quarter. That's a much higher percentage than the industry average."
The company shipped 711,000 Macs in the quarter. Consumer desktop sales were 256,000, half of which being flat panel iMacs. iBook sales shrank slightly "due to some cannibalization by the 12-inch PowerBook." he said.
Average revenue per system jumped above $2,000, driven by a greater percentage of beyond-the-box sales, which Anderson attributed partially to iLife, Keynote and Final Cut Express sales.
Apple retail "great" With 53 retail stores now open in the US, the company is preparing to open 70 by the end of 2003, including Apple's third large-format store on Michigan Avenue in Chicago. Stores are attracting an average 4,400 visitors per week, and 50 per cent of customers purchasing systems do not currently own a Mac.
Anderson said: "Apple retail had a great quarter."
He added: "The segment attracted revenues of $135 million, which was down seasonally from the December quarter. Per store revenue was $2.6 million per store, about the same as a year ago. The unit lost $3 million, but manufacturing profit for systems sold through the stores was about $23 million, which was excluded from the segment's results."
He said that iPod sales reached 78,000, and that half of these were Windows-compatible models.
Creative decline Apple's pro desktop sales remained weak, with just 156,000 units sold - 26 per cent down from last year: "We think it's a creative-market weakness issue. All data shows Apple with the dominant market share in this area. Research indicates that most creative professionals who plan on buying or upgrading technology over the next 12 months plan on buying Macs," said Anderson. Creative markets have suffered a double blow, from continued economic weakness and consumer uncertainty as a result of the Iraq war.
"It would help to see QuarkXPress on OS X," Anderson said. "Hopefully this will happen soon."
He added: "As performance improves in the Power Mac line, we think a convergence of factors will drive an upgrade cycle."
Apple was also hard hit in the US education markets. Apple's educations sales fell 14 per cent. Anderson said: "But 39 per cent of our quarter's shipments were portables, which is above the industry average. Also, 400,000 US teachers have taken advantage of Apple's X for Teacher's promotion.
The company has no data on its education market-share. "We're expecting a tough time in the June quarter, though there will be some seasonal improvement, as there always is. Year-over-year we are expecting a decline," he said.
Apple's cash on hand increased $64 million to $4.5 billion, and gross margins climbed to 28.3 per cent, Anderson said. Apple's online Apple Store accounted for 46 per cent of total revenue. Apple expects a slight profit in the June quarter.
In the post-announcement questions, Anderson refused to comment on whether Apple is in the market for Universal Music or if the company is preparing to switch to Intel processors. He also avoided comment on any plans for international Apple stores.
Apple is determined to stick to its guns, said Anderson: "We believe the investments in our retail initiative and research and development will fuel growth when the economy improves."
Anderson said Apple will continue to consider small acquisitions which would boost shareholder value. The company ended the March quarter with 4.5 bln usd in cash.
Discussing Apple's plans to expand its product portfolio, Anderson said: "We have made a number of acquisitions of small software companies where there has been a strategic fit. Such an acquisition could exist," he said.
The full financial results audio transmission is available online.