Apple's chief financial officer Fred Anderson and corporate controller Peter Oppenheimer spoke at Morgan Stanley's Semiconductor and Systems conference March 1.
The wide-ranging 40 minute discussion covers a range of topics, with a particular focus on iPods, Apple notebooks, the creative professionals market and retail. And the discussion confirms Apple's aggressive plans
"We would like to become a $10 billion company again", the executives said, confirming the company already has control systems in place to enable it to handle more revenues than it takes today.
Looking to 2003's 'Year of the Notebook', analysts asked if Apple holds a strategy for 2004. Anderson said: "We have no specific theme this year, except growth for the company. There are three key drivers: portable – mobility and wireless communications; the digital lifestyle and music, iPod, iPod mini and iTunes Music Store."
Innovation is critical. "Because we have this modern Unix-based technology in Mac OS X we are able to innovate much faster than Redmond (Microsoft). Their last release was in 2001, but you'll see us continue to innovate in our OS."
Apple's financial chiefs stressed how Apple continues to benefit from its strategy of investing in a downturn. "Over the last three years during the downturn, Apple increased research and development to bring out even more innovative products. Our r&d spend climbed from $300 million per year to around $500 million per year now." The executive pointed out the four versions of Mac OS X that Apple has shipped so far, saying: "This is really important; because we have this great foundation we are able to innovate really quickly."
iPod home run
"iPod has been a grandstand home run," Anderson observed, confirming that Apple could have "sold more iPods in the Christmas quarter if it had had greater supply".
He explained Apple's strategy: "We have gone for broad distribution in this market to remain competitive. We now want to focus on continuing to innovate, we don't want to rest on our laurels."
With alliances with Pepsi, HP and AOL already announced, Anderson said: "We are working on other alliances but have nothing to announce at this time." He added that the HP deal does not preclude Apple from securing similar deals with other manufacturers.
Meanwhile, the company is "hard at work" on bringing iTunes Music Store to other geographies, and agreed the company expects that will "impact more on iPod sales". Anderson observed that iPods are "doing really well in Europe", adding: "I hear in the UK it has generated the same sort of cultural change as you see in New York."
With 30 per cent market share, Apple's financial executives observed: "It sure feels good to be competing in the total market rather than a five per cent share. Management understands this. The HP deal shows a willingness to partner where it makes sense and Apple will continue to employ that philosophy. You walk around the campus and you see people with smiles on their faces because we like to play in a broader market."
Confirming Apple's desire to establish its audio codec as a de facto standard for online music, they said: "With the HP deal we are going to get tremendous momentum behind establishing our standard AAC as the standard."
The company has consistently called its iTunes Music Store a 'Trojan Horse' to help generate iPod sales – and iPod is a Trojan Horse too, they hinted: "Traffic to the music store will lead to iPod sales, and over time because people will love our products, people will buy a Mac."
Apple is ready to fight to preserve its position at the vanguard of the new digital music revolution, Anderson said: "We're well on our way and we are not going to let anyone else take our leadership position".
Apple sees changing pro market
Responding to questions about Apple's pro market share, the executives said: "First of all what you have to do to evaluate the strength of the pro market is look at Power Mac plus PowerBook sales.
"Many creative professionals are moving to portables, given the size of displays, their performance and the desire for mobility. And in the overall industry, there is a real growth area in portable."
On the road map for Apple's Power Mac G5s, Apple's financial leaders said: "We think we can sustain around 200,000 unit sales of Power Macs per quarter during a given product's lifecycle."
In a hint at a broad product refresh cycle to come, they also hinted that Apple management tends to favour a two-quarter lifespan approach to products in its range, occasionally extending this to three or even four quarters per product iteration.
Finally, Anderson and Oppenheimer said: "We are focused on growing our company. As we do you will see cash flow from operations grow. We will continue to review strategic acquisitions."
The full webcast is available in QuickTime format.