Cupertino (CA) – Analysts always expect post-holiday season sales to drop somewhat, but the question always is, when does a drop become a slump? Just during Apple’s fiscal first quarter, which ended in December, the company now says it sold just over 14 million iPods, earning $2.9 billion in sales. For the subsequent quarter just ended, Apple reported today, it sold 8.5 million iPods, for $1.7 billion in revenue.
The revenue drop is 41% over the previous quarter, but still represents 69% greater revenue than for Apple’s second fiscal quarter of 2005. But will analysts see this as a slump, even if just a small one? Just after Apple’s results were posted, early indications were mixed. MarketWatch cited a Thomson First Call analyst as having predicted Apple would report earnings of 43¢ per share (diluted); this afternoon, it reported 47¢ per share instead, on net sales of $4.34 billion and gross sales of $1.23 billion. In the second fiscal quarter of last year, Apple earned 36¢ per share on net sales that were over $1.1 billion less than for the quarter just ended.
Yet net sales figures for Apple came in less than street predictions of $4.54 billion. One key indicator of the cause could be the rising cost of just doing business. Total operating expenses rose in the previous quarter to $768 million, up from $566 in Q2 2005.
In the computer segment of the company (Apple, by the way, continues to manufacture computers), the gap between the desktop and portable divisions continues to narrow. Last year at this time, desktop Macintoshes accounted for 56.8% of the company’s computer sales. For the previous quarter, Apple sold 667,000 new Mac desktops – 59,000 more than for the second quarter of fiscal 2005 – and 587,000 new Mac portables – 125,000 more. Now, iMacs and Power Macs account for 53.2% of the split.
Where is Macintosh doing better? Once again for the technology sector, Europe leads the way while Asia slumps. Mac sales for Europe are growing at a rate of 40% per year. In North and South America, the news is not bad, with sales growing by 8% per year. In Japan, however, annual sales are plummeting at a rate of 21% per year. Most analysts attribute sluggish sales in Japan to the current state of that country’s economy, which observers there compare to the late 1970s for the United States.
During the quarterly conference call, the company’s CFO, Peter Oppenheimer, said he expected the average selling price of iPods to drop over the company’s next fiscal quarter.
Just after Apple posted its numbers and its quarterly conference call began, shares of the company surged in after-hours trading, but fell back down after analysts had time to gather their negative adjectives. Conceivably, today could be written up as a banner day for Apple inside the company, and merely a decent one outside. But in the wake of much worse news from Intel, which reported a drop in profit of 38% for its fiscal quarter just closed, over the prior year, financial analysts could very well end up putting their iPod earbuds back on, and singing a happy tune for Apple.