Apple's Mac sales up 44%, profit soars 88% -- but iPods down

COO declines to state the number of iPhones for sale in June

Apple Inc. sold 1.52 million Macs in its second fiscal quarter, the company reported today -- a 36% increase fueled by nearly 400,000 more notebooks than the same quarter last year.

Revenues from the sale of its desktop and notebook lines climbed 44% in the first three months of 2007 compared to 2006, Apple said, and accounted for 56% of the company's $5.26 billion in revenues for the quarter. As has been the trend, sales of Apple notebooks -- the MacBook and MacBook Pro -- posted gains dramatically better than desktop models. While the number of desktops sold rose just 2% year-to-year, the tally of notebooks sold during the quarter soared 79% over 2006.

"We're doing really really well [with the Mac]," said Peter Oppenheimer, Apple's CFO, during the earnings call today. "The demand for MacBook remains very strong." During the quarter, Apple sold 626,000 desktops and 891,000 notebooks. In the same quarter of 2006, the company sold 614,000 desktops and 498,000 portables.

Mac sales, however, were off the previous quarter of Oct.-Dec. 2006 by 6% in both units and revenues, and Oppenheimer said that revenues would likely drop again in the third quarter, the slip driven by the beginning of the educational buying season. Early educational purchases, he said, are weighted toward K-12, which traditionally opts for lower-powered, and lower-priced, Macs than either consumers or higher ed.

iPod sales revenues were down year-to-year, the first time Apple's posted negative numbers for its iconic music player. Although unit sales were up 24% year-to-year, revenues were down by 1%. The sequential figures were much bleaker, with unit iPod numbers down by 50% and revenues off 51% from the holiday selling season of 2006.

Oppenheimer refused to get pessimistic about the iPod, however. "Both the Mac and iPod exceeded our expectations," he said as he cited especially strong sales of the iPod shuffle, the company's lowest-priced music player.

At $770 million, quarterly profits were up a whopping 88% over a year earlier, easily beating Wall Street's estimates. The boost in net income, said Oppenheimer was fueled by lower component costs, including memory and displays.

Oppenheimer also took questions about the iPhone, Apple's highly-anticipated entry into the mobile phone market. While he repeated that the iPhone would be available "in June," neither he nor Tim Cook, company COO, would comment on the number of units it will have ready to sell that month. "We really need to start shipping [into the channel] before we know anything about demand," said Cook.

The iPhone, which will be available in two configurations for $499 and $599, will be sold only at Apple and AT&T Inc. stores and their online sites. AT&T will be the sole service provider for the iPhone at its debut.

In a change from its usual accounting practices, Oppenheimer said that Apple will amortize the selling costs for the iPhone over the device's 24-month subscription, and will account for Apple TV costs in a similar fashion. That led to several questions about how much Apple will receive from AT&T for each customer who signs up for a calling plan, but Oppenheimer refused to bite. Apple's making the change, he said, because it will update both the iPhone and Apple TV software periodically. Accounting rules, Apple has claimed in the past, require either amortization or another fee from the user when providing new functionality to hardware.

Apple shares posted a 2.3% gain today to close at $95.35. In after-hours, trading, shares had climbed an additional 6.5% to $101.57 by 7 p.m. EDT.

Copyright © 2007 IDG Communications, Inc.

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