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Apple's profit soars — but iPod sales slow

Apple's profit soars — but iPod sales slow

Apple sold 1.52 million Macs in its second fiscal quarter, the company reported on Wednesday — a 36 percent increase fuelled by nearly 400,000 more notebooks than the same quarter last year.

Revenues from the sale of its desktop and notebook lines climbed 44 percent in the first three months of 2007 compared to 2006, Apple says, and accounted for 56 percent of the company's US$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 two percent year-to-year, the tally of notebooks sold during the quarter soared 79 percent over 2006.

"We're doing really really well [with the Mac]," says Peter Oppenheimer, Apple's CFO, during the earnings call. "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 October-December, 2006 by six percent in both units and revenues, and Oppenheimer says 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 says, are weighted toward K-12, which traditionally opts for lower-powered, and lower-priced, Macs.

IPod sales revenues were down year-to-year, the first time Apple's posted negative numbers for its music player. Although unit sales were up 24 percent year-to-year, revenues were down by one percent. The sequential figures were much bleaker, with unit iPod numbers down by 50 percent and revenues off 51 percent 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 88 percent over a year earlier, easily beating Wall Street's estimates. The boost in net income, says Oppenheimer was fuelled 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," says Cook.


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