Well, it’s official: Apple is no longer a computer company.
Apple posted its first quarter 2006 financial results last week, with revenue of $5.75 billion and a profit of $565 million for the quarter. The results are a 65 percent increase in revenue over the same quarter a year ago, although the company’s gross margin was down to 27.2 percent from 28.5 percent a year ago. International sales accounted for 40 percent of the quarter’s revenue. The results are the highest quarterly earnings and revenue in the company’s history.
To be sure, Apple still makes Macs. The company shipped more than 1.2 million Macintosh computers, basically flat with Mac shipments during the fourth quarter of 2005, but a 20 percent improvement over the same quarter a year ago. Why the static quarter-to-quarter sales figures? Sales in the Americas and among portables were particularly weak, due to an aging notebook product line and the public knowledge that Apple is transitioning from PowerPC to Intel processors, no doubt causing some customers to defer purchases until details of new Intel-based products became available. (In case you missed it, Apple just announced Intel-powered iMacs and MacBook Pro portables at Macworld San Francisco.)
However, in revenue terms, the iPod success story is still unfolding. The company sold more than 14 million iPods during its first fiscal quarter amounting to $2.9 billion in revenue. This figure is significant because roughly half of Apple’s quarterly revenue came from iPod sales alone. Roll in money from other music products and services (e.g., the iTunes Music Store, etc.) and Apple’s iPod and music businesses accounted for roughly 60 percent of Apple’s revenue for the quarter. The quarter marks the first time Apple’s non-computer business has out-earned the company’s desktop, notebook, software, peripherals and services offerings.
Looking forward, Apple says it expects second quarter revenue to be around $4.3 billion, a conservative figure which sent Apple’s share price into a bit of an after-market tumble. The reasons for a cautious revenue figure include a possible slowdown in iPod sales after the holiday buying season, and a pause in Macintosh sales prior to the introduction of Intel-based models. Some analysts are also cautioning the company may not want to become too reliant on income from the turbulent digital music player market.