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For Apple, Halo effect eclipses Osborne effect

Stock drops 10pc on iPod anxiety

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There can be little doubting that the iPod 'halo effect' now shines a positive light on Apple's Mac sales. Strong US educational sales, particularly into Higher Education, also helped the company shrug off fears of an 'Osborne Effect' prior to next year's move to Intel processors. In fact, Mac sales were up 48 per cent year-on-year. However fears about soft iPod sales caused Apple stock to drop 10 per cent in after hours trading.

The fourth quarter of 2005 saw revenue of $3.68bn and a net profit of $430m, up from $2.35bn and $106m a year ago, and The year brought home $13.93bn and a net profit of $1.33bn.

But what of the source of the halo effect, the iPod? Surprisingly, and despite ten consecutive quarters of growth for the iPod, Apple found itself fending off criticism of "weak" iPod numbers. Apple sold 6.45m iPods in the quarter, only 5 per cent up from the previous quarter, but 1m of these were iPod Nanos shipped in the last 17 days of the period. One analyst described the 5.4m non-Nano iPods sold as "pretty light demand".

Apple responded that Mini shipments were wound down prior to the Nano launch, that overall iPod sales came in as expected, that it couldn't meet Nano demand, and that the company would be launching new products in the music segment in time for the holiday season.

Apple has a product event scheduled for tomorrow - and CFO Peter Oppenheimer hinted at a strong PowerPC product pipeline ahead of the Big Switch.

In terms of Mac sales, Apple set a record of 634,000 iBook and PowerBook shipments for the quarter, 139,000 more than last year, but the strongest growth year-on-year came from desktop and server sales. Mac Mini, iMac, eMac, PowerMac and Xserve were up 56 per cent in terms of units and 42 per cent higher measuring revenue. Portable revenue was up 22 per cent on 41 per cent more units shipped.

Quarter-on-quarter however, desktop unit shipments declined 12 per cent.

Overall, Mac shipments units are 48 per cent higher year-on-year, compared to IDC's PC market growth of 13 per cent.

Notably absent was any mention of the iTunes Music Store's performance. Apple's financial officers, however, were happy to declare that the philosophy and strategy behind the store remained unchanged: it helped shift iPods and Macs. ®

Bootnote: The 'Osborne Effect' is a myth, readers reminded us recently.

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