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Apple acknowledges Intel hiccup

Wanted: Universal Binaries

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Apple recorded the second strongest quarter in its history ending March 30, bested only by the Christmas quarter that preceded it.

2Q FY2006 brought home a profit of $410m on revenue of $4.36bn, up 41 and 34 per cent respectively.

iPod revenue accounts for half of Apple's income, explaining why gross revenue was down 24 per cent sequentially. When it was purely a computer company, Apple could expect strong new year quarters on the back of product launches from MacWorld. Today, with a fashionable consumer range within the price range of potential Christmas shoppers, more fluctuations can be expected.

As an indication of how much Christmas helped the iPod, revenue from sales of the MP3 player fell from $2.9bn to $1.7bn, while music sales remain soft: revenue from iPod related products, including iTMS, fell $6m to $485m.

But the underlying numbers look even better than the headlines, with sales rising $1.1bn year on year, and cost of sales rising by just over $800,000. So Apple's R&D investment was able to rise from $119m to $176m, because it could afford to.

Gross margin was steady at 29.8 per cent.

Apple executives admitted that professional computer users were waiting for Universal Binaries from ISVs, to run on the Intel-based PowerMacs due later this year. While Apple has ported Final Cut Studio, Aperture and Logic to Intel, suites from Adobe and Microsoft will take some time.

"Our sales teams didn't discourage customers from waiting until the Intel models arrive," said CFO Peter Oppenheimer of the retail channel.

Apple posted a steady outlook for Q3, with revenue in the range $4.2bn to $4.4bn, with earnings 39c to 43c a share (GAAP, diluted) compared to 47c for Q2. This includes a 4c per share charge for non-stock based compensation.

Steady as she goes, then. ®

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