This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Apple Inc. (AAPL: chart) on October 22, 2007.
Chief Financial Officer: Peter Oppenheimer
Chief Operating Officer: Timothy D. Cook
Senior Director, Investor Relations and Corporate Finance: Nancy Paxton
Key Investors Issues
- Earnings per share increased to $1.01 as against 62 cents in the prior year quarter.
- Quarterly revenue rose from $4.84 billion to $6.22 billion in previous year.
- During the quarter, the company sold 1.12 million units of the new iPhone.
- For Q1, Apple projects revenue of about $9.2 billion.
Fourth Quarter Fiscal 2007 Financial Highlights
Apple posted revenue of $6.22 billion and net quarterly profit of $904 million, or $1.01 per diluted share.
These results compare to revenue of $4.84 billion and net quarterly profit of $542 million, or 62 cents per diluted share, in the year-ago quarter. The revenue was driven by record Mac sales and continued strong demand for iPods. International sales accounted for 40% of the quarter’s revenue.
Total company gross margin was 33.6%, which was lower sequentially but higher than expected, due to a number of factors.
The firm benefited from a higher margin product mix, a weakening U.S. dollar, a better-than-expected commodity environment, and a higher mix of direct business.
Operating margin for the quarter was stronger than expected at 17.1%, resulting primarily from higher revenue and gross margin than we had anticipated.
Operating expenses were $1.03 billion, including $58 million in stock-based compensation expense.
The firm capitalized $22 million of software development expense related to Leopard during the quarter.
- OI&E was $170 million.
- The tax rate for the quarter was about 27%, lower than the anticipated rate of 32%, primarily due to a benefit from the settlement of prior year audits.
- The firm had very strong cash generation during the quarter, increasing the cash balance to end with $15.4 billion.
- Cash flow from operations was $1.7 billion.
During the quarter, the Mac products and services represented 62% of the total quarterly revenue.
The firm has shipped 2.16 million Macs, 400,000 above the June quarter’s all-time record for Apple and representing 34% growth over the year-ago quarter. On a worldwide basis, Apple''s growth rate was over two times IDC’s most recently published market growth rates for the September quarter. Customers responded very favorably to the new iMacs announced in August, driving 31% year-over-year growth in desktop systems. Demand for Apple''s Macbooks and Macbook Pros continued to be very strong. Sales of portables increased 37% over the prior September quarter and accounted for 62% of Macs sold. The firm ended the quarter with slightly less than three weeks of Mac channel inventory.
The company’s music products and services accounted for 36% of total revenue during the quarter.
The firm sold 10.2 million iPods, representing 17% growth over the year-ago quarter. The firm began and ended the quarter within its target range of four to six weeks of iPod channel inventory. Reaction to the new iPods announced last month has been very positive and the firm is shipping the best iPod lineup ever, as it heads into the holiday buying season. Apple executed a very smooth transition to an all-new iPod lineup without a hitch.
Other music revenue grew 33% year over year, once again fueled by strong iTunes store sales.
The firm is very pleased with initial reaction to the iTunes WiFi music store and the new relationship with Starbucks. iTunes continued to account for over 85% of songs purchased and downloaded in the U.S., according to the latest data available from Nielsen Soundscan, and iTunes customers have now purchased over 3 billion songs and 100 million TV shows.
Based on the latest data from ISPI market research, 17% of global music sales in the first half of calendar 2007 were digital, up from 11% in all of 2006. The company believes that the popularity of iTunes has been instrumental to the growth in this trend. Based on the latest data from NPD, iTunes continues to be the third largest distributor of music in the United States, having surpassed both Target and Amazon.
