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Apples big bet on Intel chips is paying off big time.
That appears to be the consensus of analysts following Apple Computers fiscal third-quarter earnings, July 19. The Cupertino, Calif., company announced its second best quarterly results ever, with net income of $472 million and earnings of 54 cents a share.
Those numbers were well above Wall Street estimates of 44 cents a share. While Apples iPod shipments get all the headlines, company officials claimed, and several analysts agreed, that the coupling of the Mac notebook line with Intels dual-core Core Duo processor appears to be paying off.
“There was lots of skepticism,” Tim Deal, an analyst with Technology Business Research in Hampton, N.H., said. “People were questioning whether it would add value to the Mac platform without taking anything away. What you have is a feature-laden product and I think its going to be a success for Apple.”
Apple reported that it sold a little more than 1.3 million Macs in the third quarter, a 12 percent growth from a year ago. The iMac, MacBook Pro, MacBook and Mac Mini are already using the Intel processor.
Several experts expect that the Power Mac, as well as the desktop, will have Intel chips by the end of the year.
In reporting to investors, company officials claimed to now hold 12 percent of the laptop market in the United States, an increase from 6 percent of the market a year ago.
In their talk to investors, Peter Oppenheimer, Apples chief financial officer, said the 1.327 million Macs sold in the third quarter of 2006 represented the highest number of units ever sold in a 13-week quarter.
For Apples efforts last quarter, analyst Charlie Wolf of Needham & Company in New York raised his 2006 earnings per share estimate from $1.95 to $2.95, as well as its 2007 estimate from $2.45 to $2.50.
“The stunning news in the quarter was the shipments of notebooks,” Wolf wrote in a report. “Shipments came in at 800,000, up 61 percent, despite the fact that the new MacBook was introduced halfway through the quarter. In our opinion, its the best Mac yet in terms of price/performance.”
By showing an increase in Intel-based Macs, the company was able to overcome concerns about how the new platform would run.
“There were application compatibility issues, but those get worked out over time,” Michael Silver, a research vice president at Gartner wrote in an e-mail to eWEEK.
“Users need to make sure their critical applications have either been updated to run on Intel or will run on Rosetta [an emulation technology that allows PowerPC-native applications to run on Intel-based Macs] before they make the leap.”
Joe Wilcox, a senior analyst with Jupiter Research, said the strong sales of the notebooks reflect the way Apple has marketed its laptops. He said the company designs and markets the computers as part of a mobile lifestyle.
“The strong Mac sales indicated that Apple got a boost from adding Intel,” Wilcox said.
While sales of the desktops were slow, many believe that will change once the Intel processors are added.
“Sales of desktops grew 8 percent year over [last] year, reflecting hesitation from professional-level customers as they wait for both an Intel-powered PowerMac and compatible software from Adobe,” according Steve Lidberg, a senior research analyst at Pacific Crest Securities.
“Desktop sales should receive a lift when the refreshed PowerMac is introduced, likely in August, at Apples developer conference, and again in the spring when Adobe is slated to release the Intel-compatible Creative Suite 3,” Lidberg said in the report.
Deal, the Technology Business Research analyst, suspected that Apple would continue to improve with its core-customer base, but that the larger enterprise market, even with the Intel processors, would remain elusive.
Still, Apple had more good news on July 20, when Gartner released its latest report on PC shipments in the second quarter of this year.
In that study, Apple placed fourth in the United States and it claimed 4.6 percent of the market.