Apple Revenue, Profits Soar

Surging Mac and iPod sales helped Apple report a 37 percent jump in revenue for its fiscal fourth quarter, its best performance in nine years, officials say.

Apple Computer Inc. reported the highest quarterly revenue in 9 years Wednesday as strong sales of Macintosh laptops and iPod music players allowed the company to generate $2.35 billion in revenue in its fiscal 2004 fourth quarter.

Quarterly revenue increased 37 percent from the $1.7 billion reported in the year ago quarter.

However slower than expected deliveries of IBMs PowerPC G5 CPU chips that power Apples desktop product lines put constraints on the companys manufacturing output. This caused Apples inventory to fall below the four-week minimum target that the company prefers to maintain, said Peter Oppenheimer, Apple CFO.

"All models of the Power Mac and iMac were constrained [in Q4] due to the lower than anticipated supply [of G5 processors]," said Timothy Cook, executive vice president of worldwide sales and operations. "We had expected the PowerMac [G5] dual 1.8GHz and 2GHz configurations to reach a supply-demand balance in August and that did not happen due to yield issues. We had expected the Power Mac [G5] dual 2.5GHz and iMac G5 to be short during the quarter but the supply of both of those were less than anticipated."

Cook said the company in September shipped twice as many G5-based systems than it had in July and August combined. He said the company in the current quarter will "achieve a supply-demand balance on every G5 model we ship, of Power Mac and iMac, with the exception of the 2.5[GHz] model," which will remain constrained.

/zimages/4/28571.gifClick here to read more about IBMs problems in producing enough 3GHz PowerPC G5 chips that.

Company officials said Apple hoped to improve inventories in the current quarter as it move though the holiday sales period. Slow G5 deliveries may have held back desktop sales, which were down 29 percent over the 2003 fourth quarter.

But this problem with the desktop was offset by a 74 percent increase in iBook sales, according to the companys financial filing.

Profits for the quarter increased to $106 million, more than double the $44 million Apple reported a year ago. These results were about 50 percent higher than projected by Wall Street analysts.

Revenue for the quarter totaled $2.35 billion, a 37 percent increase over the year ago quarter with operating margin steady at over 5 percent. The company expects this trend to continue into the first quarter of 2005, with Oppenheimer predicting revenue of between $2.8 billion and $2.9 billion. Operating margins during that period should rise to around 7 percent.

/zimages/4/28571.gifApple execs were mostly mum about the forthcoming version of the Mac OS X operating system, code-named "Tiger." Check out a slide show of screens from the beta release here.

For the year, the company reported profits of $276 million on revenue $8.28 billion compared to net income of $69 million on revenue of $6.21 billion in 2003, The company reported cash reserves in excess of $5 billion at the end of the quarter.

Driving the sales growth were sales of more than 2 million iPod music players, including a 6 per cent segment that was produced by Hewlett-Packard Co. under a new production alliance announced in August, Oppenheimer said.

/zimages/4/28571.gifClick here to read the details about Hewlett-Packards introduction of its own iPod version produced under a licensing agreement with Apple.

The company also shipped 836,000 Mac desktops, iBooks and PowerBooks as sales of the latest G5 models continued to ramp up strongly, he said.

Revenue was helped by strong sales at Apples retail store chain. "With an average of 81 stores open during the quarter average, quarterly revenue per store was $4.6 million up from $3.1 million in the year ago quarter a 48 percent increase," Oppenheimer said.

Retail revenue in the quarter totaled $376 million, which was an increase of over $100 million from the third quarter and represented 95 percent growth over the year ago quarter, he said. Apples retail operations also generated $68 million in profits from manufacturing operations, according to Oppenheimer.

/zimages/4/28571.gifFor insights on the Mac in the enterprise, check out Executive Editor Matthew Rothenbergs Weblog.

Apple is continuing to expand its retail chain adding six new stores during the forth quarter "and apple expects to end the calendar year with 100 stores," he said. The company opened its first European market store in London, joining its two other international stores in Japan, Oppenheimer said.

The company expects to open additional stores in the United Kingdom and Japan later in the 2005 fiscal year, he said.

Editors Note: David Morgenstern provided additional reporting for this story.

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John Pallatto

John Pallatto

John Pallatto has been editor in chief of QuinStreet Inc.'s since October 2012. He has more than 40 years of experience as a professional journalist working at a daily newspaper and...