The phenomenal growth of Apple's iPod music player was joined by strong growth in Mac shipments during the company's third quarter, leading Apple to the best financial quarter in its history, it announced on Wednesday.
However, Apple's guidance for its fourth fiscal quarter indicates that the company is not sure whether it can sustain its momentum following the news that it plans to start using Intel's processors next year.
Overall revenue was US$3.5 billion (NZ$5.2 billion), up 75% compared to last year's third fiscal quarter — the period ending June 25. This exceeded the estimates of analysts compiled by Thomson First Call for US$3.33 billion in revenue.
Net income was US$320 million, up a whopping 425% from the year-ago period.
"We are delighted to report Apple's best quarter ever in both revenue and earnings," said Steve Jobs, Apple co-founder and chief executive officer, in a press release.
The explosive growth of the iPod is an old story, but shipments of the music players reached 6.15 million units during the quarter, up 616% compared to last year's third quarter. This time, the iPod growth was accompanied by a strong increase in Mac shipments, which totalled 1.2 million units during the quarter, a 35% increase. Analysts have been waiting for data to provide evidence of an '"iPod halo effect" translating into improved Mac sales.
"I couldn't be happier with the performance of our Mac products this quarter," said Peter Oppenheimer, Apple's chief financial officer, on a conference call following its announcement.
But Apple expects fourth-quarter revenue to be unchanged from the current quarter, and expects earnings per share to decline, Oppenheimer said. Most PC vendors see sequential increases in revenue during the second half of the calendar year.
For one thing, third-quarter sales were higher than usual because of the release of Tiger, the latest version of Apple's Mac OS X operating system, Oppenheimer said. This spurred a lot of upgrades, and the company expects a sequential decline in software sales, he said.
However, analysts have cautioned that Apple might see a slowdown in PC sales as users decide to wait for its first Intel products to come out next year. Apple has laid out a road map for the transition that will allow users to run applications written for either the PowerPC processors the company currently uses as well as Intel's chips, but some users might be wary about bumps in the road, analysts said after Apple and Intel announced their deal in June.
Jobs had previously said that Apple would continue to release new Mac products based on the PowerPC chips this quarter, and Oppenheimer confirmed that new systems were to be launched this quarter. These systems could be powered by IBM's latest PowerPC processors, the dual-core 970MP or the low-power 970FX, both of which were introduced last week.
Apple did not see a clear dropoff in sales after the June 6 Intel announcement, but it does not yet have all the data it would like on the last few weeks of the quarter, said Tim Cook, executive vice president for worldwide sales and operations, on the conference call. "We're being prudent with our guidance," he said.
Oppenheimer noted that the expectations for $3.5 billion in fourth-quarter revenue would represent a 50% increase over the prior year. The flat guidance would also allow Apple to again shatter analyst expectations with a decent quarter. Analyst firms such as NPD Techworld and Current Analysis expect a stronger third-quarter, back-to-school selling season than in recent years.
Overall Mac shipments grew at three times the rate of the overall PC industry during the quarter, Cook said. Apple shipped 687,000 desktops and 495,000 notebooks in the quarter, increases of 65% and 8% compared to last year, respectively.
Apple posted a 48% increase in unit shipments in Europe, but the company had a difficult quarter in Japan with a 25% drop in shipments compared to its second quarter and a 7% drop compared to last year. Changes are in store for the company's operations in Japan, Cook said.